The markup vs margin trap
Markup is your profit divided by your cost. Margin is your profit divided by the price. It's the same dollars of profit, measured against two different numbers — so the two percentages are never equal.
Say a job costs you $100 and you mark it up 50%. You charge $150 and make $50. But $50 is only a third of $150, so your margin is 33.3%, not 50%. To keep half of the price as gross profit, you have to charge $200 — a 100% markup.
The trap is setting a margin goal (say, from your budget) and then pricing with a markup of the same number. Every job comes in under your goal, and the gap gets bigger the higher the number. Pick one way to talk about pricing, and convert with the table below when you need the other.
Markup → margin
| Markup on cost | Gross margin you actually get |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50% |
| 150% | 60% |
| 200% | 66.7% |
How it works
- Job cost = parts + labor cost + overhead allocation (if you enter one).
- From a target margin: price = job cost ÷ (1 − margin). Divide, don't multiply.
- From a markup: price = job cost × (1 + markup).
- Converting: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin).
Things this leaves out
- Overhead, if you leave it at 0. Then the margin shown is gross margin on direct cost. Rent, office staff, marketing, and your own pay still come out of it. Add an overhead allocation to see what's left after those.
- Callbacks and warranty. A return trip costs labor you won't bill.
- Sales tax, financing fees, and card fees. Handle those however your state and your processor require.
We don't quote typical HVAC markups or margins here because we haven't found a solid public source for them. That's what the anonymous Owner Numbers survey collects, so owners can compare against real peers.
Related tools
Pricing a flat-rate task from labor hours? The markup vs margin & flat-rate price calculator builds the job cost from hours and your loaded labor rate. To find that loaded rate, use the HVAC break-even hourly rate calculator. Pricing a maintenance plan? Try the HVAC maintenance agreement calculator. To see net profit on a job after overhead and commission, use the HVAC job profit calculator. Weighing a price increase? The HVAC price increase calculator shows your new gross profit and how many jobs you could lose and still break even. Pricing an install with overhead, commission, and a financing fee taken out of the price? The HVAC install job pricing calculator shows the price and the markup multiplier it takes.