Contractor Profit Margin Calculator

How contractor profit margin is calculated

Profit margin is the share of the price you keep after paying for the job. Subtract every cost the job consumed from what you charged to get profit, then divide profit by the price.

• Profit = Revenue - (Materials + Labor + Subcontractors + Equipment + Overhead)
• Profit margin = Profit ÷ Revenue × 100

Margin is always measured against the price, not the cost. That is what makes it different from markup, and why a 25% markup is only a 20% margin.

Worked example

A bathroom remodel billed at $24,000. Materials came to $7,800, your crew’s labor (with payroll taxes and workers comp) to $6,900, the plumber and tile sub to $3,600, a dumpster and tool rental to $450, and the job’s share of truck, insurance and office costs to $1,250.

• Total costs: $7,800 + $6,900 + $3,600 + $450 + $1,250 = $20,000
• Profit: $24,000 - $20,000 = $4,000
• Profit margin: $4,000 ÷ $24,000 = 16.7%

If that job was quoted expecting a 25% margin, 8 points disappeared somewhere between the estimate and the final invoice - usually labor overruns, unbilled change orders, or material price creep.

What to include so the number is real

• Labor at its true cost: wages plus payroll taxes, workers comp and benefits - not just the hourly rate.
• Every subcontractor invoice, including small ones paid by card.
• Equipment and rentals, fuel, dump fees and permits.
• A fair share of overhead: vehicles, insurance, software, office and your own time managing the job.

Leaving overhead out gives you gross margin, which always looks better than what actually lands in your account. Run it both ways if you like, but price your next job off the full number.