What is the difference between markup and gross margin?
By the YardPilot team · Updated · 4 min read
Short answer
Markup is profit divided by cost; gross margin is profit divided by price. The same dollar profit gives a bigger markup percentage than margin percentage. A 40% markup on a $500 job is $700 — only a 28.6% margin. To earn a 40% margin, you need a 66.7% markup ($833.33).
Same profit, different percentage
Take a job that costs $500 and sells for $700. Profit is $200. As markup, that's $200 ÷ $500 = 40%. As margin, it's $200 ÷ $700 = 28.6%. Both describe the same job — they just divide by different numbers.
Why it matters
Many owners decide they need "40%" and add 40% to cost. If what they actually needed was a 40% margin to cover overhead and profit, every job comes in more than 11 points short. Over a season, that gap can be the difference between growing and treading water.
Converting between them
Use these formulas:
- Markup = margin ÷ (1 − margin)
- Margin = markup ÷ (1 + markup)
- 20% margin = 25% markup
- 30% margin ≈ 42.9% markup
- 40% margin ≈ 66.7% markup
- 50% margin = 100% markup
Let the software do the math
YardPilot prices for gross margin directly — total cost ÷ (1 − target margin) — and shows the equivalent markup so you can compare with how you've priced before.
Price every job from your own numbers
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