XL EagleMarkup
Markup. Markup is a percent added on top of a cost to set a selling price. It usually covers overhead, G&A, risk and profit in one step.
On government work, a prime contractor often adds markup on top of a subcontractor's price to cover management, insurance, bonding and profit. Markup on cost is different from margin on price; a 25 percent markup equals a 20 percent margin.
Why it matters to a small contractor
If you sub to a prime, expect them to add markup to your number. Give your best honest price, because a padded sub price plus prime markup can lose the bid for both of you.
Example
A sub quotes $40,000 for parking lot striping. The prime adds 15 percent markup for management and risk and bids $46,000.
Markup: common questions
What is the difference between markup and margin?
Markup is figured on cost. Margin is figured on selling price. A 50 percent markup is only a 33 percent margin.
Is there a legal limit on markup?
Not on fixed-price bids, but the total price must still be fair and reasonable to win.
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