What Markup Should a Contractor Charge? Markup vs. Margin Explained (2026)
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Table of Contents
Here is the difference, the formulas, and the markup you actually need.
Markup vs. margin: the definitions
Markup = (Price − Cost) ÷ CostMargin = (Price − Cost) ÷ PriceTo set your price:
Price = Cost × (1 + Markup)Price = Cost ÷ (1 − Margin)Markup-to-margin conversion table
This is the table to keep on your wall. The markup you apply always produces a smaller margin.
| Markup on cost | Resulting gross margin |
|---|---|
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 35% | 25.9% |
| 40% | 28.6% |
| 50% | 33.3% |
| 67% | 40.0% |
If you want to keep 30% of every dollar (a 30% margin), you must mark up job cost by about 43%, not 30%.
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Activate my free accountWhat markup is typical by job type?
These are commonly cited industry ranges, not fixed rules — smaller and riskier jobs carry higher markup:
| Work type | Typical markup on cost |
|---|---|
| Large commercial / new construction | 15% – 25% |
| Residential remodeling | 30% – 50% |
| Small repairs & service calls | 50% – 100%+ |
| Custom / high-risk scope | 35% – 60% |
The smaller the job, the more your fixed overhead has to be recovered from fewer dollars — so the markup goes up, not down.
Worked example
A remodel costs you $10,000 in labor, materials, and subs. You want a 30% profit margin.
That $1,286 gap on a single job is the difference between a business that grows and one that just stays busy.
Frequently Asked Questions
What markup should a contractor charge in 2026?
Most contractors need a 30% to 50% markup on job cost to reach a healthy 25%–35% profit margin. Large commercial work runs lower (15%–25%) and small repair jobs run higher (50%+), because fixed overhead has to be recovered from fewer dollars on a small job.Is markup the same as margin?
No. Markup is figured on your cost; margin is figured on your selling price. A 30% markup produces only a 23% margin. To keep a 30% margin you must mark up cost by about 43%.How do I convert markup to margin?
Margin = Markup ÷ (1 + Markup). For example, a 50% markup gives 0.50 ÷ 1.50 = 33.3% margin. Going the other way, Markup = Margin ÷ (1 − Margin).What is a good profit margin for a contractor?
Many established residential contractors target a 25% to 35% gross margin before net profit. Net profit after overhead is typically much lower, which is why undercharging on markup is so dangerous.Why do small jobs need a higher markup?
Your fixed overhead — truck, insurance, office, software — costs roughly the same whether the job is $2,000 or $50,000. On a small job that overhead is spread over fewer dollars, so a higher markup is required just to break even.Related Guides
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