Profit Margin Calculator
Gross, operating, and net margin for one job or a whole month. Includes typical ranges by trade so you can see where your numbers land.
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What the customer pays.
Direct cost to deliver the job — materials, subs, on-site labor.
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Gross, operating, net — what each one tells you
One business can show three very different margins depending on which costs you subtract. Each answers a different question.
Gross margin asks: am I charging enough to cover the cost of doing this job? It subtracts only direct cost — materials, subs, hands-on labor. If gross is weak, your pricing or your job costs are wrong.
Operating margin asks: is the business profitable before taxes? It subtracts overhead from gross — insurance, vehicle, office, admin pay, marketing. A healthy gross can disappear here if overhead runs too high for the revenue base.
Net margin asks: how much do I actually keep? It subtracts taxes and interest. For an owner-operator, this is the closest number to take-home pay after the business covers itself.
(Revenue − COGS) ÷ Revenue(Gross profit − Operating expenses) ÷ Revenue(Operating profit − Taxes − Interest) ÷ Revenue$100,000 revenue. $60,000 COGS. $25,000 overhead. $5,000 taxes & interest.
Gross 40%. Operating 15%. Net 10%.
Margin vs markup
Same dollar profit, different denominators. Margin is profit as a percentage of revenue. Markup is profit as a percentage of cost.
A $500 profit on a $1,500 sale (cost was $1,000) is a 33.3% margin AND a 50% markup. Both describe the same job. Contractors usually quote markups. Banks and accountants speak in margins. Mixing them up is the single most common pricing mistake — a 50% markup feels like 50% margin, but it's actually 33.3%.
| Margin | Markup |
|---|---|
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 33.3% | 50.0% |
| 40% | 66.7% |
| 50% | 100.0% |
To convert in either direction: Margin = Markup ÷ (100 + Markup) and Markup = Margin ÷ (100 − Margin).
What a "good" profit margin looks like
It depends on the industry and which margin. For most service businesses, a 30–50% gross margin and a 10–20% net margin is healthy. Below 10% net, the business has no buffer for a slow quarter or an underbid job. Below 5% net, the owner is effectively working without a margin of safety. Product businesses run on lower percentages because volume makes up for thinner per-unit margins.
| Trade | Gross margin | Net margin |
|---|---|---|
| Construction (general) | 15–25% | 2–6% |
| Plumbing | 25–40% | 4–15% |
| HVAC | 20–35% | 5–15% |
| Electrical | 25–40% | 5–15% |
| Roofing | 20–35% | 5–12% |
| Painting | 25–50% | 8–25% |
| Landscaping | 30–50% | 10–20% |
| Cleaning | 35–55% | 10–25% |
| Carpentry / finish | 25–45% | 8–18% |
| Flooring | 25–40% | 7–15% |
| Handyman (sole operator) | 50–70% | 15–30% |
Ranges from NAHB cost-of-doing-business surveys, IRS Statistics of Income for NAICS 23, and Sageworks industry profiles. For deeper numbers, the long-form pieces on construction profit margins, lawn care profit margin, and calculating margins on construction jobs work through real scenarios.
Worked examples
Plumbing service call — $425 billed, $250 cost
Customer paid $425 for a water heater fix: $325 labor, $100 parts. Wholesale parts cost $60, paid technician time at fully-loaded labor rate was $190. Gross profit is $175. Gross margin is $175 ÷ $425 = 41.2% — healthy for residential service plumbing. After ~25% overhead allocation, operating margin lands around 16%.
Painting a 2,000 sq ft house — $4,800 billed, $3,400 cost
Quoted at $4,800 for exterior plus minor prep. Cost was $800 in paint and supplies plus $2,600 of crew labor across three days. Gross margin is $1,400 ÷ $4,800 = 29.2%. Below where painting typically targets (35%+), probably a competitive bid or under-budgeted prep. After overhead and taxes, net margin on this job lands around 8–10%.
HVAC install — $8,400 billed, $5,000 cost
Furnace plus AC replacement, one-day install. Cost: $4,200 equipment plus $800 install labor. Gross margin is $3,400 ÷ $8,400 = 40.5%. Equivalent markup on combined cost is 68%, which is what customers push back on when they see the equipment invoice. The 40.5% funds the truck, the office, the warranty work, the quotes that don't close, and the owner's pay. More detail on this trade: how to price HVAC jobs.
Pricing backward from a target margin
Set the margin you need first, then work back to price. The math is one line: Required price = Cost ÷ (1 − target margin). A $2,000 job at a 35% target margin: $2,000 ÷ 0.65 = $3,077. Profit is $1,077. Equivalent markup is 53.8%.
The "Target margin" tab on the calculator does this for you. Useful when a customer pushes for a lower price — drop the margin a few points and see what each point costs in dollars on the specific job.
Margin mistakes that cost contractors money
Confusing markup with margin. A 30% markup is a 23.1% margin. Pricing a $1,000 cost job at $1,300 thinking you earned 30% means you actually earned 23.1%. Across a year of jobs, the gap is real money.
Not paying yourself in the cost. If the owner works on the tools, owner labor belongs in cost of goods. Leaving it out makes margin look great until tax time. Use the labor cost calculator to get a real loaded labor rate.
Forgetting to allocate overhead per job. Gross looks healthy and operating tanks because overhead never gets billed to anyone. Allocate a percentage of overhead into every quote so the gross margin you read is the gross margin that clears overhead.
Quoting fixed price, billing variable cost. Fixed-price jobs absorb every overrun. Build a contingency into the quote (5–10% of cost) for anything but the simplest scopes. The contractor pricing guide walks through this trade by trade.
Discounting from price instead of margin. A 10% discount off price is more than a 10% hit to margin. If margin was 25%, a 10% price cut drops margin to about 17% — a 32% reduction in profit on that job.
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