Margin and markup answer different questions
Markup measures contribution relative to cost. Margin measures contribution relative to selling price. Both can be useful, but they use different denominators and therefore produce different percentages for the same cleaning contract.
Margin = (price − cost) ÷ price.
A simple cleaning-contract example
Assume a recurring account costs $8,000 per month to service and is priced at $10,000 per month. The account contributes $2,000.
- Markup: $2,000 ÷ $8,000 = 25%.
- Margin: $2,000 ÷ $10,000 = 20%.
Nothing about the account changed. Only the denominator changed.
The common pricing mistake
If the goal is a 20% margin, adding a 20% markup to cost does not produce it. An $8,000 cost marked up by 20% gives a $9,600 price. The $1,600 contribution is only about a 16.7% margin on revenue.
At $8,000 of recurring cost and a 20% target margin, the required monthly price is $10,000.
Why this matters after the contract starts
Even if the original bid was calculated correctly, account costs can move. Wage rates rise, hours drift, supplies change and additional work can become part of the routine. A contract that started at its target margin can fall below it without any change to monthly revenue.
That is why ProfitWatch focuses on the account after the bid is won: compare today's recurring cost with today's price and measure the current contribution margin.
Use one definition consistently
Teams get into trouble when sales talks about markup, operations talks about labor percentage and finance talks about margin without defining the terms. Pick a standard operating metric for account health and use it consistently in pricing reviews, monthly operating reviews and customer increase decisions.
Do not confuse account margin with company net margin
An account can have a healthy contribution margin while company net profit is weak because overhead is high. Account contribution is an operating lens for deciding whether an individual contract is supporting the business; it does not replace company financial statements.
Check the current account, not only the original bid
If you already have the contract, start with actual monthly revenue and recurring cost instead of reconstructing the original proposal. Then compare the current result with the target you intended.
Read Commercial Cleaning Profit Margin for the account-level framework, or run the free Account Profitability Check on one real contract.