How to Calculate Job Profit
Job profit is what you have left after covering all costs on a project. Calculating it accurately — before and after the job — is fundamental to running a profitable contracting or service business.
The Basic Formula
Job Profit = Job Revenue − Total Job Cost
Profit Margin = Job Profit ÷ Job Revenue × 100
Markup = Job Profit ÷ Total Job Cost × 100
What Goes Into Total Job Cost
- Materials: Everything purchased specifically for this job — lumber, pipe, concrete, fixtures, parts.
- Labor: The loaded cost of all hours worked on the job, including burden. Not just the wage rate.
- Subcontractors: What you pay any subs or specialty trades for this project.
- Equipment: Rental costs or allocated equipment usage for this job.
- Other direct costs: Permits, disposal fees, delivery charges, and any other costs tied directly to this job.
Overhead (rent, insurance, office costs) is typically recovered through your markup rather than tracked per job — unless you use job costing that allocates overhead directly.
Worked Example
| Materials | $4,200 |
| Labor (loaded cost) | $3,800 |
| Subcontractors | $1,500 |
| Equipment rental | $300 |
| Other (permits, disposal) | $200 |
| Total job cost | $10,000 |
Selling price (job revenue): $13,000
Job profit: $13,000 − $10,000 = $3,000
Profit margin: $3,000 ÷ $13,000 = 23.1%
Markup: $3,000 ÷ $10,000 = 30%
Markup vs Margin — Not the Same
In the example above, a 30% markup produced a 23.1% margin — not 30%. Markup is based on cost; margin is based on revenue. Confusing the two is one of the most common pricing errors in contracting.
See Markup vs Margin: What's the Difference? for a full explanation.
Estimating vs Actual Job Profit
Job profit should be calculated twice: once during estimating (to set the price) and once after completion (to assess actual performance). Differences between estimate and actual reveal where jobs run over — materials waste, labor overruns, scope creep, or underestimated subcontractor costs.
Common Mistakes
- Using wage rate instead of loaded labor cost — understates labor cost by 25–40%
- Forgetting subcontractor markup or coordination costs
- Not including all permit and disposal costs
- Confusing gross profit with net profit — overhead and taxes reduce gross profit further
- Not tracking actual vs estimated costs after the job — prevents improvement over time