Definition
Markup is the amount added to the cost of materials, subcontractors, or expenses when they are billed to a client, expressed as a percentage of cost. A 20 percent markup on a $100 part bills the client $120. Markup covers procurement time, risk, and carrying costs and is distinct from margin, which is calculated on the selling price.
Markup in practice
State your markup policy in the contract. Some clients prefer pass-through costs with a separate handling fee; others accept a marked-up price without a breakdown.
Frequently Asked Questions
What is the difference between markup and margin?
Markup is profit as a percentage of cost; margin is profit as a percentage of price. A $100 cost sold for $125 has a 25 percent markup but a 20 percent margin.