Free contractor tools
Profit Margin Calculator
Break a job down into materials, labor, and overhead — and see what it actually makes after the office gets paid.
Office, vehicles, insurance, software — the share this job should carry.
Net profit on this job
$5,000
How do you calculate profit margin on a job?
Gross profit is your price minus direct costs (materials and labor); gross margin is that profit divided by the price. Net profit goes one step further and subtracts the overhead the job should carry:
gross profit = price − (materials + labor)
net profit = gross profit − overhead
margin% = profit ÷ price
Why gross margin isn't the whole story
A job can show a healthy gross margin and still lose money once overhead — your office, trucks, insurance, phones, and software — is counted. That's why contractors who only track gross stay busy but broke. Allocate a fair share of overhead to every job and price against net margin, not gross.
In the example above, a $20,000 job with $13,000 of direct cost shows $7,000 gross profit (35% gross margin). After $2,000 of overhead, real net profit is $5,000 — a 25% net margin.
What net margin should a contractor aim for?
It varies widely by trade and volume, but many small contractors target a net margin in the high single digits to the low teens after owner's pay, and stronger operators push higher. The point isn't a magic number — it's measuring it on every job so you can fix the unprofitable ones.
How Simple Contractor CRM helps
SCC tracks material cost, labor, and customer price on every estimate and derives margin live, so the numbers you price against are the numbers you actually book — not a guess you reconcile in a spreadsheet after the job's done.
Frequently asked
- What's the difference between gross and net margin?
- Gross margin counts only direct job costs (materials and labor). Net margin also subtracts overhead — the cost of running the business. Net is the number that tells you whether you actually made money.
- How do I allocate overhead to a job?
- A common approach is to total your annual overhead, divide it across your expected billable revenue or labor hours, and apply that rate per job. Even a rough allocation beats ignoring overhead entirely.
- Is margin the same as markup?
- No. Margin is profit as a percent of price; markup is profit as a percent of cost. Use the Markup vs Margin Calculator to convert between them.
- Should owner's salary be in overhead or profit?
- Pay yourself a real wage as a cost (in labor or overhead), and treat profit as what's left over on top of that. Counting owner's pay as 'profit' is how contractors fool themselves into thinking a job worked.
Run the next job the simple way.
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