Markup vs Margin: Why It Matters for NZ Tradies
This is one of the most common pricing mistakes — and it can cost you thousands per year.
The Key Difference
Markup is calculated on your cost. Margin is calculated on your selling price.
| You apply | On a $1,000 job cost | You charge | Your profit | Markup | Margin |
|---|---|---|---|---|---|
| 20% markup | $1,000 | $1,200 | $200 | 20% | 16.7% |
| 20% margin | $1,000 | $1,250 | $250 | 25% | 20% |
If you say "I want to make 20% on this job" but calculate 20% markup, you're actually making 16.7% margin — not 20%.
Why Tradies Get Caught Out
Many tradies quote a "25% margin" but calculate it as markup. Over a year, this can mean losing tens of thousands of dollars in expected profit.
Example: - Annual materials spend: $200,000 - You think you're making 25% margin: expect $66,667 profit - But you calculated 25% markup: you actually made $50,000 - Shortfall: $16,667/year
The Formula
To get X% margin:
Selling price = Cost ÷ (1 - X/100)
To get X% markup:
Selling price = Cost × (1 + X/100)
Recommended Margins for NZ Tradies
| Item | Target gross margin |
|---|---|
| Labour | 25–40% |
| Materials | 15–25% |
| Subcontractors | 10–15% |
| Overall job | 20–30% |
Use Fergus or Simpro to track your actual margins job by job and see where you're winning and losing.