Guide · Pricing
Markup vs. profit margin: a builder's guide to pricing projects
Most builders quote with markup and assume they're earning margin. They are not the same number — and the gap is usually where the profit goes.
The definitions, in one line each
Markup is how much you add on top of your cost. Margin is what's left in your pocket after cost, as a share of the price the client paid.
The formulas
- Markup % = (Price − Cost) ÷ Cost × 100
- Margin % = (Price − Cost) ÷ Price × 100
Why the difference matters
A 20% markup on a project that cost you ₦10,000,000 produces a price of ₦12,000,000 — but your margin is only 16.7%. A 30% markup gives you a 23.1% margin. To actually earn a 30% margin, you need a 42.9% markup. Builders who confuse the two routinely under-price by 5–10 points of profit.
| Markup applied | Resulting margin |
|---|---|
| 10% | 9.1% |
| 20% | 16.7% |
| 30% | 23.1% |
| 40% | 28.6% |
| 50% | 33.3% |
| 100% | 50% |
How to price for a target margin
Decide the margin you need first. Then derive the markup:
Markup needed = Margin ÷ (1 − Margin)
Target a 30% margin? Apply a 42.9% markup. Target 40%? Apply 66.7%. Target 25%? Apply 33.3%.
Common pitfalls on site
- Variations priced at cost +10%. That's a 9% margin on changes that often introduce the most risk.
- Overheads missing from "cost". If your cost line is only materials and direct labour, your markup must cover overhead before it becomes profit.
- Discounting at the end. A 10% discount on a 25% margin project leaves you with 16.7%. Never give a discount you haven't first checked against margin.
Where Ordit fits
Ordit tracks contract value, funds received, and money spent per project — and shows margin in real time, separately from what the client sees. That way you can price with confidence and defend the number when scope shifts. Book a demo to see it on your own project.