Setting prices is one of the most important decisions you’ll make as a service business owner in the Magic Valley. Charge too little, and you’ll work yourself into the ground without turning a profit. Charge too much, and customers will call your competitors in Twin Falls or Jerome instead.

Markup is the bridge between covering your costs and actually making money. It’s the percentage you add on top of what a job costs you, and it determines whether your business thrives or just survives.

The challenge is that most Magic Valley contractors never learned how to calculate markup properly. You started your business because you’re a skilled plumber, HVAC technician, landscaper, or roofer, not because you have an accounting degree. So pricing becomes guesswork. You look at what other contractors charge, pick a number that feels reasonable, and hope for the best.

That approach works until it doesn’t. Rising material costs at the supply houses, unexpected overhead, and underestimated labor hours can quietly erode your margins. Before you know it, you’re driving all over Twin Falls, Kimberly, and Filer staying busy but not building wealth.

This guide will show you exactly how markup works, walk you through the formula, share typical percentages by industry, and help you recognize when your pricing needs adjustment. By the end, you’ll have a clear framework for setting prices that cover your costs, pay you fairly, and keep your Magic Valley business growing.

What Is Markup and How Is It Different From Profit Margin?

Understanding markup starts with knowing what it actually measures and why it’s not the same thing as profit margin. These two terms get confused constantly, and mixing them up can cost you thousands of dollars in mispriced jobs.

What Does Markup Actually Mean for Service Businesses?

Markup is the amount you charge above your costs to make a profit. It can be expressed as a dollar amount or a percentage. For service businesses across the Magic Valley, markup gets applied to materials, labor, and overhead to determine your final price to the customer.

Here’s a simple example. Say you’re a Twin Falls landscaper and you buy fertilizer from a local supplier for $10 per bag. You charge your customer $25 for that fertilizer. The $15 difference is your markup, which works out to 150% of your cost.

The same logic applies to labor and services. If it costs you $110 in labor and materials to complete a handyman job in Jerome and you want a 40% markup, you’d charge $154. That extra $44 is what keeps your business running after expenses are paid.

Markup ensures you’re not just breaking even on every job. It accounts for the profit you need to reinvest in equipment, handle slow winter months, and actually pay yourself a reasonable wage.

Why Is Confusing Markup With Margin So Dangerous?

Markup and profit margin both involve your costs and selling price, but they measure different things. Markup is calculated as a percentage of your cost. Margin is calculated as a percentage of your selling price. This distinction matters more than most business owners realize.

Consider a job where your costs are $70, and you sell the service for $100. Your markup is 42.9% because you added $30 on top of a $70 cost. But your profit margin is only 30% because that $30 profit represents 30% of the $100 sale.

The danger comes when you think in margin terms but calculate using markup formulas. If you want a 30% profit margin and mistakenly apply a 30% markup, you’ll end up with less profit than expected. Over hundreds of jobs serving customers from Buhl to Gooding, that math error can mean the difference between a profitable year and a struggling one.

How Much Markup Should You Charge for Your Magic Valley Business?

Once you understand what markup measures, the next step is learning how to calculate it correctly. The formula itself is straightforward, but getting accurate inputs requires knowing which costs to include.

What Formula Should You Use to Calculate Markup?

To determine how much markup you should charge, use the basic formula: Selling Price = Total Costs + (Total Costs × Markup Percentage). You can also work backward to find your markup percentage by dividing gross profit by total cost and multiplying by 100.

Let’s say you want to price a plumbing repair in Kimberly. Your total costs, including labor, materials, and allocated overhead, come to $200. You want a 50% markup to hit your profit goals. Using the formula: $200 + ($200 × 0.50) = $300. You’d charge the customer $300 for that job.

To find markup on an existing price, subtract your cost from the selling price to get gross profit, then divide by cost. If you charged $300 and your costs were $200, your gross profit is $100. Divide $100 by $200 and multiply by 100 to get a 50% markup.

Running these calculations before every job prevents underpricing. Many Magic Valley contractors estimate on the fly and consistently leave money on the table. A consistent markup formula removes the guesswork.

