Markup vs margin: the math estimators get wrong on every other quote

A surprising number of fit-out estimators use markup and margin as if they were the same word. They are not, and confusing them is one of the cheapest ways to lose money on a quote.

Two minutes, a worked example, then back to work.

The two formulas

Markup is on top of cost:

sell = cost × (1 + markup)

If your cost is $80 and your markup is 25%, your sell rate is $100.

Margin is a share of sell:

margin = (sell − cost) / sell

Same numbers — cost $80, sell $100 — your margin is (100 − 80) / 100 = 20%.

So: a 25% markup gives you a 20% margin. Not 25%.

Why this matters

Suppliers quote you in cost. Clients see sell. The number you actually keep is margin. If you mentally treat your 25% markup as your 25% margin, you have already given yourself a 5-percentage-point haircut on every line — and on a $40,000 fit-out quote that is $2,000 you thought you had banked but did not.

Multiply across a year of quotes and the gap is meaningful.

A working example

Suppose you are quoting 100 m of 100mm 40kg drywall partition.

Field	Value
Cost	$80 / m
Markup	1.25× (25%)
Sell	$100 / m
Total cost	$8,000
Total sell	$10,000
Profit	$2,000
Margin	20%

Now suppose you wanted a real 25% margin instead of a 25% markup. You would need:

sell = cost / (1 - margin)
sell = 80 / (1 - 0.25)
sell = 80 / 0.75
sell = $106.67

Markup of 1.33× gives a 25% margin. The markup that matches a target margin is always a bigger number than the margin.

A cheat sheet

Target margin	Required markup
10%	1.11×
15%	1.18×
20%	1.25×
25%	1.33×
30%	1.43×
40%	1.67×
50%	2.00×

Print it. Tape it to your monitor.

Why we expose both in Quotiqa

The pricing card takes a markup and a cost, computes the sell, and shows the margin live. The estimator can think in either direction:

• "I want a 1.25× markup" → margin chip shows 20%, decide if that is enough
• "I want a 22% margin" → adjust markup to ~1.28× until the chip says 22%

The chip is the answer. The chip is what your business cares about. The markup is just the lever you happen to be pulling.

What to do today

Open last quarter's quotes. Compute margin properly: (sell − cost) / sell, line by line. Compare to what you thought you were charging. If you have been thinking in markup but answering in margin (or vice versa), the gap is the size of your annual error.

Then come back to a tool that surfaces both. We are biased about which one — but the margin sandbox in the simulator is interactive if you want to play with the math before deciding.