Markup vs Margin: The Pricing Mistake That Costs Painters Thousands
A painting business turning over 500,000 of cost a year and quoting markup-not-margin at 40% target leaves 83,333 on the table — same maths in AUD, USD, GBP, NZD, CAD. That is not rounding error; that is a tradesperson's annual wage.
Charging cost × 1.40 is a 40% markup. The resulting gross margin is 28.6%, not 40%. This is the most expensive arithmetic mistake in the painting trade — and it compounds every time a quote goes out, in whatever currency you bill in.
Worked examples below use generic currency units. The ratios and percentages are identical in AUD, USD, GBP, NZD, CAD.
The formulas
Markup (added to cost): sell = cost × (1 + markup/100)
Margin (taken from sell): margin% = (sell − cost) ÷ sell × 100
Cost-plus (the correct one): sell = cost ÷ (1 − margin/100)
What each multiplier actually delivers
| Target margin | Correct cost-plus multiplier | Wrong (markup) multiplier | Actual margin from wrong multiplier | Revenue lost per 1,000 cost |
|---|---|---|---|---|
| 20% | ÷ 0.80 (× 1.250) | × 1.20 | 16.7% | 41.67 |
| 25% | ÷ 0.75 (× 1.333) | × 1.25 | 20.0% | 66.67 |
| 30% | ÷ 0.70 (× 1.429) | × 1.30 | 23.1% | 100.00 |
| 35% | ÷ 0.65 (× 1.538) | × 1.35 | 25.9% | 134.62 |
| 40% | ÷ 0.60 (× 1.667) | × 1.40 | 28.6% | 166.67 |
| 45% | ÷ 0.55 (× 1.818) | × 1.45 | 31.0% | 204.55 |
| 50% | ÷ 0.50 (× 2.000) | × 1.50 | 33.3% | 250.00 |
Worked example
A job has 4,000 of total cost. Painter wants a 40% margin.
- Wrong: 4,000 × 1.40 = 5,600. Actual margin: (5,600 − 4,000) ÷ 5,600 = 28.6%.
- Right: 4,000 ÷ 0.60 = 6,667. Actual margin: (6,667 − 4,000) ÷ 6,667 = 40.0%.
Gap: 1,067 on this single quote. Across 50 jobs a year at this size, that's 53,350 of revenue left on the table — for the same cost base, regardless of currency.
Why the formula matters
Surfacely's pricing engine never lets the painter accidentally do markup math. Every margin input field is labelled "margin %" and runs cost ÷ (1 − margin/100). The painter can adjust margin per cost category (labour, materials, access, prelims, overheads) and the system protects each one.