Markup is not margin, and the difference is your wages

This is the most expensive arithmetic mistake in the trades, and it is made by people who are extremely good at their actual job.

Markup is what you add to your cost. Margin is what is left of the selling price.

They are not the same number, and the gap between them is wider than almost everyone assumes.

The arithmetic

A part costs you $100. You add 30%. You sell it for $130.

Your profit is $30 on a sale of $130. That is 23%, not 30%.

Run it the other way. You want to keep 30% of the selling price. You need to sell that $100 part for $142.86, because $42.86 is 30% of $142.86. That is a markup of nearly 43%.

The formula:

selling price = cost ÷ (1 − desired margin)

The table worth taping to the van

You want this margin	Multiply cost by	Which is a markup of
10%	1.11	11%
15%	1.18	18%
20%	1.25	25%
25%	1.33	33%
30%	1.43	43%
35%	1.54	54%
40%	1.67	67%
50%	2.00	100%

Look at the 40% row. To keep forty cents of every dollar, you have to sell at nearly double your cost. A contractor adding "40% markup" and believing they have a 40% margin is actually running at 29% — and wondering every December where the money went.

Why this matters more than it looks

On a $1,800 job with $900 of materials and subs:

• Markup 30% on cost → price $1,170 of margin thinking, actual margin 23%
• On a year of 150 jobs, that seven-point gap is tens of thousands of dollars

And the gap is not evenly distributed. It is worst on material-heavy jobs — exactly the ones where you are fronting money and carrying risk.

The second mistake: marking up only materials

Plenty of estimates apply markup to parts and charge labour at a flat hourly rate that was set three years ago and has never been examined.

Your hourly rate has to carry:

• the technician's wage and payroll taxes
• insurance, workers' comp, bonding
• the van, fuel, maintenance, tools
• unbillable hours — driving, quoting, chasing suppliers, the callback
• the office hours nobody pays for
• and then profit, which is what is left

A rate built from wage plus a bit is not a rate. It is a wage with extra steps.

Where the leak hides

Three places, in order of how much they cost:

Discounting at the door. "I'll do it for $1,600." That $200 came entirely out of margin — all of it, not a proportion. On a 23% margin job, a $200 discount on $1,800 removes almost half your profit.

Unpriced change work. The extra valve, the second trip, the hour of moving furniture. Done as a favour, invisible on the invoice, straight out of the same pocket.

Materials quoted from memory. You priced it at what it cost last time you bought it. Supplier pricing moved and your estimate did not.

Fixing it without raising prices

Before touching your rates, do these:

1. Recalculate every selling price with the divide-by formula, not the multiply-by habit.
2. Put a real expiry date on estimates so material moves do not become your problem.
3. Price change work the moment it is agreed, not at the end.
4. Write the discount as a line — "goodwill adjustment −$200" — so you can see, at the end of the year, what being agreeable actually cost.

That last one is uncomfortable and it is the most useful report you will ever run.

Keeping the catalog honest

All of this depends on knowing your real cost per line, which means a catalog you actually maintain rather than numbers you remember.

In Pro Speak Artisan, each trade arrives with its line items and units, and you set your own prices once. Every estimate after that is built from those numbers — so when supplier pricing moves, you change it in one place, not in your head on forty driveways. The accounting export then hands your bookkeeper the real figures rather than a reconstruction.

Margin is not a mindset. It is division.