Pricing guide
Markup versus margin for remodelers
Understand the difference between adding markup to cost and protecting a target gross margin before pricing work.
By Tyler Thompson, residential remodeling contractor and product founder · Updated 2026-08-24
Answer first
Markup is added to cost; margin is the share of the selling price left after that cost. A 25% markup produces a 20% gross margin—not 25%.
Working calculator
Translate markup and margin
- Selling price
- $100,000
- Gross profit
- $20,000
- Result
- 25.0% markup
20.0% gross margin
Planning aid only. It does not determine whether the estimate contains every cost or whether the price covers overhead, risk, taxes, warranty, and net-profit requirements.
The formulas
- Selling price = cost × (1 + markup rate)
- Gross margin = (selling price − cost) ÷ selling price
- Required selling price for a target margin = cost ÷ (1 − target margin)
Example
If estimated cost is $80,000 and the company applies a 25% markup, selling price is $100,000 and gross margin is $20,000 ÷ $100,000 = 20%. To target a 25% margin on $80,000 of cost, selling price is $80,000 ÷ 0.75 = $106,666.67.
What the math does not solve
- Whether every project cost has been included
- Overhead recovery and company net-profit requirements
- Risk, contingency, financing, taxes, or warranty exposure
- Whether the market and scope support the price
- Actual cost tracking after the estimate