What is the Difference Between Construction Markup and Margin

Markup is what you add to your job costs so you can cover overhead and make a profit. Profit margin is the percentage of revenue you actually keep after covering all costs. Think of markup as what you charge above your costs. Think of margin as what stays in your account after the job is done. They work together, but they are not the same. Confuse the two, and you can end up winning a job that doesn’t pay.

Construction Profit Margin Explained

Construction profit margin is the percent of your total revenue that remains as profit after all costs are paid. That includes materials, labor, equipment, subs, and overhead.

Example
You bid a site development project for $1,250,000
Your total job costs come in at $1,100,000
Your profit is $150,000
Your profit margin is $150,000 divided by $1,250,000, which equals 12 percent

This number tells you how efficiently your business turned revenue into actual profit. It’s not about what you charge. It’s about what you keep.

Construction Markup Explained

Markup is what you add to your job costs to reach your desired profit. If your direct costs are $1,100,000 and you want to earn $150,000, you mark up your costs accordingly.

It’s a pricing tool
Markup is applied before the bid goes out
Margin is measured after the job is done

Example
You want a 12 percent profit margin on a $1,100,000 cost base
Use the formula:
Markup % = 0.12 ÷ (1 – 0.12) = 13.64 percent

Apply that markup:
$1,100,000 × 1.1364 = $1,250,040
Bid total = $1,250,040
Profit = $150,040
Profit margin = 150,040 ÷ 1,250,040 = 12 percent

This is how you price the job right the first time and protect your margin before you submit the bid.

Why Construction Markup and Margin Matter

If you use the wrong markup for the margin you want, you’re leaving money behind. A $10,000 miss on markup could erase most of your profit.

Getting this math right matters at every stage: Estimating, bidding, change orders, job tracking, and final invoicing.

How to Calculate Profit Margin in Construction

Profit Margin = Profit ÷ Revenue

Example
You bid a curb and sidewalk job for $550,000 Your total cost comes in at $500,000 Your profit is $50,000 Profit margin = $50,000 ÷ $550,000 = 9.09 percent

You didn’t hit your 10 percent target. Why? You marked up 10 percent on cost but didn’t account for the margin math.

How to Calculate Markup in Construction

To hit a target profit margin, you need to reverse-engineer the correct markup. Use this formula:

Markup % = Target Profit Margin ÷ (1 – Target Profit Margin)

Example
Target margin: 10 percent
Markup = 0.10 ÷ (1 – 0.10) = 11.1 percent

If job cost is $500,000
Add $55,555
Bid = $555,555
Now you hit your 10 percent margin

This formula ensures your bids cover all costs and protect your profit.

Common Construction Profit Margin vs. Markup Mistakes (and How to Avoid Them)

Mistake 1: Using the same markup across all projects

Every job has different risks. Use custom markups based on scope and cost structure.

Mistake 2: Ignoring rising overhead

As your business grows or adds tech and equipment, your true costs go up. Review and adjust your markup regularly.

Mistake 3: Confusing markup and margin

They’re not interchangeable. Using markup thinking when tracking margin leads to bad decision-making.

Mistake 4: Not reviewing actuals vs estimates

If you’re not checking projected margins against real results, you’re flying blind.

Markup and Margin: Why They Matter at Every Stage

Estimators
Markup accuracy means your bids are sharp and profitable.

Project Managers
Knowing how margin erodes over time helps PMs flag scope creep and slippage.

Executives and Owners
Margin is a key measure of job health. It tells you if your company is making real money or just staying busy.

Materials and Your Margin: Where Money Disappears Fast

Materials are one of the easiest ways profit leaks out of a job. Here’s how to lock that down:

• Negotiate better bulk pricing
• Watch waste like a hawk
• Mark up landed costs, not just line items
• Track delivery overruns and returns digitally

Just a few percent lost in material margin can wipe out profit on a $1 million job.

Your Margin Moves When You Use the Right Tools

Manual math and spreadsheets invite mistakes. Good estimating software and quoting tools make margin protection easier and faster.

Online marketplaces like Bulk Exchange don’t just connect you to suppliers. They help you:

• Track real-time pricing
• See margin impacts before you bid
• Quote jobs faster and smarter

Better tools mean fewer errors and more control over your bottom line.

→Markup builds your price

→Margin shows your profit

→Know the difference, and use both like a pro

Because in construction, you don’t just win jobs by bidding low. You win by bidding smart and keeping your money when the job’s done.