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Bad math steals margin. Here's where.
The 5 Job Costing Mistakes That Drain Contractor Profitability
Five places contractor profit quietly leaks out, and a practical fix for each one. Two of them are below. The full guide has all five.
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Two of the five
Start with these.
The two that show up in bids before a job even starts.
The markup vs. margin trap
A job has $1,000 in costs. You want a 20% margin, so you multiply by 1.20 and charge $1,200.
But $200 on a $1,200 job is a 16.7% margin, not 20%. You gave away part of your profit before the job started.
The fixDivide costs by (1 – the margin you want).
Ignoring labor burden
A $30/hour employee often costs $40–$45/hour once you count employer payroll taxes, workers' comp, liability insurance, vehicle costs, paid time off, and time you can't bill, like driving and training.
Labor burden commonly adds 30–50% on top of wages. Bid at the wage, and you're underbidding.
The fixWork out a burden rate for each employee, and use it in every estimate.
In the full guide
The other three.
Each one with what goes wrong, what it costs, and how to fix it.
- 03The dashboard receipt graveyardProfit rarely disappears in one big mistake. It bleeds out in $50 and $100 supply runs.
- 04Guessing on overheadJobs have to cover the office, the trucks, the insurance, and your salary, not just lumber and labor.
- 05Managing by bank balanceCash in the bank isn't the same as profit. Some of it is customer deposits and money you owe.
