Markup ≠ Margin: The Pricing Mistake Costing Builders Thousands

You're landing jobs. Your crew's busy. Work's getting done.

But the profit? Still not showing up. Chances are, it’s not your hustle that’s broken. It’s your math.

One of the biggest (and most expensive) mistakes we see builders make is confusing markup with margin — and it's bleeding profits from good businesses every day.

We decided to break this down for you and even scrape together a calculator for you to easily understand what pricing you should be setting.

Key Notes

  • Learn the real difference between markup and margin — and why it matters

  • See the exact math behind pricing for true profit, not guesswork

  • Discover the costly risks of underpricing due to margin confusion

  • Get the fix: how to build buffer-based, margin-first quotes

  • Hear how one contractor boosted gross profit by 43% using these strategies

Markup ≠ Margin

Markup = how much extra you tack onto your costs.
Margin = how much actual profit you keep from the sale.

If you don’t understand the difference, you’ll consistently underprice your jobs, miss your profit targets, and wonder where your cash is going.


Let’s say a job costs you $1,000. You mark it up by 30%.
$1,000 × 1.30 = $1,300

You make $300 profit. So your margin is:

$300 ÷ $1,300 = 23%

You thought you priced for 30% profit. But you’re only getting 23%. You want a 30% margin instead.

You need to charge: $1,429


Because $1,429 − $1,000 = $429 profit
And $429 ÷ $1,429 = 30%


So to make a 30% profit margin, you have to mark up by 42.9% — not 30%.

Why it Matters?

If you confuse the two:

  • You'll underprice every job

  • Your margins will shrink without you noticing

  • You’ll work just as hard for less take-home

Real-World Example: From Leaking Profit to 43% Growth

In Episode 1 of The Scale Up Project, we sat down with Eric Fortenberry — founder of JobTread and the guy that 6,500+ contractors trust to help them price right.

Eric shared the story of a $5M construction company that was bleeding cash. They were pricing everything using markup and missing their margins by a mile.

Here’s what changed when they brought JobTread in:

  • Switched to margin-based pricing

  • Built templates that auto-calculated true profitability

  • Replaced “gut-feel” quotes with scalable job budgets

The result? Revenue jumped from $5M → $8M, and gross profit grew by 43% in one year.

The Snowball Effect of Getting It Wrong

Getting this one thing wrong doesn’t just mess with your margins — it creates a domino effect:

  • You can’t confidently invest in growth

  • Your pricing misaligns with your delivery model

  • You end up taking on more jobs just to break even

So How Do You Fix It?

  • Use margin-based pricing tools (not napkin math)

  • Build budgets before selling jobs — every cost accounted for

  • Align how you price, hire, and deliver — no more guessing

  • Review job profitability in real time so you can course-correct early

  • Track job overruns — and build buffers into future quotes → The more you review, the better you’ll predict timelines and price with confidence.

  • Set your margin target — and work backward → Want a 30% margin? Add 5% as a buffer. Price with a clear goal in mind — not just what feels fair.n one year.

This Lesson Came from Episode 1 of The Scale Up Project

We launched The Scale Up Project for construction and home improvement business owners who want to scale smarter — not harder.

From marketing to hiring, operations to sales strategy, we dig into what actually works.

Episode 1 features Eric Fortenberry, and covers:

  • Why most contractors get margin vs. markup wrong

  • How to build profitability into your pricing

  • Real tactics to help you scale profitably

Listen on Spotify

Plug In Your Costs & Set Your Target Margin

We built a free calculator to help you see exactly how much to charge to hit your true margin goals.

Run the Numbers

Frequently Asked Questions

Frequently Asked Questions

How do I choose a realistic margin target for my business?
Is there an industry standard margin for contractors?
How often should I review and adjust my pricing strategy?
Can I train my team to build margin-based estimates?
Are there tools that automate margin-based pricing?
How do I choose a realistic margin target for my business?
Is there an industry standard margin for contractors?
How often should I review and adjust my pricing strategy?
Can I train my team to build margin-based estimates?
Are there tools that automate margin-based pricing?
How do I choose a realistic margin target for my business?
Is there an industry standard margin for contractors?
How often should I review and adjust my pricing strategy?
Can I train my team to build margin-based estimates?
Are there tools that automate margin-based pricing?

Conclusion

Understanding the real difference between markup and margin is the difference between a busy business and a profitable one. If you’re not reviewing your job performance, setting clear margin goals, and accounting for overages, you’re guessing your way through quotes.

Smart pricing isn't about charging more; it’s about charging right.

Want to see how your numbers stack up and what you should be charging? Book a free consultation with us and let’s walk through it together.

Your Full Stack Performance Driven SEO Agency

Contact Us

0207 856 0455

cb@digitalrainmaker.co.uk

Silverstream House, 45 Fitzroy Street, London, WIT 6EB

Get in Touch

Your Full Stack Performance Driven SEO Agency

Get in Touch

Contact Us

0207 856 0455

cb@digitalrainmaker.co.uk

Silverstream House, 45 Fitzroy Street, London, WIT 6EB

Your Full Stack Performance Driven SEO Agency

Contact Us

0207 856 0455

cb@digitalrainmaker.co.uk

Silverstream House, 45 Fitzroy Street, London, WIT 6EB

Get in Touch