If you're charging a 25% markup on materials and assuming that gives you a 25% margin, you're underpricing every single job. It's one of the most common — and most costly — mistakes NZ tradies make. With material costs across timber, steel, aluminium, and glass all rising through Q1 2026, getting this maths wrong is more expensive than ever.
This guide explains the difference between markup and margin, shows you how GST complicates things, and gives you real NZD examples you can apply to your quotes today.
Markup and Margin Are Not the Same
Both terms describe how much you add to your costs — but they use different bases for the calculation.
Markup is calculated as a percentage of your cost:
Markup % = (Selling Price − Cost) ÷ Cost × 100
Margin (also called gross profit margin) is calculated as a percentage of your selling price:
Margin % = (Selling Price − Cost) ÷ Selling Price × 100
Here's why it matters. Say you buy materials for $1,000 and add a 25% markup:
- Cost: $1,000
- Markup (25%): $250
- Selling price: $1,250
- But your actual margin is: $250 ÷ $1,250 = 20%
You marked up by 25% but only made a 20% margin. If you needed 25% margin to cover your overheads and wages, you've just left money on the table on every job.
The Conversion Formula
To convert between markup and margin:
Markup to Margin:
Margin = Markup ÷ (1 + Markup)
Margin to Markup:
Markup = Margin ÷ (1 − Margin)
So if you need a 30% gross margin, you need to apply a 42.9% markup on your costs:
0.30 ÷ (1 − 0.30) = 0.429 = 42.9% markup
Common equivalents for NZ tradies:
| You need this margin | Apply this markup |
|---|---|
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 33% | 49.3% |
| 40% | 66.7% |
Print this table out and stick it on your ute dashboard.
How GST Complicates Everything
If you're GST-registered (required once your turnover exceeds $60,000 in a 12-month period, as set by IRD), there's an extra layer of complexity when quoting.
Most NZ tradies buy materials including GST and can claim that GST back. So your actual cost for materials is always the GST-exclusive price. Your markup and margin calculations should always be done on GST-exclusive figures — and then GST is added to the final quote.
Here's a worked example for a plumber:
- Materials (ex-GST): $800
- Markup at 40%: $320
- Materials sell price (ex-GST): $1,120
- Labour (3 hours at $95/hr ex-GST): $285
- Subtotal (ex-GST): $1,405
- GST (15%): $210.75
- Total invoice: $1,615.75
Your gross margin on this job: ($320 + $285) ÷ $1,405 = 43% — before overheads.
If you accidentally calculated your 40% markup on the GST-inclusive material cost ($920), you'd have come up short by around $48 on that one job. Multiply that across 200 jobs a year and it's nearly $10,000 in lost revenue.
Use the GST Calculator to keep your ex-GST and inc-GST figures straight.
What Gross Margin Should NZ Tradies Target?
This varies by trade and overhead structure, but as a rough guide for sole traders and small businesses:
- Minimum viable margin: 25–30% (covers wages, vehicle, insurance, tools)
- Healthy margin: 35–45% (covers the above plus meaningful profit)
- Materials-heavy trades (plumbing, electrical rough-in, tiling): 30–35% is realistic due to high material pass-through
- Labour-heavy trades (painting, plastering, landscaping): 40–50% is achievable
Your target margin must cover: 1. Your own wages (at market rate — don't fool yourself by paying yourself below what you'd pay a staff member) 2. Vehicle costs (running, maintenance, WOF, rego) 3. ACC levies, insurance, tool replacement 4. Tax — including provisional tax if your residual income tax exceeds $5,000 (IRD guidance at ird.govt.nz)
Use the Hourly Rate Calculator to work out the true cost of your own labour before you set your charge-out rate.
Real NZD Examples by Trade
Builder quoting a deck
- Timber and hardware (ex-GST): $2,400
- Required margin: 35% → apply 53.8% markup
- Material sell price: $2,400 × 1.538 = $3,691
- Labour: 16 hours × $110/hr = $1,760
- Subtotal ex-GST: $5,451
- GST: $817.65
- Quote total: $6,268.65
Electrician quoting a switchboard upgrade
- Components (ex-GST): $1,100
- Required margin: 30% → apply 42.9% markup
- Component sell price: $1,573
- Labour: 8 hours × $120/hr = $960
- Subtotal ex-GST: $2,533
- GST: $379.95
- Quote total: $2,912.95
Use the Job Cost Calculator to run these numbers for your own jobs with your actual costs and target margin.
Where Tradies Go Wrong
Mistake 1: Using one markup rate for everything. Low-cost items (fixings, sealant, small fittings) can carry higher markups (60–80%) because the handling cost is fixed regardless of value. High-cost materials (large structural timber, major appliances) might run at 20–25% — but the dollar margin is still strong.
Mistake 2: Quoting from memory. Material prices have moved significantly in 2026. Timber, steel, and aluminium are all up from 2024 levels. Always get a current supplier quote before pricing a job.
Mistake 3: Forgetting overhead in your labour rate. Your $90/hr charge-out rate doesn't mean you earn $90/hr. After GST, vehicle costs, insurance, ACC, and unpaid admin time, many tradies net less than $50/hr on paper. Use your actual overhead figures — not guesses.
Tools to Help
Fastcrew is a NZ-built tradie app that lets you build quotes with materials and labour, set your markup or margin target, and generate professional invoices — all from your phone on-site. It's particularly useful for keeping markup consistent across similar jobs rather than calculating from scratch each time.
The Markup and Margin Calculator on this site converts between markup and margin instantly and shows you the GST-inclusive quote total.
Download our free NZ tradie quoting templates — including a job cost sheet with markup and margin fields pre-built — at tradietools.nz/templates/
NZ Tradie Tools provides free calculators, templates and guides for New Zealand tradies. Visit tradietools.nz.