How to calculate markup on materials and labor

October 4, 2026 · 6 min read

Every line item on your estimate has a cost (what you pay) and a price (what you charge). The difference is your markup — and if the markup doesn't cover your overhead, you're paying to work. Here's how to set it deliberately instead of guessing.

Markup vs. margin

The two terms measure the same money from opposite directions:

• Markup is a percentage added to cost: price = cost × (1 + markup). A $100 item with 50% markup sells for $150.
• Margin is profit as a percentage of price: (price − cost) ÷ price. That $150 sale has a 33% margin, not 50%.

The trap: thinking a 30% markup earns you 30% profit. It earns 23%. When you hear "aim for 50% margin," the markup you need is 100%.

Material markup

Materials cost you more than the invoice from the supplier: time to source them, trips to pick them up, storage, warranty exposure when a part fails, and the risk of damage on site. Typical material markups:

• 10–30% on large-ticket materials (lumber packages, appliances, fixtures).
• 30–100% on small parts — screws, fittings, hardware — where the handling cost outweighs the sticker price.

Ranges vary by trade and region. The rule that holds everywhere: markup materials at least enough to cover handling and warranty, and don't hand clients your supplier pricing.

Labor markup

Your labor cost is never just the hourly wage. The "burdened" rate includes payroll taxes, workers' comp, insurance, benefits, and the unpaid hours (travel, quoting, paperwork) that keep the business running. On top of that rate, add your profit.

Example: you pay a worker $35/hour. Burden adds roughly 25–40%, making the real cost about $45–49/hour. Charge $70–90/hour and the business keeps the difference to cover overhead and profit. If you bill clients your raw wage, every job loses money before it starts.

A worked example

Deck repair, materials cost $1,200, labor estimated at 24 hours:

• Materials at 25% markup: $1,200 × 1.25 = $1,500
• Labor at $75/hour: 24 × $75 = $1,800
• Contingency at 5%: $165
• Estimate total: $3,465 plus tax on taxable items

Common mistakes

• Margin/markup confusion. Pricing at 30% markup expecting 30% profit leaves 7 points on the table.
• Forgetting overhead. Truck payments, insurance, and tool replacement are real line items even when they don't appear on the estimate.
• Discounting labor to win bids. Materials you can pass through; labor is where your profit lives. Cutting labor is cutting your own pay.

Putting it on the estimate

FieldLog is an Android app that builds estimates offline — no account or internet connection required. Each line item carries its own quantity and unit price, so you can apply your markup item by item and see the totals add up. You can mark individual line items as taxable or non-taxable, apply an estimate tax rate, and generate a branded PDF with your company details to share with the client. The free plan includes 3 estimates per month.

Related guides

• How to write a construction estimate
• How long should an estimate be valid?