Markup vs Margin: Understanding the Difference
Markup and margin are often confused. Markup is added to cost; margin is percentage of selling price. A 25% markup = 20% margin.
Last updated: 2026-02-27
Material Markup Calculator
Calculate material markup, costs, and profit margins for lumber, hardware, and supplies with cost plus pricing and margin analysis.
Markup Analysis Profit Margins Pricing Strategy Cost Structure
Material Pricing Parameters
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Markup Analysis
Add materials and business parameters to calculate optimal markup percentages and pricing strategies.
Markup should reflect handling, storage, risk, and market conditions. Consider supplier relationships and competitive positioning for optimal pricing.
How to Use This Calculator
- 1 Select Business Type Choose Craftsperson, Shop, Contractor, Retailer, Distributor, or Custom.
- 2 Add Materials Add materials with cost, quantity, and category for markup analysis.
- 3 Business Parameters Set handling, storage, risk, and target profit margin percentages.
- 4 Market Analysis Enter competitor markup, market position, volume discount, and seasonal factor.
Pro Tip: Different materials warrant different markups. Specialty hardwoods: 30-50%, construction lumber: 20-35%, hardware: 40-60%, finishes: 35-50%. Adjust based on availability and handling difficulty.
Selling Price = Cost x (1 + Markup%); Margin = Profit / Selling Price | Material Category | Craftsperson | Shop | Contractor | Retailer |
|---|---|---|---|---|
| Hardwood Lumber | 25-35% | 30-40% | 20-30% | 40-60% |
| Softwood Lumber | 20-30% | 25-35% | 15-25% | 35-50% |
| Plywood/Sheet | 20-30% | 25-35% | 15-25% | 35-50% |
| Hardware/Fasteners | 30-50% | 40-60% | 25-40% | 50-100% |
| Finishes/Adhesives | 25-40% | 35-50% | 20-35% | 40-70% |
| Specialty Materials | 30-50% | 40-60% | 25-45% | 50-80% |
Markup varies by market, volume, and business model. Use as starting reference.
Markup Optimization Tips
- Tiered Pricing: Higher markup for small quantities, competitive for bulk orders
- Supplier Relationships: Negotiate volume discounts — pass through partially to maintain margin
- Seasonal Adjustment: Increase markup 10-20% during peak demand seasons
- Waste Factor: Include 5-15% waste factor in material cost before applying markup
- Review Quarterly: Track actual vs. projected margins and adjust for market changes
Glossary of Terms
Percentage added to cost to set selling price. Cost + Markup = Selling Price. A 25% markup on $100 cost = $125 selling price.
Profit as percentage of selling price. Profit / Selling Price = Margin. $25 profit on $125 selling price = 20% margin.
Pricing method adding fixed percentage to material cost. Simple but may not reflect market value or competitive positioning.
Expenses for receiving, storing, and managing inventory. Includes labor, space, and damage risk. Typically 5-10% of material cost.
Percentage added for price volatility, damage, waste, and returns. Higher for specialty materials (5-10%), lower for standard (2-5%).
Frequently Asked Questions
What markup percentage should I use for lumber?
Lumber markup ranges: Craftsperson 25-35%, Small shop 30-40%, Retailer 40-60%. Consider handling costs, storage, and market positioning.
How do I factor in handling and storage costs?
Handling: 5-10% (receiving, inspection, handling labor). Storage: 3-8% (space, climate control, inventory management). Include in base cost before markup.
Should I use different markups for different materials?
Yes. High-value items: lower markup%. Bulk materials: higher markup%. Specialty items: premium markup. Adjust for handling and storage difficulty.
How do volume discounts affect markup strategy?
Volume discounts from suppliers can be passed to customers or retained. Consider tiered pricing: small qty (full markup), medium (partial discount), large (competitive).
How often should I review markup percentages?
Quarterly or when major changes occur: supplier prices, market conditions, competition. Track actual vs. projected margins and adjust.
What is the difference between markup and margin?
Markup: percentage added to cost. Margin: profit as percentage of selling price. 25% markup = 20% margin. Use markup for pricing, margin for profitability analysis.