Mastering Markup and Margin for Landscapers and Trades
Accredited Suppliers, Sones Accountancy Services highlights how understanding the difference between markup and margin is the key to quoting confidently and keeping your profits in check.
Running a landscaping or trade business can feel similar to juggling power tools and picky clients. One minute you’re quoting a lawn makeover, the next you’re scratching your head over profit numbers. That’s where grasping the difference between markup and margin comes in, it’s like having the right wrench for a stubborn bolt.
What is markup?
Markup is the extra percentage you add to the cost of a job or product to set your selling price. Think of it as the ‘buffer’ that covers materials, labour and, fingers crossed, a tidy profit.
- Formula: (Selling Price – Cost) ÷ Cost
- Focus: How much you add on top of cost
- Use: Deciding how much to charge
Here’s a quick example: If materials and labour cost £800 and you apply a 25% markup, you would charge £1,000.
What is margin?
Margin shows what portion of the final selling price ends up as profit. It’s your reality check on how healthy each job really is.
- Formula: (Selling Price – Cost) ÷ Selling Price
- Focus: Profit as part of total price
- Use: Measuring overall profitability
Back to our example: Charging £1,000 on an £800 job nets £200 profit. So, your margin is 20% (£200 ÷ £1,000).
The key differences
- Markup is based on the cost of the product, while margin is based on the selling price.
- Markup is the percentage increase on cost, while margin is the percentage of profit on the selling price.
- Markup focuses on how much is added to the cost, while margin focuses on the profit as a percentage of the selling price.
The relationship
A bigger markup usually means a bigger profit margin, but they don’t grow at the same rate. For example, if you want a 50% profit margin, you need to add a 100% markup to your cost.
Wrapping up
Markup builds your price; margin reveals what you really keep. Both are vital in keeping your landscaping or trade business thriving. Next time you’re quoting or reviewing jobs, keep an eye on both: like making sure your mower blade is sharp and your engine well-oiled, mastering markup and margin keeps your profits trimming up nicely.
If you need a hand getting started, please feel free to contact us. Book a free non-obligation consultation: https://sonesaccountancy.co.uk/calendly-15-minute-call
