Markup or margin? Why a 50% markup is only a 33% margin
This is one of the most expensive mix ups in home services, and it hides in plain sight.
An owner says, "I run a 50% margin." What he means is he adds 50% to his costs. That's markup. His margin is a third, and he's planning his whole business around a number that isn't real.
The two numbers, side by side
Take one job.
- Job cost: $1,000 in materials, labor, subs and permits
- You add 50%: the price is $1,500
- You keep $500
Markup compares what you keep to the cost: $500 ÷ $1,000 = 50%.
Margin compares what you keep to the price: $500 ÷ $1,500 = 33%.
Same job. Same $500. Two very different numbers.
Why margin is the one that runs your business
Every bill you pay comes out of the price, not the cost. Your office, your trucks, your insurance, your salary and your marketing all have to fit inside what's left of the price after the job cost. That's margin.
If you think you're running 50% and you're really running 33%, you've got a lot less room to pay for all of it than you think. Then a slow month shows up and it doesn't add up.
What good looks like
For HVAC, the trade with the best published numbers, ServiceTitan's guidance is to aim for a gross margin of 50 to 55% across your services. Getting there takes a markup of 100% or more on the job cost. A 50% markup doesn't come close.
Your trade may run different numbers. That's why the first step is measuring your own.
A quick table to keep on the wall
- 25% markup is a 20% margin
- 50% markup is a 33% margin
- 100% markup is a 50% margin
- 150% markup is a 60% margin
To hit a margin, divide your cost by one minus the margin. For a 50% margin on a $1,000 job: $1,000 ÷ 0.5 = $2,000.
Price for profit, not to win the bid
The owners who get this wrong usually aren't careless. They're trying to win the job. They see a competitor's price, shave a little, and tell themselves they're still at 50%.
You don't win by being the cheapest. You win on trust and speed. Know your margin on every job, and price so the work pays for the whole business, not just the materials.
Margin, CAC and lifetime value are the three numbers you run on. Here's what it really costs you to win a customer, and the full set is in our free playbook.
Not sure where your business stands yet? Our free Growth Ladder assessment takes about four minutes.
- Understanding HVAC Profit Margins (ServiceTitan)
- Run It Like They Would, The Next Right Move (2026)
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