Understanding Markup and Margin

Markup and margin are crucial concepts that are often misunderstood in the context of business pricing and profitability. Markup refers to the percentage added to the cost of goods or services to determine the selling price, while margin represents the percentage of the selling price that is profit after costs are deducted. For instance, if a kitchen remodel costs $50,000 and is sold for $75,000, the markup would be calculated based on the cost, determining the price required to make a profit. It is essential for contractors to recognize that a high markup does not always equate to a high margin, illustrating the complexity in balancing these two factors for financial sustainability.