Profit Margin Calculator
Calculate your profit margin on any project to ensure you are meeting your financial targets.
Formula
Profit Margin = ((Selling Price - Total Costs) / Selling Price) × 100. Net Profit Margin = ((Selling Price - Total Costs - Overhead) / Selling Price) × 100
How to Use
- 1Calculate total direct costs for the project: materials, labor, subcontractors, equipment, permits.
- 2Determine your selling price (what you are charging the customer).
- 3Subtract total direct costs from selling price to get gross profit.
- 4Divide gross profit by selling price and multiply by 100 to get gross profit margin percentage.
- 5For net profit margin, also subtract your overhead allocation from gross profit before dividing by selling price.
Example
Scenario
You bid a kitchen remodel at $45,000. Your direct costs are $28,000 and your overhead allocation for this job is $7,000.
Calculation
Gross Profit = $45,000 - $28,000 = $17,000. Gross Margin = $17,000 / $45,000 × 100 = 37.8%. Net Profit = $17,000 - $7,000 = $10,000. Net Margin = $10,000 / $45,000 × 100 = 22.2%.
Result
The project has a gross profit margin of 37.8% and a net profit margin of 22.2%, yielding $10,000 in net profit on the $45,000 job.
Tips
- ★Track both gross and net profit margins — gross margin shows job-level profitability while net margin shows true business profitability after overhead.
- ★Aim for a minimum net profit margin of 8-12% after all overhead is covered — top-performing contractors achieve 15-20%.
- ★Compare actual margins on completed jobs to your estimated margins to identify where you are losing money.
- ★Low margins on high-volume work can be more profitable than high margins on infrequent projects — consider total annual profit, not just per-job percentages.
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Common questions about the profit margin calculator
A healthy gross profit margin for contractors is 30-50%, depending on the trade and project type. Net profit margin (after overhead) should be at least 8-12% for a sustainable business, with top-performing contractors achieving 15-20%. Remodeling contractors typically need higher margins than new construction builders due to higher overhead per project.
Improve margins by reducing waste and rework, negotiating better material pricing, improving labor productivity, accurately estimating job costs, controlling overhead expenses, and being selective about the projects you bid. Tracking actual vs. estimated costs on every job helps identify where margin is being lost.
Both matter. Gross margin tells you if individual jobs are priced correctly relative to direct costs. Net margin tells you if your business is profitable after accounting for overhead (rent, office staff, insurance, vehicles). You can have great gross margins but still lose money if overhead is too high.