Markup vs. margin: the bidding mistake that costs contractors money
"Put 20% on it" sounds simple, until you realize 20% markup and 20% margin are different numbers. Mixing them up quietly takes profit out of every job.
The formulas
- Markup = profit ÷ cost. Cost $10,000 + 20% markup = price $12,000.
- Margin = profit ÷ price. That same $12,000 job has a margin of $2,000 ÷ $12,000 = 16.7%.
- To hit a target margin: price = cost ÷ (1 − margin). For a 20% margin on $10,000, the price is $12,500.
Quick conversion table
| Markup | Margin |
|---|---|
| 10% | 9.1% |
| 20% | 16.7% |
| 25% | 20.0% |
| 33.3% | 25.0% |
| 50% | 33.3% |
Don't forget overhead
Overhead covers the truck, insurance, the office, software, and your own estimating time. It's a cost of being in business, not profit. Work out your annual overhead (the SBA business guide has a worksheet for estimating business costs) and recover it in every bid, then add profit on top.
Setting it in Quick Bid
Quick Bid lets you set overhead and profit for the whole bid or by section (see ConstructConnect Quick Bid). Decide whether your company thinks in markup or margin, write it down, and set your bids up the same way every time.
Need help setting up your estimating templates? Contact us.
Published October 24, 2026. Some links may be affiliate links; see our Affiliate Disclosure.