What Profit Margin Should a Contractor Aim For?
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Short answer: aim for a 40–50% gross margin on each job and an 8–15% net profit margin overall. Those are two different numbers, and mixing them up is one of the most expensive mistakes in the trades. Here's what each means and how to hit them. Check any job's margin with the free profit margin calculator.
Gross margin vs. net margin
- Gross margin is per job: what's left after the direct costs of that job (materials + job labor). A healthy trades gross margin is 40–50%.
- Net margin is the whole business: what's left after direct costs and overhead (truck, insurance, office, your admin time). A healthy contractor net margin is 8–15%.
The gap between them is overhead. You can have great job-level margins and still lose money if overhead eats the difference — which is why both numbers matter.
Why markup ≠ margin
A 50% markup (cost × 1.5) is only a 33% margin. If you price off markup but think in margin, you're quietly underpricing. To hit a 40% margin you need about a 67% markup; for 50% margin, a 100% markup (2×). The job estimate calculator shows both so you don't get caught out.
Three levers to raise your margin
- Price from cost, every time — build each quote up from materials + labor + overhead + markup, not gut feel.
- Track actual job profit — quoted margin and real margin differ once change orders and overruns hit. Measure the real one.
- Cut overhead drag — every fixed cost you trim drops straight to net profit and lowers your break-even.
Quick FAQ
What is a good profit margin for a contractor?
Around 40–50% gross margin per job and 8–15% net profit margin for the business after overhead. Specialty or high-risk work can run higher; commodity work often lower.
What's the difference between markup and margin?
Markup is added onto your cost; margin is profit as a share of the final price. A 50% markup is only a 33% margin. To hit a target margin you need a higher markup than the margin number.
How do I actually increase my margin?
Price every job up from cost with a deliberate markup, track actual vs. quoted profit to catch overruns, and trim fixed overhead. Small changes to all three compound into a much healthier net margin.
General guidance, not financial advice — your target margins depend on your trade, market, and risk.
Related: how to price a job · break-even calculator · how to write a contractor estimate.