Know your real margins in 30 seconds. Stop leaving money on the table.
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Markup is the percentage you add ON TOP of your costs. Margin is the percentage of the final price that's profit. A 50% markup = 33% margin. A 100% markup = 50% margin. Most contractors think in markup but banks and accountants think in margin. Know both.
Industry average is 6-10%. Healthy contractors target 15-20%. Below 8%, one bad job wipes out your profit. Above 20%, you're pricing smart and managing costs well. If you're below 10%, you need to either raise prices or cut costs — there's no middle ground.
It's your NET profit divided by YOUR hours on the job (not crew hours). If you profit $3,000 on a job where you spent 40 hours managing it, your effective rate is $75/hr. This tells you what your TIME is actually worth. Many contractors making "good money" discover they're earning less per hour than their crew.
The top 5 forgotten costs: (1) Vehicle/fuel expenses, (2) Insurance, (3) Tool wear & replacement, (4) Unbilled travel time, (5) Warranty callback time. Most contractors underestimate overhead by 10-15%, which means their "20% markup" is really 5-10%.
The average contractor loses $15,000-36,000/year to unbilled extras. Even one small "while you're here" request per week at $200 = $10,400/year off your bottom line. If your margin is 10%, that's like doing $104,000 in additional revenue just to break even on the freebies.