Contractor Profit Margin Calculator: Know Your Real Numbers

"I add 20% to my costs." Great — but that's markup, not margin. And if you don't know the difference, you're probably making less than you think.

Markup vs Margin

These are NOT the same thing:

That "20%" markup is actually 16.7% margin. You're leaving $500 on the table per $10K in costs.

The Formulas

• Markup % = (Price - Cost) ÷ Cost × 100
• Margin % = (Price - Cost) ÷ Price × 100
• Price from Margin = Cost ÷ (1 - Margin %)
• Price from Markup = Cost × (1 + Markup %)

Target Margins by Trade

Industry benchmarks (gross profit margin):

• General contractors: 15-25%
• Remodeling: 25-35%
• Specialty trades (electrical, plumbing): 20-30%
• Custom homes: 15-20%
• Commercial construction: 10-15%

These are gross margins. Your net profit (after overhead) will be lower.

Why Most Contractors Miss Their Targets

1. Underestimating costs — Forgot permit fees, dumpster rental, fuel
2. Scope creep — "While you're here, can you also..."
3. Callbacks — Unpaid return trips eat profit
4. Confusion about markup/margin — Thinking 20% is 20%
5. No tracking — Can't hit a target you don't measure

Quick Reference Chart

The Fix

Stop guessing. Track actual costs on every job. Compare to your estimates. Calculate real margins — not what you hoped for, what actually happened.

Over time, you'll see patterns. Which job types are profitable. Where estimates miss. What to charge next time. That's how you build a business that actually makes money.