What is job profitability for a contractor? It is job profit shown as a rate. Job profit is the dollars left on one job after costs. Job profitability is that same leftover as a percent of what the customer paid, so you can compare a small job to a large one without guessing which one actually paid.
Revenue tells you how busy you were. Job profit tells you whether that job paid. Job profitability tells you whether it paid enough for its size. A $400 leftover on a $1,000 job is not the same result as a $400 leftover on a $4,000 job, even though the dollar profit matches.
This guide defines both terms, walks the formula (revenue minus labor, materials, overhead, drive, and tax), and works one labeled example. It does not replace the full bid method. For that, use how to price a contractor job. To run a live job, use the Job Profit Calculator.
Job Profit vs Job Profitability
Job profit is a dollar amount on a single job: what remains after labor, materials, overhead, drive, and tax. It is not your labor pay. Labor is a cost. Profit is the leftover after those costs are covered.
Job profitability is that leftover as a percent of revenue. The percent lets you compare jobs of different sizes on the same scale.
A $600 leftover on a $2,000 job is 30%. A $600 leftover on a $6,000 job is 10%. Same dollars, different businesses. If you only track dollars, the bigger jobs feel more profitable. The rate is how you catch that.
How to Calculate Job Profit
Start from the price the customer paid (revenue). Subtract every cost that belongs to that job. What remains is job profit. Divide that by revenue to get job profitability.
1. Revenue
The quoted price, plus billed change orders. Not the number you wish you had charged, and not the number a competitor quoted. If you did not bill it, it is not revenue.
2. Labor
Your time and any crew time on the job, at your loaded labor rate. That includes paying yourself. Do not treat your own hours as free and then call the leftover "profit."
3. Materials
What you paid for parts and supplies used on this job. If you marked materials up in the quote, that markup sits in revenue. Subtract what left your pocket. Markup in the bid is covered in the contractor job pricing guide.
4. Overhead
The share of business costs that exist whether this job runs or not: truck, insurance, tools, software, admin time. Allocate a portion so the job carries its share. Skipping this line because it is not on the invoice is how a "profitable" job still leaves you short. Calculate the rate from your own books: what overhead percentage a contractor should use.
5. Drive
Time in the truck and fuel (or a trip fee you treat as a job cost). Drive time is time you cannot spend on another job. If you leave it off this job, you ate it. Put the hours and the fuel on the job you drove to.
6. Tax
Self-employment tax and income tax on the profit this job produces. If you skip this line, the "profit" you write down is not what you keep. Treat the tax set-aside as a cost of that job.
Then close the math:
If job profit is negative, that job lost money. If job profitability is weak next to other jobs you run, that job worked you harder than it paid. For reference ranges by trade (not a number to copy from a forum), see contractor profit margins by trade.
A Worked Example (Made-Up Numbers)
The figures below are an example only. They are round numbers invented to show the math. They are not a claim about what contractors earn, charge, or keep, and they are not a recommended price.
Example job: a one-day service job quoted at $2,000.
Add the costs: $700 + $500 + $250 + $70 + $180 = $1,700. Subtract from revenue: $2,000 − $1,700 = $300 job profit. Divide: $300 ÷ $2,000 = 0.15, or 15% job profitability.
The usual mistake: skip overhead, drive, and tax, then call it $800 profit ($2,000 − $700 − $500) and 40% profitable. Those three lines are real costs. Until they are on the job, the leftover is not job profit. It is a number that will not survive the month.
Run Your Own Numbers
The example is one job with round numbers. Your jobs are not. Open the Job Profit Calculator, enter labor, materials, overhead, drive time, and tax, and read net profit and profit margin on that job before you send the estimate.
Use it as a check, not as a second quoting system. The method behind the fields is the 6-step pricing guide. Overhead is the rate from your overhead percentage. The margin on the job is the job-level version of profit margins by trade.
Frequently Asked Questions
What is job profit for a contractor?
The dollars left on one job after labor, materials, overhead, drive, and tax. Not revenue, and not your labor pay.
What is job profitability?
Job profit as a percent of revenue (job profit ÷ revenue × 100). Use it to compare jobs of different sizes.
How do I calculate job profitability on one job?
Take the price the customer paid. Subtract labor, materials, overhead allocated to the job, drive, and tax. Divide what remains by the price. That percent is job profitability on that job. Run the same stack in the calculator if you do not want to do it by hand.
Why can job profit look fine when job profitability is weak?
Because dollars do not scale with job size. $500 left on a $1,500 job is a different result than $500 left on a $5,000 job. The first is about 33%. The second is 10%. Track both, or the big jobs will look like winners until you divide.
Do I include my own labor in the cost?
Yes. Your hours on the job are a cost. If you leave them out, you will count wages as profit and underprice the next one. Pay yourself in the labor line, then measure job profit on top of that.
The Bottom Line
Job profit is the leftover dollars on one job. Job profitability is that leftover as a percent, so you can compare jobs. Calculate it the same way every time: revenue minus labor, materials, overhead, drive, and tax, then divide. Skip a line and you will quote as if the leftover is bigger than it is.
Work the example once with a real job from last month. Then put the next estimate through the Job Profit Calculator before the customer sees a number you cannot change.
Results are estimates for educational purposes only. Consult a licensed tax professional for advice specific to your situation.
