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Markup vs Margin: What a Tradie Should Really Add to Materials

By Luke Tadich · The Tradie Owner

Markup and margin are not the same number

Here is the mistake that quietly bleeds trade businesses dry. Markup is the amount you add on top of what materials cost you. Margin is the slice of profit you keep out of the final price. They sound like the same thing. They are not. Say a batch of materials costs you $100 and you add 20% markup. You charge $120. Your profit is $20. But $20 out of a $120 sale is 16.7%, not 20%. So your 20% markup only handed you a 16.7% margin. Every tradie who prices at '20%' believing they pocket 20% is short-changing themselves on every single job. On a $50,000-a-year materials spend, that gap is real money walking out the door. Get the two words straight and you can fix your pricing in an afternoon.

The formula, and the one conversion that matters

• Markup % = (price − cost) ÷ cost × 100. It answers "how much did I add on top?"
• Margin % = (price − cost) ÷ price × 100. It answers "how much of the sale did I actually keep?"
• To hit a target margin, divide, don't multiply. Price = cost ÷ (1 − margin). Want a 30% margin on $1,000 of gear? $1,000 ÷ 0.70 = $1,428.
• The conversion cheat sheet: 20% margin needs 25% markup. 25% margin needs 33% markup. 30% margin needs 43% markup. 40% margin needs 67% markup. 50% margin needs 100% markup.
• Rule of thumb: decide the margin you want to keep, then convert it to the markup you type into the quote. Margin is the goal. Markup is the lever.

Worked example: $2,000 of materials on one job

1. Materials cost you $2,000. That is straight off the supplier invoice, before you have lifted a finger.
2. You add "20%" the way most tradies do. You charge $2,400 and feel like you banked 20%. You did not. Your margin is 16.7%, so you actually kept $400.
3. Now price for a genuine 20% margin. $2,000 ÷ 0.80 = $2,500. That is a 25% markup. You keep $500.
4. That is an extra $100 on one job for zero extra work. Same materials, same labour, same client. Run 80 jobs a year and you just found $8,000 you were quietly handing back to nobody.
5. Want a 30% margin? That is a 43% markup, so you charge $2,857. On materials that carry pickup time, delivery, wastage, price rises and warranty risk, that is fair pay, not gouging. The bloke marking up 10% is not cheaper than you. He is just going broke slower.

So what should you actually add to materials? For most Australian trades, a defensible markup sits between 25% and 40%. Go lower and you are barely covering the cost of handling the stuff. That markup is not padding. It pays for the hours you spend sourcing and chasing gear, the ute runs to the supplier, the wastage and offcuts you eat, the price rises between quote and invoice, the warranty you carry on the goods, and the cash you float while you wait 30 or 60 days to get paid. Charge nothing for all of that and you are running a supply business for free on top of your trade. One warning though. Materials are only half the story. The bigger leak for most tradies is an under-cooked labour rate, so run your numbers through the free charge-out-rate calculator before your next quote. And if you want a sharper set of eyes across the whole business, book a free strategy session. Thirty minutes, and you leave with the blueprint whether or not we work together.