M ARGIN VS. M ARKUP Avoid the pitfalls and increase your bottom line. 75% OF CONTRACTORS DON'T KNOW HOW TO PROPERLY ESTIM ATE THE M ARKUP THEY'LL NEED. Builders are often confused when it comes to margin and markup. The two terms reflect profit differently. Financial experts estimates that at least 75% of installation contractors don?t know how to estimate the markup they?ll need to cover job costs plus overhead and still turn their projected profit margins. Read t hrough our "Margin Vs. Markup" cheat sheet for everyt hing you need t o know.
LET'S TALK TERMINOLOGY. The t erms you need t o know before you can calculat e margins and markups.
Revenue:
COGS:
Gross Profit :
Earnings before deduct ing cost s
Cost s t o creat e sales it ems
Revenue - COGS
M ARGIN
M ARKUP
Margin shows the revenue earned after paying the COGS as a percentage of the gross profit.
Markup shows how much more your selling price is than the amount sale items cost you.
(Gross Profit / Revenue) X 100
(Gross Profit / Cost ) X 100
IS YOUR LACK OF UNDERSTANDING M ARGIN VS. M ARKUP AFFECTING YOUR PROFITABILITY? SPEAK W ITH A CLB FINANCIAL EXPERT
M ARGIN VS. M ARKUP Avoid the pitfalls and increase your bottom line. LET'S TALK CALCULATIONS. Now you know t he t erms, t he next st ep is learning how t o calculat e margins and markups. Const ruct ion Commodit ies
Trade & Management Product ion
+
FIND THE M ARGIN
=
Value-Added on Complet e Project
FIND THE M ARKUP
STEP 1: FIND THE GROSS PROFIT $200 - $150 = $50 Gross Profit
STEP 1: FIND THE GROSS PROFIT $200 - $150 = $50 Gross Profit
STEP 2: GROSS PROFIT / REVENUE $50 / $200 = 0.25 Margin
STEP 2: GROSS PROFIT / COGS $50 / $150 = 0.33 Markup
STEP 3: MARGIN X 100 0.25 X 100 = 25% Margin
STEP 3: MARKUP X 100 0.33 X 100 = 33% Markup 33% M ARKUP
25% M ARGIN
LET'S TALK PROFITABILITY. Margin and markup measure profit abilit y different ly. Each markup relat es t o a specific margin. M ARGIN
M ARKUP
M ARGIN
M ARKUP
10%
11.11%
30%
42.87%
15%
17.64%
40%
66.68%
20%
25%
43%
75.42%
25%
33.33%
50%
100%