Calculator
Gross Margin and Markup Calculator
Margin and markup are not the same number, and confusing them is the most expensive arithmetic mistake in the trades. This calculator keeps them straight.
Labor with burden, materials, equipment, subs, permits.
Results
- Gross profit
- $5,550
- Gross margin
- 30.0%
- Markup
- 42.9%
- Price required for 40% margin
- $21,583
- Margin if cost runs 10% over
- 23.0%
(Price minus cost) divided by price.
(Price minus cost) divided by cost. Not the same number.
Illustrative only. If your cost figure excludes labor burden, the margin shown is overstated.
A contractor who marks up cost by 30 percent believes they are earning a 30 percent margin. They are earning 23. Over a year of bids, that seven-point gap is the difference between a profitable company and one that works hard for the bank. The confusion is so common that we check for it in every assessment.
This calculator does three things: computes gross margin and markup from price and cost, computes the price required to hit a target margin, and shows what happens to margin when direct costs run over. Use it on a job, a service ticket, or a whole division.
How to read the result
- Gross margin equals (price minus cost) divided by price.
- Markup equals (price minus cost) divided by cost.
- To hit a target margin, price equals cost divided by (1 minus target margin).
- Direct cost includes fully burdened labor, materials, equipment, subcontractors, and permits. If your cost number leaves out burden, your margin is fiction.
FAQ
Questions about this calculator
What is a healthy gross margin?
It depends on the trade and the mix of service, install, and maintenance work. Service work generally carries higher margins than installation because labor is a larger share of the ticket. Our HVAC margin article walks through illustrative ranges and how to compute yours correctly.
Should overhead be in the cost?
Not in gross margin. Gross margin covers direct costs only. Overhead comes out below the line, which is why a job with a thin gross margin can never contribute to overhead, no matter how busy it keeps the crew.
How do I know my labor burden?
Use the employee burden calculator on this site. Burden typically adds 25 to 40 percent to wages once payroll taxes, workers' compensation, benefits, and paid non-billable time are counted.
Keep reading
From the number to the decision
The service that acts on this result, the articles that explain it, and the industries where it matters most.
Insights
- What Is a Healthy Gross Margin for an HVAC Company?Service, installation, and maintenance agreements earn different margins for different reasons. Here is how to measure each one correctly before you compare it with anything, and the pricing math that produces the margin you want instead of the one you got.
- How to Determine Whether a Service Division Is ProfitableA service division can show a profit on the department report and lose money in the company, or the reverse. Here is how to build the divisional income statement that tells the truth, and how to decide what to do with what it says.
Industries
- HVACService and replacement are two businesses sharing a truck. Finance leadership that reports them separately, forecasts the shoulder season, and turns ServiceTitan data into numbers a lender or buyer will believe.
- Home ServicesMarketing buys the call, the technician sells the job, and the cash arrives through a financing partner in the wrong month. Finance leadership for home services companies running on lead cost, close rate, and trucks.
- Professional ServicesYour inventory is time, and it expires every Friday. Finance leadership for engineering, architecture, consulting, agency, and other firms that sell expertise by the hour, the project, or the retainer.
Calculators
- Full-Time vs. Fractional CFO Cost CalculatorSalary is the smallest part of what a CFO costs. Put in the real numbers and compare them with a fractional engagement sized to your company.
- Working Capital CalculatorWorking capital is the money the business needs to run between the day you spend and the day you get paid. Here is how much you have, and how much you need.
- Construction WIP CalculatorEnter contract value, estimated cost, cost to date, and billings to date. Get percent complete, earned revenue, and whether the job is overbilled or underbilled.
Financial assessment
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