If your accountant says you need 25% profit margins and you're adding 25% to your costs, you're making less than you think. Markup and margin are not the same thing — and confusing them is one of the most common pricing mistakes in the trades.
The Difference, Simply Explained
**Markup** is the percentage you add to your cost price to get the selling price.
**Margin** is the percentage of the selling price that is profit.
Example: You buy a boiler for £1,000.
- Add 25% markup → selling price is £1,250, profit is £250
- Your margin? Only 20% (£250 ÷ £1,250)
A 25% markup gives you a 20% margin. Not the same!
Why It Matters
Say you're aiming for 25% profit margins across your business. If you're applying 25% markup to everything, your actual margin is only 20%. Over £200,000 of annual revenue, that's £10,000 less profit than you expected.
The Conversion Formula
- **Markup to margin**: Margin = Markup ÷ (100 + Markup) × 100
- **Margin to markup**: Markup = Margin ÷ (100 − Margin) × 100
Or just use our [free markup calculator](/tools/markup-calculator) — it does the maths for you.
Common Trade Markups
| Trade | Material markup | Effective margin |
| --- | --- | --- |
| Plumber (parts) | 20–30% | 17–23% |
| Electrician (cable, fittings) | 15–25% | 13–20% |
| Builder (bulk materials) | 10–20% | 9–17% |
| Kitchen fitter (units) | 25–40% | 20–29% |
The Right Approach
1. Know your target margin (ask your accountant)
2. Convert that margin to the equivalent markup
3. Apply that markup to your material costs
4. Track actual margins on completed jobs (Gaffer does this automatically)
If you're aiming for 25% margin, you need a 33% markup. Not 25%.
Track It Job by Job
The problem with annual averages is they hide the bad jobs. Some jobs make you 40% margin. Others lose money. You need to track profitability per job to know which types of work are actually profitable. Gaffer's job costing feature shows you real-time margins on every job — materials, labour, and overheads.