How to Calculate Profit Margin for Construction Jobs
Profit margin and markup are not the same number, and confusing them is how contractors think they're making 20% when they're actually making 16.7%. The mistake is structural: margin is profit divided by revenue, while markup is profit divided by cost. Apply a 25% markup and you get a 20% margin - but if you think that 25% is your margin, you've just miscalculated every bid. Over a full year of projects, that 4-point gap compounds into a cash shortfall that looks like a revenue problem when it's actually a math problem.
This guide explains the markup-versus-margin distinction clearly, shows you how to convert between them, and walks through how to track both gross and net margin on a construction job. The BidFlow Profit Margin Calculator handles the arithmetic - this guide explains what the numbers mean and what to do with them.