Profit Margin Optimizer
Back-solve your bid price for a target net margin after all costs (job cost + overhead allocation).
Labor + material + sub + equipment for this job
This job's share of monthly overhead (office, insurance, vehicles, admin payroll)
What you want left after direct cost AND overhead
If you priced this purely on gross margin (no overhead in denominator)
Required bid price
$113,636
For 12.0% net margin after all costs
| Direct cost | $80,000 |
| Overhead allocation | $20,000 |
| Total cost | $100,000 |
| Required bid price | $113,636 |
| Gross profit | $33,636 |
| Net profit | $13,636 |
| Gross margin % | 29.60% |
| Net margin % (check) | 12.00% |
| Markup on direct cost | 42.05% |
| Markup on total cost | 13.64% |
If you priced by gross margin target (30.0%)
Methodology: Required revenue R is back-solved so that (R − total cost) / R equals your target net margin. Formula: R = (direct + overhead) / (1 − netMargin). Markup on direct cost is then (R − direct) / direct.
Estimates only. Verify with detailed takeoff and current supplier quotes.
Frequently Asked Questions
What is the difference between net and gross margin?
Gross margin is (revenue − direct job cost) ÷ revenue. It tells you what is left after labor, material, sub, and equipment but before any office overhead. Net margin is (revenue − direct cost − overhead) ÷ revenue. It is what you actually keep before taxes. A contractor running 25% gross and 8% overhead-to-revenue ratio nets 17%. Pricing only to a gross-margin target leaves overhead unrecovered when overhead grows faster than revenue — which is why this tool back-solves from net.
How do I estimate overhead allocation per job?
Add up annual overhead — office rent, admin salaries, vehicles, insurance, software, marketing, owner's salary if not job-charged, utilities. Divide by annual direct job cost to get an overhead rate (commonly 10–25% of direct cost for small GCs and remodelers). For this job, allocate: overhead = direct cost × your overhead rate. Or divide annual overhead by your number of jobs per year for a flat per-job number. Either method is defensible if applied consistently.
What if my margin varies by trade or job type?
Different work carries different risk and competitive pressure, so target different margins. Service work and small repairs commonly run 25–40% net because there are fewer competitors and higher overhead per dollar of revenue. Large bid-spec commercial work runs 5–10% net because competition compresses pricing. Custom residential lands in the middle at 10–18% net. Run this calculator separately for each line of business rather than averaging.
What net margin target is realistic for a contractor?
Industry benchmarks for 2026: general contractors net 3–7% on commercial bid work, 7–12% on negotiated commercial, 8–15% on custom residential, and 15–25% on remodel and service. Specialty trades (electrical, plumbing, HVAC) often run 8–15% net. Below 5% net for the risk in construction is dangerous — one bad project or slow-pay client wipes the year. If you cannot bid jobs that hit your target net margin, your overhead is too high or your market is over-saturated, not the other way around.