Which Jobs Are Actually Making You Money? Most Contractors Do Not Know
A contractor does $600,000 in revenue. She is working 60-hour weeks. At year end, she has $40,000 in profit — 6.7% net margin. Some of her jobs were profitable. Some were not. She does not know which ones. Without that information, she cannot make her business more profitable. She can only work harder.
Why Revenue Is the Wrong Metric
Revenue tells you how busy you are. Profit tells you whether being busy is working. A $45,000 kitchen remodel that runs 30% over on labor and requires two revisits can generate less profit than three $8,000 service jobs that take two days each. Chasing revenue without tracking profitability means you are optimizing for the wrong thing.
The Job Profitability Calculation
Job profit = revenue − direct labor (actual hours × loaded rate) − materials (at cost) − overhead allocation (overhead per hour × actual hours) − subcontractor costs.
The overhead allocation is the part most contractors skip. If your overhead per billable hour is $45 and a job takes 12 actual hours, allocate $540 in overhead to that job before calculating profit. A job that generates $200 in gross profit (revenue minus labor and materials) but took 12 hours is a $340 overhead loss. It looks profitable until overhead is counted.
Patterns That Emerge When You Track It
Track job profitability for 90 days and patterns emerge: certain job sizes hit your overhead sweet spot, certain customer types take more callbacks and admin time, certain geographic zones cost more in drive time, certain job categories consistently run over estimate. These patterns tell you where to focus your marketing and where to raise your rates or stop taking the work.
Use the Job Profitability Calculator to calculate actual profit on any job — enter revenue, actual hours, your loaded labor rate, overhead per hour, and material cost. Run it on your last ten jobs. The variation in profitability across similar-looking jobs will surprise you.
Frequently Asked Questions
How do you calculate job profitability for a trade business?
Job profit = revenue − (direct labor + materials + overhead allocation + any subcontractor costs). Overhead allocation is your overhead per hour × actual job hours. A job that looks profitable on revenue minus materials and labor may be unprofitable when overhead is properly allocated.
What types of jobs are typically most profitable for trade businesses?
Service and diagnostic calls typically carry the highest margin — low material cost, high labor rate, and short duration means less overhead per job. Replacement work on known-price equipment (water heaters, panels, HVAC units) is predictable. Large custom installation projects carry schedule risk that compresses margin when they run over.
Why do time-and-materials jobs often outperform fixed-price bids?
Fixed-price bids require you to absorb scope uncertainty — if the job takes longer or needs more materials, margin compresses. Time-and-materials jobs pass that risk to the customer. The trade-off: customers prefer fixed price for budget certainty. The solution: accurate fixed-price quoting with contingency built in, or a not-to-exceed time-and-materials arrangement.
How do I identify which job types to pursue and which to avoid?
Track actual hours and materials against estimates on every job for 90 days. Calculate actual margin for each job type. You will find patterns — certain job categories consistently run over estimate, certain customer types generate more callbacks, certain job sizes hit your overhead sweet spot. Use that data to specialize.