Margin
The profit above the stated cost base expressed as a percentage of the selling price.
Definition
Margin is calculated as profit divided by selling price. State the cost base and what is included before using it as a pricing target.
Example in practice
Hypothetical arithmetic, not a recommended pricing policy.
| Calculation on £100 cost | Selling price | Profit | Margin |
|---|---|---|---|
| Add a 20% mark-up on cost | £120 | £20 | 16.67% |
| Price for a 20% margin | £125 | £25 | 20% |
For a 20% margin, selling price = £100 ÷ (1 − 0.20) = £125. A 20% mark-up is £100 × 1.20 = £120.
Use the term carefully
Check whether the cost base includes project preliminaries and business overhead. Keep the approved uplift visible and avoid applying it again to a package that already includes it.
Compare mark-up and overheads and profit. Use the margin review guide for a worked project example.
Put this into practice on your next project
Your first complete project is free, including the estimate, risk information, client reports and internal reports. Bring your drawings, specification and site notes, then review the working against how your business will deliver the job.