Job profit margin

Job profit margin calculator

Cost the job properly — hours, materials, subbies, the other bits — and see what it actually left behind, what an hour on it really sold for, and what it needed to sell for to hit the margin you're aiming at. Adding 20% to your costs is not a 20% margin, and the gap costs more than most tradies think.

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Fine-tune your numbersWhat an hour costs the business, subcontractors, other job costs, share of overheads for this job and margin you're aiming at

Markup and margin are not the same number

This is the single most expensive mistake in trade pricing, and it's an arithmetic one rather than a judgement call. Markup is what you add to your costs. Margin is what you keep out of the price. They only agree at zero.

  • A 20% markup on $1,000 of cost gives a $1,200 price and $200 of profit — a 16.7% margin.
  • A 50% markup gives $1,500 and $500 — a 33% margin.
  • To actually make a 30% margin you need a 43% markup.

The gap widens the higher you go, which is why it bites hardest on the jobs you thought were your best ones. If you've been adding a percentage to cost and calling it your margin, you have been earning less than you think on every job — consistently, and by more each time you push the number up.

What counts as a cost

The margin is only as honest as the costs you put against it, and the two that get left out are the two that matter.

  • Your own hours count. If you worked on the job, the business owes you for that time at what an hour costs it — not at nothing because you're the owner. A job that only makes money when you don't pay yourself isn't making money. The charge-out rate calculator works out what your hour costs.
  • On-costs count. A wage is not what an employee costs. Leave, public holidays, retirement contributions and insurance sit on top, and a job costed at the bare hourly wage is understating its labour by a fifth or more. The employee cost calculator gives you the real hourly figure.
  • The hour that sold. Take the materials, the subbies and the other costs out of the price and divide what's left by the hours: that's what each hour on the job actually brought in. If it's under your charge-out rate, the job was underpriced however the margin looks.

Overheads that aren't job-specific — the van, the phone, the accountant — come out of the margin across all your jobs, which is what makes the target margin a target rather than a profit. If you'd rather see this job carry its share, the drawer has a line for it: your year's overheads divided by your billable hours, times the hours on this job.

Common questions

Job profit margin, answered.

On a job, most trade businesses aim somewhere between 15% and 35% before overheads — higher on labour-heavy work, lower where materials dominate the price. What matters more than the benchmark is that the same number comes out of every job: a business averaging 20% consistently is in better shape than one swinging between 5% and 40% and not knowing why.

No. Use the ex-tax figure. Tax you collect on an invoice was never yours — it passes through to the tax office — so counting it as income inflates every margin you calculate and hides a job that actually lost money.

Yes, and this is the one people skip. Put your hours in and cost them at what they cost the business, the same as you would an employee's. Leaving yourself out makes every job look profitable and tells you nothing about whether the work is worth doing at that price.

What the hour costs you, not what you charge for it. For an employee that's their wage plus on-costs — leave, public holidays, retirement contributions, insurance — which usually lands 30–40% above the wage rate. For your own hours, the rate from the charge-out rate calculator is the honest number: it's what an hour has to bring in before the business makes anything.

Because they're different sums. Markup divides profit by your cost; margin divides it by the price. A 20% markup is a 16.7% margin, a 50% markup is a 33% margin, and the gap grows as the number rises. The result panel shows you both so the difference is visible rather than assumed.

Not for the gross margin, which is what most tradies mean by "the margin on a job" and what the benchmark figures above describe. Put them in when you want to know whether this job paid its way in the business as a whole: divide the year's overheads by the hours you bill in a year, multiply by the hours on this job, and put that in the drawer. The margin that comes out is the one your accountant would recognise.

Work out which input was wrong before repricing anything. Usually it's the labour — hours that ran over, or an hourly cost that was the wage rather than the true cost of employing someone. Repricing a job type off one bad estimate just moves the error.
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