Markup vs Margin: The Most Expensive Mistake Australian Sparkies Make
Understand the difference between markup and margin, why a 30% markup is only a 23% margin, and how to set the right number for your electrical business.
A sparky once told me he was making 40% margin on every job. I asked how. He said, “I add 40% to my cost.” That’s a 28.5% margin. Not 40%. He’d been undercharging for years and didn’t know it.
If you’ve never sat down with the maths, this is the article. Five minutes here will save you tens of thousands over a year.
The two formulas, side by side
Markup: a percentage you add to your cost.
Sell price = Cost × (1 + markup)
Margin: the percentage of the sell price that’s profit.
Margin = (Sell − Cost) ÷ Sell
They are not the same thing. They never have been.
Why the gap matters
Take a $1,000 job:
| Markup applied | Sell price | Actual margin |
|---|---|---|
| 20% | $1,200 | 16.7% |
| 25% | $1,250 | 20.0% |
| 30% | $1,300 | 23.1% |
| 40% | $1,400 | 28.6% |
| 50% | $1,500 | 33.3% |
If you wanted a 30% margin on that $1,000 job, you’d need to add 43% ($1,428.57 sell price). Most sparkies who think they’re at 30% margin are actually closer to 20.
The maths to use instead
Forget markup as your default. Set a target margin, then work backwards.
Sell = Cost ÷ (1 − target margin)
A few examples:
- Cost $500, target 30% margin → $500 ÷ 0.7 = $714.29
- Cost $1,200, target 35% margin → $1,200 ÷ 0.65 = $1,846.15
- Cost $3,500, target 25% margin → $3,500 ÷ 0.75 = $4,666.67
This is the formula every accountant and every estimating software uses. It’s the formula TradieTally runs in the background on every quote.
Different margins for different jobs
A flat margin across every job is a beginner’s mistake. Different work has different risk, different complexity, different cash-flow profile.
A rough starting point:
- Service calls: 35-50% margin (high risk, fast turnaround, low volume per job)
- Residential reno work: 25-35% margin
- Commercial fitouts: 18-28% margin (higher volume, longer payment terms)
- Project tenders: 12-20% margin (volume-based, but watch variation pricing)
These are starting points, not law. The Electrical Business Margins pillar page covers tiered margins in more depth.
Run it on a real job
Open the Markup Calculator. Plug in a real job you’ve quoted recently. See whether you were at the margin you thought.
Most sparkies aren’t. The first time you realise it stings. The second time, you’ve already fixed it.
The full system
Knowing the formula is one part. Building it into a quoting workflow that survives a busy week is another. The Electrical Estimating Course covers the whole system. Once you’ve got the method, TradieTally runs it for you on every quote, including live margin warnings if a quote drops below your target.
Confusing markup and margin is the single most expensive mistake in the electrical trade. The fix takes ten minutes.