Margin and markup (cost+)

As freight brokers, you often have to calculate prices for your customers by adding a gross profit to the carrier cost of the shipment. This profit can be either a margin or a markup (also known as cost+), and it's important to understand the difference between the two concepts.

Margin represents the profit as a percentage of the price the customer pays, while markup represents the profit as a percentage of the carrier cost.

Examples

• Margin: If the cost of a shipment is $1,000 and the margin is 20%, then the customer price would be $1,250 and the profit would be $250.
• Markup: If the cost of a shipment is $1,000 and the margin is 20%, then the selling price would be $1,200, and the profit would be $200.

Adding margin

To add a margin to a cost, you can use this formula:

Customer price = Carrier cost ÷ ( 1 - Margin % )

For example, if the cost of a shipment is $1,000, and you want to add a 20% margin, the customer price would be $1,000 / ( 1 - 0.20 ) = $1,250.

Adding markup

To add a markup to a cost, you can use this formula:

Customer price = Carrier cost × ( 1 + Markup % )

For example, if the cost is $1,000, and you want to add a 20% markup, the customer price would be $1,000 x ( 1 + 0.20 ) = $1,200.

Converting markup to margin

To convert a markup percentage to a margin percentage, you can use this formula:

Margin % = Markup % ÷ ( 1 + Markup % )

For example, if the markup is 20%, the margin would be 0.20 / ( 1 + 0.20 ) = 0.1667 or 16.67%.

There are also online calculators like this one.

Inside Quote Factory

Our system is built on margin, but we try to make markup easy, too. When you're calculating a price, we have a built-in calculator:

And we show the markup, labeled as Cost+: