Guide · Markup and margin
Markup vs. margin: a 30% markup leaves a 23.08% margin.
If a project costs you 100 and you add 30%, you charge 130. The profit is 30, but 30 ÷ 130 is 23.08%. Same profit, a different base for the percentage.
Profit, margin and markup
- Profit: the money left after the costs included in your calculation. Here, 130 − 100 = 30.
- Markup: profit divided by cost. Here, 30 ÷ 100 = 30%.
- Margin on price: profit divided by price. Here, 30 ÷ 130 = 23.08%.
“Margin on cost” sometimes means markup. Always check the base: cost or price. MargenClaro's target margin uses the price.
Formulas for converting markup and margin
Enter percentages as decimals: 30% = 0.30. These formulas assume a positive cost, with no fees or taxes.
Markup = margin ÷ (1 − margin)
Price = cost ÷ (1 − margin)
For a 30% margin on a cost of 100: 100 ÷ 0.70 = 142.857… Rounded up to two decimal places, the price is 142.86. Multiply the decimal margin or markup by 100 to display a percentage.
| Markup | Resulting margin |
|---|---|
| 10% | 9.09% |
| 20% | 16.67% |
| 30% | 23.08% |
| 50% | 33.33% |
| Target margin | Required markup |
|---|---|
| 10% | 11.11% |
| 20% | 25% |
| 30% | 42.86% |
| 50% | 100% |
With a positive cost, no finite price leaves a 100% margin. If costs and fees were zero and the price were positive, the margin would be 100%, but markup on zero cost cannot be calculated with this formula.
With a payment fee, don't add percentages to cost
Assume a cost of 100, a payment fee of 5% plus a fixed 0.50, and a target margin of 30%. Both the margin and percentage fee are shares of the price, so subtract them in the denominator:
(100 + 0.50) ÷ (1 − 0.05 − 0.30) = 154.615… → 154.62
| Method | Price | Fee | Profit | Margin |
|---|---|---|---|---|
| Add 30% + 5% to cost | 135.00 | 7.25 | 27.75 | 20.56% |
| 30% margin, no fee | 142.86 | 0.00 | 42.86 | About 30.00% |
| 30% margin, fee of 5% + 0.50 | 154.62 | 8.23 | 46.39 | About 30.00% |
In the last case, the fee is 154.62 × 5% + 0.50 ≈ 8.23; profit is about 46.39. Calculations keep intermediate decimal places; the table displays rounded amounts. Margin and percentage fee must total less than 100% to calculate a price with a positive cost.
Reproduce the example in the free calculator
Enter 1 hour at an internal hourly cost of 100; set direct costs, overhead and contingency to zero; enter a 5% fee plus 0.50 fixed, a 30% margin and zero tax. The calculated price is 154.62. Use the same currency for every amount.
Which margin should you use for a project?
Your target is a business decision. These formulas do not set a market rate or prove a client will accept your price. Include the real cost of your time, expenses and revisions, and agree on the scope before starting.
For step-by-step examples, our fixed-price project guide (in Spanish) explains how to build a cost estimate; our extra-revisions guide (in Spanish) shows what five additional hours change.
If you also need to save quotes and prepare client proposals, the optional downloadable toolkit is US$19, a one-time payment before tax. The free calculator needs no account.
Illustrative figures, before tax. Not tax or accounting advice.