Free Tool

Contractor Profit Margin Calculator

Most trade business owners think they're making 20-30% margins. The reality is usually closer to 8-12%. Find out where you actually stand.

Job Revenue

$

Direct Costs (Cost of Goods Sold)

What it costs to complete THIS specific job

$
$
Include burden: wages + payroll taxes + workers comp (~30% above hourly)
$
$
$

Overhead Allocation (Optional)

Your share of monthly fixed costs applied to this job

$
Rule of thumb: Monthly overhead ÷ jobs per month. Include rent, insurance, office staff, trucks, etc.

How to Calculate Contractor Profit Margins

Most trade business owners use markup when they should be thinking about margin. Here's the difference:

Markup

What you add to your costs

Cost $100 + 50% markup = $150 price

Margin

What you keep from the sale

$150 price - $100 cost = $50 profit (33% margin)

Key insight: A 50% markup only gives you a 33% margin. To get a 50% margin, you need a 100% markup.

The Margin Formula

Gross Margin = (Revenue - Direct Costs) ÷ Revenue × 100

Net Margin = (Revenue - Direct Costs - Overhead) ÷ Revenue × 100

What Should Your Markup Be?

Use this conversion guide:

If you want this margin... Use this markup
20%25%
25%33%
30%43%
35%54%
40%67%
50%100%

Why Most Contractors Are Underpriced

  1. Hidden labor costs — Payroll taxes, workers comp, and benefits add 25-40% to hourly wages
  2. Truck and tool depreciation — Real cost often ignored until vehicle dies
  3. Warranty and callback work — "Free" fixes that cost real money
  4. Overhead amnesia — Rent, insurance, phones, software all need to be covered
  5. Scope creep — Small extras add up when not tracked

Want to track this on every job?

Download our free Job Costing Template — the same tool we use with clients.

Get the Template →