Setting the Right Profit Margin

Markup is the percentage added on top of your total costs to arrive at a selling price. It's calculated against your cost base — not the final price the client pays.

• Markup is expressed as a percentage of your cost
• Formula: Selling Price = Total Cost × (1 + Markup %)
• A 25% markup on £1,000 of costs gives a selling price of £1,250
• The £250 profit represents 25% of cost, but only 20% of the selling price
• Markup is commonly used in product-based industries and materials purchasing

Markup always produces a lower margin than it appears. A contractor who thinks they're making 30% profit but is using markup is actually achieving around 23% margin on their revenue.

Margin is the percentage of the final selling price that is profit. It's the more accurate measure for understanding how much of every pound your client pays is actually profit to your business.

• Margin is expressed as a percentage of your selling price
• Formula: Selling Price = Total Cost ÷ (1 − Margin %)
• A 25% margin on £1,000 of costs gives a selling price of £1,333
• The £333 profit represents exactly 25% of the £1,333 selling price
• Margin is the standard measure used in financial reporting and business planning

QuickEstimate uses margin by default because it gives you a true picture of profitability. You always know exactly what percentage of your revenue is profit — no mental gymnastics required.

There's no single correct margin — the right number depends on your trade, your market, your overheads, and your business goals. Here's how different sectors typically approach it.

• General building and renovation: typically 15–25% net margin
• Electrical and plumbing: typically 20–30% net margin due to specialist skills and liability
• Landscaping and groundworks: typically 15–20% net margin on larger contracts
• Specialist finishes (tiling, plastering, painting): 20–35% given lower material costs relative to skilled labour
• Large commercial contracts: often 10–15% margin at higher volume
• Higher risk, complexity, or specialist knowledge justifies a higher margin

These are benchmarks, not rules. If your overheads are high, your margin needs to be higher. If you're the only specialist in your area, your margin can reflect that too.

Your minimum viable margin is the floor below which you cannot go without losing money. Understanding it protects you from underpricing under competitive pressure.

• Start with your annual overhead total from your overhead calculation
• Add the annual salary or drawings you need to pay yourself
• Add a reserve for tax, equipment replacement, and contingency
• Divide this combined figure by your projected annual revenue
• The result is your minimum margin — anything below this means trading at a loss
• Add your desired profit on top to arrive at your actual target margin

This exercise often surprises contractors. Many discover their minimum viable margin is already higher than what they've been charging — making it clear why cash flow has felt tight.

Once you know your target margin, enter it as your default in QuickEstimate. It will be applied automatically to every estimate — with full flexibility to adjust on individual jobs.

• Go to Settings → Pricing Defaults and enter your target margin percentage
• Choose whether margin is applied to total job costs or direct costs only (excluding overhead)
• QuickEstimate calculates and displays the profit amount alongside your margin percentage
• Override the margin on any individual estimate without changing your default
• View margin performance across all completed jobs in the Profitability Report

QuickEstimate shows both the margin percentage and the actual profit figure on every estimate summary, so you always see the real monetary value — not just a percentage.

Not every job warrants the same margin. Some situations call for a premium; others may be priced more keenly to win volume or a valuable new client relationship.

• Increase margin for tight timelines, difficult access, hazardous conditions, or specialist skills
• Increase margin on first jobs with a new client where risk is unknown
• Reduce margin slightly on large-volume, repeat, or long-term contract work where certainty justifies it
• Never reduce margin simply because a competitor is cheaper — understand why they're cheaper first
• Document any margin adjustments in the estimate notes so you can track your decision-making over time

QuickEstimate lets you adjust margin at the estimate level at any time before sending. Your default remains unchanged — only the individual job is overridden.