Quote Margin Workshop

Markup divides profit by cost. Gross margin divides profit by selling price. They describe the same quote from different starting points, so a 30% markup does not produce a 30% gross margin. For example, a job with estimated direct costs of 700 and a selling price of 1,000 has estimated gross profit of 300. Its markup is 300 ÷ 700 = 42.86%. Its gross margin is 300 ÷ 1,000 = 30%. All examples here exclude sales tax and use fictional amounts in a single currency. One quote, three calculations Measure Formula Example Estimated gross profit Selling price − estimated direct costs 1,000 − 700 = 300 Markup Estimated gross profit ÷ estimated direct costs × 100 300 ÷ 700 × 100 = 42.86% Gross margin Estimated gross profit ÷ selling price × 100 300 ÷ 1,000 × 100 = 30% Label the percentage wherever you write it. A note that says only “30%” is ambiguous. A note that says “30% estimated gross margin, using direct job costs of 700” tells the next reader exactly what the calculation means. Why a...

A discount reduces revenue while your job costs may stay the same. On a quote priced at 1,000 with 700 in direct costs, a 10% discount lowers estimated gross profit from 300 to 200. That is a 33.3% reduction in gross profit—not a 10% reduction. This worksheet helps you compare a proposed discount with the original quote before changing the price. All numbers below are fictional, use a single currency, and exclude sales tax. The arithmetic works on paper or in a spreadsheet. The four numbers to write down Original selling price, excluding sales tax. Use the amount you would charge for the agreed scope before the proposed discount. Estimated direct job costs. Include the materials, direct labour and other job-specific costs you intend to include in this calculation. Use the same cost definition in both scenarios. Discount percentage. Write 10% as 0.10 when using the formulas. Any genuine cost change. If the customer removes work from the scope, estimate the revised costs separate...