Profit vs. Margin for Deck Contractors

Three numbers get used almost interchangeably when contractors talk about pricing a job: profit, margin, and markup. They're related, but they're not the same number, and the gap between them is exactly where a “profitable-looking” deck job quietly loses money.

The three numbers, defined

• Profit is a dollar amount: selling price minus total job cost. Nothing complicated here, it's what's left over.
• Margin is profit as a percentage of the selling price: profit ÷ selling price.
• Markup is profit as a percentage of cost: profit ÷ total job cost.

Same profit dollar amount, two different percentages, because margin divides by the selling price and markup divides by the cost, and those are two different numbers.

Why they're never equal on the same job

Say a deck job costs $30,000 to build, and you price it at $37,500. Profit is $7,500. Markup is $7,500 ÷ $30,000 = 25%. Margin is $7,500 ÷ $37,500 = 20%. Same job, same $7,500 profit, a 25% markup and a 20% margin, five points apart. The gap gets wider as the percentage goes up: a 50% markup is only a 33% margin, not 50%.

The mistake this causes

A contractor aiming for “20% margin” who adds a 20% markup instead isn't hitting their target, they're underpricing it. Using the same $30,000 job: a 20% markup prices the job at $36,000, for a profit of $6,000, which is actually a 16.7% margin, not 20%. Treating markup and margin as interchangeable means consistently pricing below your real target, job after job, without ever seeing it on paper.

Setting a price from the margin you actually want

If margin is the number that matters, build the price from margin directly:

Selling price = total job cost ÷ (1 − target margin)

For a $30,000 job at a true 20% margin, that's $30,000 ÷ 0.80 = $37,500, not $36,000. The formula guarantees the margin you're actually aiming for, instead of approximating it with a markup percentage that doesn't map to it.

Why this isn't just semantics

A few points of difference between margin and markup, repeated across every job in a year, adds up to real money left on the table, money that looks like it was priced in, but never actually was. Knowing which number you're working with, and pricing from it directly rather than approximating, is the difference between a target margin you actually hit and one you only think you hit.