What Costs Need to Be Included in Your Markup?

Your markup only works if your cost figure is accurate. Total cost includes three categories: labor, materials, and overhead. Missing any of these means your markup won’t generate the profit you expect.

Labor costs include wages for employees or subcontractors working on the job, plus payroll taxes, workers’ compensation, and benefits. If you’re the one doing the work, your time has value too. Many Magic Valley business owners forget to pay themselves a reasonable hourly rate before calculating markup.

Materials are the supplies needed for each specific job. Track actual costs from your suppliers, not estimates, and update pricing when costs rise. What you paid for copper fittings or roofing materials last year may not reflect today’s reality.

Overhead covers everything required to run your business that isn’t tied to a specific job. This includes vehicle payments, insurance, software subscriptions, advertising, and administrative costs. Calculate your monthly overhead, divide by billable hours, and add that hourly overhead rate to each job’s cost.

What Markup Percentage Do Other Businesses Use?

Knowing the formula is only half the equation. You also need context for what markup percentages are reasonable in your industry and market. Setting markup too far outside industry norms can price you out of work or leave significant profit on the table.

What Are Typical Markup Ranges by Industry?

Most service businesses operate in the 25% to 100% markup range. Some specialized services command even higher markups based on expertise, urgency, or market positioning.

HVAC businesses typically mark up materials by 25% to 50% and may apply 100% or higher markup on spare parts. A Filer HVAC contractor replacing a heat exchanger might charge $3,500 for a job with $2,000 in parts and $500 in labor, netting $1,000 profit at roughly 40% markup.

Construction and general contracting typically use markups between 20% and 50% depending on project complexity. Landscaping and lawn care services commonly use 50% to 65% markup on materials and labor combined. Plumbers, electricians, and roofers generally fall in similar ranges.

These ranges exist because cost structures within industries tend to be similar. Businesses face comparable material costs, labor markets, and overhead requirements. A Twin Falls plumber and a Jerome plumber have similar expenses, which is why their pricing usually falls in the same ballpark.

How Should Your Local Market Affect Your Markup Decision?

Industry averages provide a starting point, but Magic Valley market conditions should influence where you land within that range. Local competition, customer expectations, and your business’s reputation all affect what markup the market will bear.

Research what competitors in Twin Falls and the surrounding communities charge for similar services. If you’re significantly cheaper than other contractors, you might be underpricing. If you’re much higher, you need clear differentiation to justify the premium.

Your customer base matters too. Residential customers in Gooding may have different price expectations than commercial clients in Twin Falls. Emergency or after-hours work commands a higher markup because customers value speed and availability. Specialized skills that few local competitors offer allow for premium pricing.

The Magic Valley market is relationship-driven. Customers talk to neighbors, and your reputation travels fast in smaller communities like Buhl and Kimberly. Pricing fairly while delivering quality work builds the referral network that sustains local service businesses long-term.

When Should You Adjust Your Markup Strategy?

Setting markup isn’t a one-time decision. Material costs change, labor markets shift, and your business evolves. Knowing when and how to adjust keeps your pricing aligned with reality.

What Signs Tell You Your Markup Is Too Low?

The clearest sign of underpricing is being constantly busy but not making money. If your calendar is full with jobs across the Magic Valley but your bank account isn’t growing, your markup probably isn’t covering true costs.

Watch for these warning signals: you’re unable to afford necessary equipment upgrades or vehicle replacements, you can’t pay yourself a reasonable salary comparable to what you’d earn working for someone else, or you’re dipping into savings during slow winter months because there’s no cash reserve.

Another indicator is winning nearly every bid. A healthy close rate for service businesses is typically 40% to 60%. If you’re closing 80% or 90% of quotes, customers are saying yes because you’re the cheapest option in Twin Falls, not because you’re providing the best value.

Review your actual job costs against estimates. If labor consistently takes longer than quoted, or material costs have crept up without corresponding price increases, your effective markup has shrunk without you realizing it.

