Contractor Business Calculators

A 50% markup produces a 33.3% margin. They are different calculations on different bases — markup is a percentage of your cost, margin a percentage of the selling price — and they agree only at zero.

This is the most expensive arithmetic error in the trades. A contractor who needs a 30% margin and applies a 30% markup takes 23% instead. On its own that is a rounding error; across a year of jobs it is frequently the entire profit, which is how a business can be busy, well reviewed and still make nothing.

Quoting, invoicing, buying materials, driving between jobs and chasing payment are all real hours that no client pays for. For most trades only sixty to seventy-five per cent of the working week is billable.

A rate calculated across every hour worked is therefore roughly a third too low from the outset, and it fails invisibly — the busier you get, the faster it loses money. It is worth tracking a fortnight honestly rather than estimating this one.

Insurance, the van, tools, phone, software, accounting and advertising are real costs that no single job creates but every job must help carry. A bid built from materials and labor alone is priced below the true cost of being in business, however healthy the margin on paper looks.

Work out your own recovery rate rather than using a default: annual overhead divided by annual direct costs. For most small contractors it lands somewhere between fifteen and twenty-five per cent.