Everything you need to know about calculating, tracking, and improving your profit margins. Based on data from 10,000+contractors.
Gross vs net margins explained
What margins you should target
Control expenses effectively
Price for profit, not just to win
Profit margin is the percentage of revenue that remains after all expenses are paid. Forcontractors, understanding and optimizing profit margins is the difference between struggling to survive and building a thriving business.
Profit Margin = (Revenue - Costs) / Revenue × 100Example: $10,000 job with $7,000 costs = 30% profit margin
| Service Type | Low Margin | Average | Optimal |
|---|---|---|---|
| New Construction | 3% | 10% | 15% |
| Remodeling | 10% | 20% | 35% |
| Service Calls | 30% | 50% | 70% |
| Specialty Work | 25% | 40% | 55% |
| Commercial | 5% | 15% | 25% |
Understanding where your money goes is the first step to improving margins. Here's how successfulcontractors typically allocate their revenue:
Buy in bulk, negotiate with suppliers
Optimize crew efficiency, reduce overtime
Control office expenses, use software
Maintain well, buy used when possible
Shop annually, maintain safety record
Focus on referrals, track results
You can't improve what you don't measure. Use software like ThePocketBoss to track time, materials, and expenses on every job.
Stop competing on price alone. Highlight your expertise, reliability, and quality to justify higher rates.
Accurate measurements and better planning can reduce material waste by 15-20%, directly improving your bottom line.
Better scheduling, route optimization, and crew management can reduce labor costs by 20-30% without cutting wages.
Identify your most profitable services and focus marketing efforts there. Service calls often have 2-3x higher margins than new construction.
ThePocketBoss helpscontractors track costs, optimize pricing, and improve efficiency.