How to use it
- Enter the Project Revenue: the contract value or the price you plan to quote.
- Enter the Total Cost: every cost of delivering the job, including labor, materials, equipment, subcontractors, site overheads and a contingency.
- Read the Profit in AED, the Margin % (profit as a share of revenue) and the Markup % (profit as a share of cost).
- Change the revenue to see the price you need for a target margin, or change the cost to see how a saving or an overrun affects it.
Margin and markup are different
Profit = revenue − cost. Margin % = profit ÷ revenue × 100, and markup % = profit ÷ cost × 100. Margin is always the lower of the two for the same job, so a 25% markup is only a 20% margin. Mixing them up is a common reason bids come out too low: adding 20% to cost does not give a 20% margin.
Pricing for a target margin
To reach a target margin, divide the cost by (1 − margin). For a 15% margin the price is the cost ÷ 0.85. To apply a markup, multiply the cost by (1 + markup).
VAT and overheads
Keep VAT out of both figures. In the UAE a VAT-registered contractor charges 5% on top of the contract price and passes it to the tax authority, so it is neither revenue nor cost. Include head-office overhead and the risk allowance in the total cost, otherwise the margin shown is higher than what you will keep.
Worked examples
- A AED 2,500,000 contract that costs AED 2,000,000 to build makes AED 500,000.00 profit: a margin of 20 % and a markup of 25 %.
- Adding a 20% markup to a AED 1,000,000 cost gives a price of AED 1,200,000, but the margin is only 16.667 %.
- A road patching job priced at AED 850,000 that ends up costing AED 900,000 shows a profit of -AED 50,000.00 - a loss, with a margin of -5.882 %.
- A AED 5,000,000 earthworks package with AED 4,250,000 of cost gives AED 750,000.00 profit and a margin of 15 %.
Margin and markup by total cost
Printable chart| Total cost (AED) | Profit | Margin | Markup |
|---|---|---|---|
| 600,000 | AED 400,000.00 | 40 % | 66.667 % |
| 700,000 | AED 300,000.00 | 30 % | 42.857 % |
| 750,000 | AED 250,000.00 | 25 % | 33.333 % |
| 800,000 | AED 200,000.00 | 20 % | 25 % |
| 850,000 | AED 150,000.00 | 15 % | 17.647 % |
| 900,000 | AED 100,000.00 | 10 % | 11.111 % |
| 950,000 | AED 50,000.00 | 5 % | 5.263 % |
| 1,000,000 | AED 0.00 | 0 % | 0 % |
For a project with AED 1,000,000 revenue. Enter your own figures in the calculator above.
Frequently asked questions
How do I calculate profit margin?
Subtract the total cost from the revenue to get the profit, then divide the profit by the revenue and multiply by 100.
What is the difference between margin and markup?
Margin is profit as a percentage of revenue; markup is profit as a percentage of cost. For the same profit, markup is always the larger percentage.
What profit margin is typical for a contracting project?
It varies by sector, contract type and risk, so use the margin you need to cover overheads and risk rather than a general figure.
Should I include VAT in revenue and cost?
Keep VAT out of both, because it is collected for the tax authority. If your figures include it, remove it from both before you compare.
How do I find the price for a 15% margin?
Divide your total cost by 0.85. The same method works for any target margin: divide the cost by one minus the margin.
Equipment for this job
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<iframe src="https://www.equipmentsfinder.com/embed/field-tools/project-profit-margin-calculator" title="Project profit margin calculator" width="100%" height="620" style="border:0;max-width:720px" loading="lazy"></iframe> <p style="font-size:12px"><a href="https://www.equipmentsfinder.com/en-us/field-tools/project-profit-margin-calculator">Project profit margin calculator</a> by <a href="https://www.equipmentsfinder.com">EquipmentsFinder</a></p>