Margin and markup describe the same dollars in two different ways, and freight brokers mix them up all the time. The difference matters: quote a load using the wrong one and you can give away several points of profit without noticing.
The short version
Margin is profit as a percentage of what the customer pays you (revenue).
Markup is profit as a percentage of what you pay the carrier (cost).
Same load, same profit, two different percentages. Markup is always the bigger number.
The formulas
Margin % = (Customer rate − Carrier cost) ÷ Customer rate × 100
Markup % = (Customer rate − Carrier cost) ÷ Carrier cost × 100
A freight example
You charge a shipper $2,000 and pay the carrier $1,700. Your gross profit is $300.
Margin: $300 ÷ $2,000 = 15%
Markup: $300 ÷ $1,700 = 17.6%
The profit is identical. Only the base of the calculation changes.
Why brokers get caught out
The classic mistake is to want a 15% margin and add 15% to the carrier cost. On a $1,700 carrier rate, adding 15% gives a customer rate of $1,955 and a profit of $255. That is a 13% margin, not 15%. Across hundreds of loads, those two points add up.
To price for a target margin, divide instead of multiplying:
Customer rate = Carrier cost ÷ (1 − Target margin)
For a 15% margin on a $1,700 carrier cost: $1,700 ÷ 0.85 = $2,000.
Margin to markup conversion
Margin | Markup needed |
|---|---|
10% | 11.1% |
12% | 13.6% |
15% | 17.6% |
18% | 22.0% |
20% | 25.0% |
25% | 33.3% |
Or skip the maths and use our free freight margin calculator. To convert yourself: Markup = Margin ÷ (1 − Margin), and Margin = Markup ÷ (1 + Markup).
Which one should a brokerage use?
Most brokerages report on margin, because it ties directly to revenue and is how brokerage performance is usually discussed. Markup is useful at the moment of quoting, when you start from a carrier cost. The important thing is that everyone in the business uses the same word for the same number, and that commission plans say clearly which one they are based on.
Gross margin is not the whole story
Gross margin per load leaves out detention you could not bill, accessorials you absorbed, claims and the time your team spent on the load. A lane can show a healthy average margin and still contain customers or carriers that cost you money. That is why margin is worth viewing by lane, customer, rep and carrier rather than as one company-wide figure. Our guide on what brokers need to see in TMS reporting covers this in more detail.
The bottom line
Margin is measured against revenue, markup against cost. Decide which one your brokerage speaks in, price with the right formula, and check margin at the level of the load, not just the month. To build the price itself from miles, fuel and accessorials, use the freight rate calculator.
See margin by lane, customer and rep in one place.
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