Practical guide

Margin vs markup

Margin and markup describe the same profit from different perspectives. Margin divides profit by selling price; markup divides profit by cost.

1. Collect assumptions

With a cost of 100 and price of 150, profit is 50. Margin is 33.3%, while markup is 50%.

2. Check price and risk

Use margin when planning a price for target profitability; use markup when comparing profit with cost.

3. Document working rules

Translate the calculated result into a simple proposal: what the client receives, by when, how many changes are included and what happens when scope changes. The price then relates to a defined commitment.

Calculate cost and the floor first, then choose a price that fits scope and outcome value.

Margin and markup calculator Read the methodology

Helpful questions

What most often breaks an estimate?

Missing communication time, unlimited revisions, an unclear outcome and assuming every working hour is billable.

Should clients see every calculation?

No. The calculation is for profitability control. The client needs clear scope, price, timing and change rules.