Are You Pricing Your Jobs for Profit?

Pricing jobs in construction isn’t as simple as adding up materials and labor. Many business owners confuse markup and margin, leading to costly pricing mistakes.
Are you charging enough to be profitable? Or are you unknowingly underpricing your work? Let’s break it down so you never leave money on the table again.

Markup vs. Margin: What’s the Difference?

Markup

• What It Means: The percentage you add to costs to determine the selling price.
• Formula: (Cost × Markup %) + Cost

Margin

• What It Means: The percentage of revenue that remains as profit after covering costs.
• Formula: (Profit ÷ Revenue) × 100

Why This Matters: Avoiding Pricing Mistakes

• Markup and margin are NOT the same. A 20% markup doesn’t mean a 20% profit margin!
• Many contractors price jobs using markup but fail to check if their final margin is high enough.
• If you’re underestimating margin, you could be losing thousands per project without realizing it.

How to Calculate Markup and Margin the Right Way
 

Example Scenario

• Job Cost: $10,000
• Desired Profit Margin: 20%
• What NOT to Do: Applying a 20% markup results in a profit margin of only 16.67%, not 20%!

How to Apply This to Your Business

1. Stop Guessing – Use the Right Formula​​​

• If you want a 30% profit margin, your markup should be 42.86%, not 30%.

• Use a Markup & Margin Calculator to get accurate pricing (download our free tool here). 

2. Review Your Past Jobs

• Pick 3 recent projects and calculate:
  • The markup you applied.
  • The actual margin you achieved
• If your margin is lower than expected, adjust future pricing.

3. Set a Minimum Profit Margin

• Decide on a target margin (e.g., 20% or higher).
• Train your sales team to price jobs based on margin, not just cost.

Smarter, Profit More
Using markup without understanding margin is a dangerous game. A small pricing mistake can mean the difference between a profitable business and one that’s barely surviving.

Want to be 100% sure your jobs are priced for maximum profit? Schedule a consultation with Hard Hats Bookkeeping today!