What is the difference between markup and profit margin in construction?

Markup is the percentage added to your cost ((Selling Price − Cost) / Cost), while profit margin is the percentage of the final selling price that is profit ((Selling Price − Cost) / Selling Price). A 20% markup on cost only yields a 16.67% profit margin; to achieve a 20% profit margin, you must apply a 25% markup.

How do Canadian contractors calculate their true hourly charge-out rate?

Take the base hourly wage plus Canadian payroll burden (CPP, EI, provincial WCB/WSIB, holiday and vacation pay), add annual fixed overhead plus owner compensation divided by annual billable hours to get your break-even hourly cost, and then divide by (1 − target profit margin).

Back to All Free ToolsBuildric Utility · Contractor Pricing · Markup vs Margin

True Hourly Rate & Markup vs Margin Calculator for Canadian Contractors

Calculate your true burdened hourly cost, overhead recovery per billable hour, and exact selling price. Avoid the costly mistake of confusing markup on cost with profit margin on selling price (where a 20% markup ≠ 20% margin).

1. Annual Overhead, Billable Hours & Burden

Company / Business Name

Target Annual Owner Compensation ($ CAD)

Annual Fixed Overhead ($ CAD — Trucks, Ins, Shop)

Billable Techs / Crew

Work Weeks / Yr

Billable Hrs / Wk

Total Annual Billable Capacity: 2,880 billable hrs/yr (Note: unbilled drive time, quotes & shop time must be recovered by billable hours).

Direct Base Hourly Wage ($/hr)

Payroll Burden % (CPP, EI, WCB, Vacation)

2. Target Net Profit Margin & Sample Job Pricing

Desired Profit Margin (%)

Job Billable Hours

Job Materials & Subs ($)

Why 20% Markup ≠ 20% Profit Margin (20% Markup = 16.7% Margin)

• Markup on Cost = (Selling Price − Cost) / Cost
• Margin on Selling Price = (Selling Price − Cost) / Selling Price
To earn a true 25% profit margin, you must apply a 33.3% markup to your total cost. If you only mark up by 25%, your actual margin drops to 20.0% and you lose $325.92 CAD on this single job!

CONTRACTOR RATE & JOB MARGIN ANALYSIS

Foothills Mechanical & Contracting

Annual Billable Capacity: 2,880 hrs (2 tech × 48 wks × 30 hrs/wk)

True Charge-Out Rate$171.75 CAD/hrat 25% Margin (33.3% Markup)

A. True Hourly Cost & Charge-Out Rate Breakdown

Direct Burdened Labour ($42.00 CAD/hr + 24% CPP/EI/WCB/Vac)	$52.08 CAD / hr
Overhead & Owner Recovery ($221,000.00 CAD / 2880 hrs)	+ $76.74 CAD / hr
True Break-Even Cost Per Billable Hour (0% Profit)	$128.82 CAD / hr
Recommended Charge-Out Rate (25% Net Margin / 33.3% Markup)	$171.75 CAD / hr

B. Sample Job Estimate (16 Billable Hrs + $1,850.00 CAD Materials)

True Labour & Overhead Cost (16 hrs × $128.82 CAD/hr)	$2,061.06 CAD
Direct Materials & Subcontractors Cost	$1,850.00 CAD
Total True Job Cost (Break-Even)	$3,911.06 CAD
Net Job Profit (25% Margin = 33.3% Markup on Cost)	+ $1,303.69 CAD
RECOMMENDED CLIENT QUOTE (PRE-TAX)	$5,214.74 CAD

C. Contractor Quick Reference: Desired Margin vs Required Markup

Margin 15%+17.6% Markup

Margin 20%+25.0% Markup

Margin 25%+33.3% Markup

Margin 30%+42.9% Markup

Margin 35%+53.8% Markup

Generated by Alberta Studio — Free Tools · albertastudio.devFor informational & estimating purposes only

Export Rate & Job Margin Sheet (PDF)

Print or save this rate sheet for your estimating binder.

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Disclaimer: For informational and business planning purposes only. Does not replace professional accounting or tax advice. Verify provincial WCB/WSIB, CPP, and EI rates with your accountant.