A Visual Guide to Understanding Markup and Margin

To successfully price a job, there are a few basic terms you need to understand.

Accurately pricing your work depends on your knowing some key terms, including overhead, production costs, gross profit, target margin, and labor burden.

I’ve discussed these terms in detail in our recent Pricing the Job series:

• Price the Job Right, Starting with Overhead
• Profit is Not a Happy Accident
• Markup and Margin

To better understand the “math” related to these terms, I've compiled this quick visual guide. If you get these formulas down cold, and constantly use them to analyze your numbers, you’ll have a much greater chance of pricing jobs to make a profit.

To start, let’s consider the total dollars coming in as a result of sales as a lump amount represented by an undivided pie chart.