Profit Margins 101: Are You Charging Enough?

It’s easy to get caught up in the hustle - booking jobs, chasing leads, managing crews. But working hard doesn’t always mean earning well. One of the biggest blind spots for contractors is not knowing whether their pricing actually leads to profit. 

You might be covering costs, but is there anything left over for growth, savings, or even a decent paycheck?

Profit margins give you that answer, and ignoring them can put your business in a dangerous spot. 

The only way to run a sustainable, growth-ready company is to understand your margins - and price your work accordingly. Let’s talk about how to figure out if you’re really charging enough.

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Covering the Basics 

You probably don’t need a reminder, but just to be on the safe side - your profit margin is the percentage of money you keep after covering all your costs. It’s that simple. It’s the number that tells you how sustainable and profitable your business really is.

Revenue can look great on paper, but if your costs eat up most of it, you're not actually making money.

For example, if you charge $10,000 for a job and your total expenses (labor, materials, tools, fuel, etc.) add up to $7,000, your profit is $3,000. That’s a 30% margin. 

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Why does this matter? We’ll explain shortly.

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What Costs Should You Include?

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Most contractors only think of the obvious expenses: materials and labor. But real profitability comes from tracking all of your costs. That includes fuel, vehicle maintenance, equipment depreciation, insurance, software, office time, subcontractors, and even your own salary. 

If it costs your business time or money to deliver a service, it belongs in your cost calculation. Forgetting these can leave you undercharging - and wondering why there's nothing left in your bank account at the end of the month.

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What’s a Healthy Profit Margin for Contractors?

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In most contracting and home service industries, a 30% gross profit margin is considered a solid baseline. That means after all job-related costs, 30% of your revenue remains for overhead, owner compensation, and reinvestment. 

Anything less than 20% should be a wake-up call. At that point, your business is too vulnerable - one delayed payment or unexpected cost could push you into the red. If you’re consistently below that, you’re either undercharging or your costs are too high. Low-margin businesses have little room for mistakes or investment. 

On the flip side, with healthy margins, you can afford to hire better help, invest in better tools, or spend more time on higher-value work instead of running from one low-paying job to the next.

Aim higher not just to make ends meet, but to build a business that can handle growth, slow seasons, or emergencies.

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Signs You're Not Charging Enough

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Here’s the reality: if you're always swamped but still stressed about money, something’s wrong. Working 60+ hours a week and still struggling to cover your bills is not sustainable. 

You might also notice you're always turning down good opportunities because your current workload doesn’t pay enough to give you any breathing room. Your business should give you freedom and financial security - not burn you out while barely breaking even.

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When & How to Raise Prices

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If your costs have gone up - and they probably have - it’s time to revisit your pricing.
Raising prices doesn’t have to be scary. Start with new customers, or apply increases to larger or more complex jobs first. Don’t apologize for it - explain it. 
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Review your job costs every 3 - 6 months and make small adjustments when needed. You don’t have to jump straight to big increases. Even a 5-10% bump can significantly improve your margins. 

Let clients know that rising costs, improved service, or demand means your pricing is being updated. If you're delivering consistently good work, most people won’t blink. And the ones who leave over a small price change likely weren’t the right clients to begin with.

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Compete on Value, Not Price

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Being the cheapest in town might get you more calls - but it won’t keep your business alive. Low prices attract high-maintenance clients, tight budgets, and constant stress.

Instead, focus on selling your value: you show up on time, do the job right, and stand behind your work. That’s worth more than saving a few bucks, and good clients know it.

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Use Software to Track Margins

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Guessing your numbers isn’t a strategy. Contractor software helps you track every job from quote to payment, giving you real data on what each job actually cost and how much you made. You’ll know which types of work are most profitable and where you’re bleeding cash. With that kind of visibility, it’s easier to fix pricing issues before they become a crisis.

If you’re still doing estimates and cost tracking on paper or in your head, you’re likely missing key info. 

Tracking your job progress and costs through software like MotionOps will make your job so much easier. It takes the guesswork out of pricing and helps you make decisions based on facts, not gut feeling. 

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Profit Isn’t Greedy - It’s What Keeps You Alive

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Too many contractors feel bad about raising prices or pushing for better margins. But the truth is, you can’t take care of customers, your family, or your employees if your business is running on fumes. 

Profit isn’t just nice to have - it’s the only way forward. So take a hard look at your pricing and make sure you’re getting paid what you’re worth.

To stay organized and on top of things, give MotionOps a try. It’s specifically designed for contractors, so it’s a software that understands your needs and priorities and is there to help you achieve all your goals. You won’t have to guess where your money is going, or how much you spent on a job. It’s all there in just a few clicks.

Book a demo today and see the difference.

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