The short answer: builder markup on materials is the percentage a contractor adds to the cost of materials before billing the client. It pays for the work of selecting, ordering, receiving and managing those materials, plus the risk of returns and damage. Markup is calculated on cost, which is not the same as margin, so a 20% markup is not a 20% margin.

1. Markup vs. margin

Markup is the amount you add, as a share of cost. Margin is your profit, as a share of the selling price. They are easy to mix up, and the gap between them grows as the numbers get bigger.

Here is how the same $1,000 of materials works out at three common markups:

• 10% markup: $1,100 to the client, $100 profit, about a 9.1% margin.
• 20% markup: $1,200 to the client, $200 profit, about a 16.7% margin.
• 25% markup: $1,250 to the client, $250 profit, a 20% margin.

If you start from a target margin, work backward with this formula: price = cost ÷ (1 − target margin). For a 20% margin on $1,000 of materials, that is $1,000 ÷ 0.80 = $1,250, which is a 25% markup.

Tip: decide whether your company talks in markup or margin, and use that word everywhere: in estimates, contracts and conversations with your bookkeeper. Most pricing mistakes on materials come from one person meaning margin and another meaning markup.

2. What markup pays for

Materials take real work that clients rarely see. Someone has to research options, get quotes, place orders, chase deliveries, deal with damaged or wrong items and process returns.

Markup is how that work gets paid for. It sits separately from your labor and overhead on the build itself. Common costs it covers:

• Sourcing time: finding the right product, checking specs and comparing suppliers.
• Ordering and tracking: placing orders, confirming lead times and following up on delays.
• Receiving: checking deliveries against the order and storing materials on site.
• Risk: damaged items, wrong finishes, restocking fees and price changes between quote and order.

3. How to show markup to clients

There are two common approaches. Neither is right for every contractor; what matters is that it matches your contract.

• Built into the price: the client sees one price per item. It is simple and common on fixed-price contracts.
• Shown as a line: the client sees cost plus a stated markup. It is common on cost-plus contracts, where transparency is part of the agreement.

Whichever you use, write it into the contract and apply it the same way on every invoice. Surprises on materials are one of the fastest ways to lose a client's trust.

4. Client-selected items and allowances

Remodels often include items the client picks: a Brizo faucet they saw in a showroom, a Kohler tub, or a KitchenAid range. Sourcing and managing those items takes the same work whether you chose them or the client did, so most contractors mark them up too.

Allowances need the same clarity. State whether the allowance amount is before or after markup. If a client goes over the allowance, the overage should carry the same markup as the base amount, and the contract should say so.

Clients sometimes want to buy items themselves. If you allow it, agree in writing who handles returns, damage and delays, since those are the costs your markup would normally cover.

5. Keep markup consistent across projects

Markup tends to drift when every project is priced by hand in a spreadsheet. One estimator rounds up, another forgets a category, and the numbers stop matching your plan.

1. Set defaults by category: for example, one rate for fixtures, one for appliances and one for special-order items.
2. Apply them automatically: use the same pricing tool or template for every estimate, so markup is not retyped each time.
3. Adjust on purpose: change the rate on a job only for a reason you can explain, like a very large order or a long-lead custom item.
4. Review once a year: check your markup against your actual overhead and target margin, not against what you charged last year.

Common questions

What is a typical markup on materials?

It varies widely by trade, region and contract type. Many residential contractors fall somewhere between 10% and 30%. Set yours from your overhead and target margin rather than copying a number.

Should I mark up items the client selects?

Usually, yes. Sourcing, ordering and managing an item takes the same work whether you chose it or the client did. Be clear about it in the contract.

Is markup the same as a materials handling fee?

They serve the same purpose. Some contractors call it a handling or procurement fee to make the value clearer to clients.

How Bundle helps

Bundle Procure quotes your materials list across suppliers, applies your builder markup automatically and sends clients a visual cart of their selections to approve before you order, with every order tracked on one PO. See how it works for remodelers →