Margin and markup calculator
Two words, two sums
Markup is the profit as a share of what the thing cost you. Margin is the profit as a share of what you sold it for. A £100 fitting sold for £150 makes £50 profit either way, but that is a 50 per cent markup and a 33.3 per cent margin. Say "I put 50 per cent on materials" and your accountant hears one number while your customer hears another, and the one you were thinking of is usually the wrong one for the sentence.
Why it goes wrong
Because margin is the one that matters and markup is the one that is easy to apply. A trade who wants a 40 per cent margin and adds 40 per cent to cost gets a margin of 28.6 per cent, and finds out at year end that the business made less than it priced for. To hit a 40 per cent margin on £100 of cost, the price is £166.67: cost divided by 0.6, not cost times 1.4. The second box on the calculator does that division.
Turning one into the other
Given a markup, the margin is markup divided by one plus the markup: 50 per cent markup is 0.5 over 1.5, a third. Given a margin, the markup is margin divided by one minus the margin: a 40 per cent margin is 0.4 over 0.6, 66.7 per cent. The calculator does both from whatever pair of figures you have.
What margin to price for
There is no right number; there is the number your overheads need. Pricing a job when you have no idea what to charge builds it from the bottom, and recording what a job actually cost is how you find out afterwards whether the margin you priced was the margin you got. On materials alone, twenty to thirty per cent markup is common in the trades; the labour is where the margin is made or lost.