Mark-up. The percentage that should have been benchmarked.

A mark-up exists for two stated reasons. The first is to compensate the seller for the administrative overhead of providing a service to an entity that is no longer part of the parent group. The second is to remove the seller's incentive to over allocate cost, on the theory that a fixed percentage above cost limits how much padding can be done inside the cost base itself. Neither argument is wrong. Both can be priced.

Mark-ups vary by workstream. Pure passthrough services, where the seller is essentially forwarding a third-party bill, attract mark-ups at the low end of the range. Complex services with embedded labour, decision making and risk, such as accounting close support or shared IT engineering, attract higher mark-ups. A blanket 10 percent mark-up across every workstream is a negotiating position, not a market rate. Each service line carries its own band.

A buyer-side review benchmarks each mark-up against comparable transactions in the same workstream. The leverage point is before signing, when the seller's commercial appetite to close the deal makes the percentage movable. After signing, the mark-up becomes contract language. Renegotiation is still possible during mid-TSA windows and at extension events, but the price for moving the number goes up.

Where the term appears

In the pricing schedule of the TSA, expressed as a percentage on each cost-plus service line. In monthly invoices, where the mark-up is layered on top of the allocated cost. In extension addenda, where sellers often try to step the mark-up up as a penalty for running past the original term. In dispute resolution, where buyers argue that the mark-up is excessive relative to the work actually performed.

Related terms

Cost-Plus Pricing · Pass-Through · TSA Extension Fee · Service Catalog · Transition Services Agreement