How Often Should You Review Your Pricing?

At minimum, review your markup and pricing quarterly. This frequency catches cost increases before they erode margins too severely. Many successful contractors review pricing monthly and adjust immediately when costs change.

Track material costs from suppliers and update your pricing whenever they increase. Don’t absorb cost increases, hoping they’re temporary. Pass them through to customers, as most understand that prices rise over time.

Monitor your labor costs annually, especially after giving raises. Review overhead whenever you add new expenses like software, vehicles, or insurance. Your hourly overhead rate should reflect current reality.

Tracking job profitability becomes easier with the right tools. Field service management platforms let you store job data, track costs, and identify which services generate the best margins. When you have clear data instead of guesswork, pricing decisions become straightforward. Download FieldServ Ai from the App Store or Google Play to help your Magic Valley business track this information automatically.

The Bottom Line

Markup determines whether your Magic Valley service business makes money or just stays busy. By calculating your true costs, applying appropriate markup percentages, and reviewing pricing regularly, you ensure every job contributes to your bottom line.

Start with the formula, research your industry’s typical ranges, and adjust for local market conditions. Whether you’re serving customers in Twin Falls, Jerome, Filer, or anywhere across the Magic Valley, getting markup right is how you build a business that pays you what you’re worth.

Frequently Asked Questions

What is a good markup percentage for contractors in Twin Falls? Most Magic Valley contractors use markup percentages between 25% and 100% depending on their trade. HVAC and plumbing companies typically apply 25% to 50% markup on materials and services. The right percentage depends on your costs, local competition, and profit goals. Research what other Twin Falls contractors charge to calibrate your pricing.

How is markup different from profit margin? Markup is calculated as a percentage of your cost, while profit margin is calculated as a percentage of your selling price. A 50% markup on a $100 cost gives you a $150 price. But your profit margin would be 33% because the $50 profit represents one-third of the $150 sale. Always clarify which metric you’re using when setting prices.

What costs should Magic Valley service businesses include in markup? Include labor costs with taxes and benefits, material costs for the specific job, and overhead expenses allocated per job. Overhead includes insurance, vehicle costs, software, and administrative expenses. Divide your monthly overhead by billable hours to find your hourly overhead rate. Missing any category means your markup won’t generate expected profit.

How often should I adjust my markup? Review your markup at least quarterly to catch rising costs before they erode margins. Update pricing immediately when suppliers raise material costs. Annually review labor costs after giving raises and overhead after adding new expenses. Contractors who track job profitability monthly make better pricing decisions.

Why am I busy but not making money? This usually signals that markup is too low to cover true costs. You might be underestimating labor time, forgetting overhead allocation, or absorbing material cost increases. Review your actual job costs versus estimates. If jobs consistently cost more than quoted, your effective markup has dropped. Adjust pricing or improve estimating accuracy.

What markup do HVAC companies in the Magic Valley typically use? HVAC businesses commonly apply 25% to 50% markup on equipment and materials, with 100% or higher markup on spare parts. Labor and service markups vary but generally fall in the 30% to 50% range. Emergency calls and after-hours service in Twin Falls or Jerome can command higher markups due to convenience value.

Should I charge the same markup on every job? Not necessarily. Different services, customer types, and job sizes may warrant different markup percentages. Emergency work often commands higher markup than scheduled maintenance. Commercial projects may justify different pricing than residential work in Kimberly or Buhl. However, maintain consistency within categories to ensure profitability.

How do I know if my prices are too high for the Magic Valley market? If you’re losing most bids and customers frequently mention price as the reason, you may be above market. A healthy close rate is 40% to 60%. Research competitor pricing in Twin Falls and surrounding areas to calibrate. However, losing some bids on price is normal and often means you’re not underpricing.

What’s the best way to track job costs and profitability? Use field service management software that lets you log labor hours, material costs, and expenses for each job. Compare actual costs to your estimates to identify where you’re losing money. FieldServ Ai automates much of this tracking and shows you which jobs and services are most profitable over time. Download it from the App Store or Google Play to get started.