How to Calculate Job Profit Margin (With a Worked Example)

Your estimate tells you what you hoped to make. Job profit margin tells you what you actually made, and the only way to know it is to calculate it after the job, from real numbers.

The formula

Job profit margin = (revenue − total job costs) ÷ revenue. The formula is simple. The hard part is getting total job costs right.

Step 1: Start with what you actually billed

Use the final amount invoiced for the job, including approved change orders, not the original quote. If a change order was performed but never billed, leave it out of revenue, but keep its costs in. That gap is real money you lost.

Step 2: Add up every direct cost

• Materials: actual receipts, including the extra trip to the supplier and anything returned or wasted.
• Labor: hours times your fully burdened rate, meaning wages plus payroll taxes, workers comp, and any benefits, not just the hourly wage.
• Subcontractors: what you actually paid, including any extras they billed.
• Equipment: rentals, fuel, and a fair usage charge for equipment you own.

Step 3: Allocate overhead

Trucks, insurance, software, office rent, and your own time answering the phone all exist because of jobs like this one. A common approach is to take last year’s overhead as a percentage of revenue and apply that same percentage to each job. It is not perfect, but it is far closer to the truth than leaving overhead out.

Worked example

• Revenue billed: $18,000
• Materials: $5,200
• Labor (burdened): $6,100
• Subcontractors: $1,800
• Equipment: $400
• Overhead at 12% of revenue: $2,160
• Total costs: $15,660
• Profit: $18,000 − $15,660 = $2,340
• Margin: $2,340 ÷ $18,000 = 13.0%

If this contractor had only subtracted materials and wages, the job would have looked like a 30%+ margin. The real number is 13%. That difference is why a business can be busy every week and still feel broke.

Track it across jobs

One job’s margin is a data point. Ten jobs’ margins are a pattern: which job types make money, which clients run long, and whether your pricing is keeping up with material costs. Calculating it consistently, the same way every time, is what makes the pattern trustworthy.