Margin

Also called Gross margin, Net margin, Profit margin

Profit expressed as a percentage of the sale price. Not the same as mark-up, and confusing the two loses real money.

What it means

Margin is profit as a percentage of what you sold something for.

If you sell a job for £1,000 and it cost you £600 to deliver, your gross profit is £400 and your gross margin is 40% — because £400 is 40% of the £1,000 sale price.

Mark-up is the same £400 expressed as a percentage of the £600 cost, which is 67%. Same job, same money, two very different-sounding numbers.

Why it matters

Margin is how you compare a £200 job with a £20,000 one, and it is the number that tells you whether being busier will actually help.

It is also the number people quote at each other loosely. A supplier saying "we only make 20%" and a customer hearing "20% mark-up" are having two different conversations about the same invoice.

What it looks like in practice

To price at a target margin, divide rather than multiply. For a 40% margin on a £600 cost: £600 ÷ (1 − 0.40) = £1,000. Adding 40% to £600 gives £840, which is a 28.6% margin — a mistake that, repeated across a year of quotes, is the difference between a viable business and a busy one.

Watch margin by job type, not just overall. Most businesses have one line of work quietly subsidising another, and the average hides it.

What to watch out for

Discounting. Cutting a price by 10% at a 40% margin does not cost you a tenth of your profit — it costs you a quarter of it, and you need to sell a third more to stand still.

Margin on a quote is not margin on delivery. If jobs routinely overrun, your real margin is whatever is left after the overrun, and nobody is measuring that unless you make them.

Where to get proper advice

An accountant or bookkeeper can set your accounts up to report gross margin by category rather than as one blended figure, which is usually a small change to the chart of accounts and the most useful thing they will do for you that year.