How to Calculate Profit on a Building Job (Real Margin, Not Guesswork)

Turnover is vanity, profit is sanity — and most builders don't know their real profit on any given job. You finished a £24,000 kitchen extension, the client paid on time, and you felt good about it. But after materials, subcontractors, fuel, skips, and all the other costs you forgot to add up — did you actually make money? And how much?

This isn't an academic question. Builders who know their job-level margins make better quoting decisions, avoid underpriced work, and build businesses that actually pay them a proper salary. Builders who guess their margins work harder every year without getting wealthier.

This guide walks through how to calculate your real profit on building jobs — with a worked example, the overhead costs most builders forget, and the margin killers that silently erode your income.

1 Revenue vs Profit: What Most Builders Get Wrong

When someone asks "how's business?" most builders answer with their turnover. "Yeah, good — turned over £180k last year." But turnover tells you nothing about profitability. A builder turning over £180,000 could be netting £50,000 or £15,000 depending on how well they manage costs.

There are three numbers that matter:

• Revenue — the total amount the client pays you. This is the headline number on your invoice.
• Gross profit — revenue minus your direct costs (materials, subcontractors, plant hire — the costs specific to that job). This tells you what the job earned before overheads.
• Net profit — gross profit minus your share of overhead costs (van, fuel, insurance, phone, tools, your own salary). This is your actual profit — the money you keep after everything is paid for.

Most builders think in terms of revenue and gross profit. Very few calculate net profit per job. And net profit is the only number that tells you the truth.

If you're turning over £150,000 and netting £25,000, you're earning less than a employed site manager — but with all the stress, risk, and liability of running your own business. Knowing your numbers is the first step to fixing them.

2 Direct Costs: The Ones You Can See

Direct costs are the expenses tied directly to a specific job. Most builders track these reasonably well — or at least have a rough idea. They include:

• Materials — everything you buy for the job. Timber, bricks, cement, plasterboard, fixings, pipe, cable, tiles, adhesives, paint, silicone. For a typical kitchen extension, materials might run £8,000-£12,000 depending on specification.
• Subcontractor costs — electrician, plumber, plasterer, tiler, groundworker, roofer. Each trade package should have a firm price before you start. On a kitchen extension, subcontractor costs might total £4,000-£8,000.
• Plant and equipment hire — mini-digger, scaffolding, skip hire, temporary fencing, portaloo. Scaffolding alone can be £1,500-£3,000 for the duration of an extension project.
• Skip hire and waste disposal — budget £250-£400 per skip. A kitchen extension with demolition work might need 3-5 skips over the project. That's £1,000-£2,000 in waste costs alone.
• Specialist fees — structural engineer's calculations, building control inspection fees, party wall surveyor if applicable.

These are the obvious costs. Add them up honestly and you'll typically find they account for 55-70% of the job revenue. That leaves 30-45% as your gross margin — which sounds healthy until you account for everything else.

3 Indirect Costs: The Ones Most Builders Forget

This is where builders lose money without realising it. Indirect costs (overheads) are the expenses of running your business that aren't tied to a single job — but they're real costs that every job needs to contribute to covering.

• Your van — lease or finance payments, insurance, road tax, MOT, servicing, tyres, breakdown cover. A mid-range trade van costs £400-£600/month all-in before fuel. That's £5,000-£7,200/year.
• Fuel — driving to site, merchants' runs, tip runs, quoting visits. A tradesperson driving 25,000 miles a year spends £3,000-£5,000 on diesel.
• Insurance — public liability (£2m-£10m cover), employer's liability, professional indemnity, tools and plant insurance. Combined: £1,500-£3,000/year.
• Accountancy fees — £500-£1,200/year for a sole trader, more for a limited company.
• Tools and equipment replacement — drills, saws, levels, laser measures, batteries, PPE. Budget £500-£2,000/year for ongoing replacement and upgrades.
• Phone and data — your mobile is a business tool. £30-£60/month for the business portion.
• Software and subscriptions — accounting software, project management tools, cloud storage. £50-£150/month.
• Your own salary — this is the big one. You need to pay yourself. If you want to earn £40,000 as a sole trader (before personal tax), every job needs to contribute its share of that £40,000.

Add up your annual overheads — van, fuel, insurance, accountancy, tools, phone, software, your salary — and you'll typically land somewhere between £50,000 and £70,000/year for a one-person building business. Every job you complete needs to cover its share of that overhead.

A useful rule of thumb: divide your annual overheads by the number of working weeks (typically 46-48, allowing for holidays and quiet periods). If your overheads are £60,000/year and you work 48 weeks, that's £1,250/week that needs to come from your jobs — before you've made any profit at all.

4 How to Calculate Job Profit: Worked Example

Let's work through a real example. You've quoted a kitchen extension at £24,000. The job takes 6 weeks. Here are the actual costs:

Direct Costs

• Materials (blocks, bricks, timber, steel, insulation, plasterboard, kitchen units, tiles, fixings): £9,200
• Subcontractors (electrician £1,800, plumber £1,400, plasterer £1,100, tiler £900): £5,200
• Scaffolding hire (8 weeks): £1,800
• Skip hire (3 skips): £1,050
• Building control fees: £450

Total direct costs: £17,700

Gross profit: £24,000 - £17,700 = £6,300 (26.3% gross margin)

Allocated Overheads (6 Weeks)

• Van costs (6/48 of £6,000/year): £750
• Fuel (site visits + merchants' runs): £480
• Insurance (6/48 of £2,400/year): £300
• Tools, phone, software (6/48 of £3,000/year): £375
• Your salary (6/48 of £40,000): £5,000

Total allocated overheads: £6,905

True Net Profit

£24,000 - £17,700 - £6,905 = -£605

That's right. On a £24,000 job that felt like a good earner, you actually lost £605 once you account for all costs including paying yourself a salary. The gross margin of 26% looked fine. The net margin of -2.5% tells the real story.

This is why calculating real profit matters. Without doing this exercise, you'd quote the next kitchen extension at the same price — and lose money again.

5 What Margin Should You Aim For?

Target margins depend on the type of work, your overheads, and your local market — but here are realistic benchmarks for UK building work:

• Gross margin (before overheads): 30-40%. This is revenue minus direct job costs. If your gross margin on a job is below 30%, it's going to be very hard to make a net profit once overheads are allocated.
• Net margin (after all costs including your salary): 15-25%. This is the real profit — money left over after you've paid yourself, covered all overheads, and accounted for every direct cost. This is what builds your business.
• Under 10% net margin: danger zone. You're essentially working for wages with all the risk and stress of running a business. At this margin, one unexpected cost on any job wipes out your profit entirely.

High-end residential work and specialist trades often achieve higher margins. Competitive new-build subcontracting tends to run tighter. But across general building work, 20% net profit is a healthy target that funds business growth, covers quiet months, and actually rewards you for the risk you're taking.

6 Common Margin Killers

Knowing the theory is one thing. In practice, these are the specific ways builders' margins get eroded on real jobs:

• Underquoting materials. Using last year's prices or guessing material quantities. Timber and steel prices move significantly year to year. Price materials at current merchant rates and add a 10-15% waste factor. Every time.
• Not charging for travel time. If you're driving 45 minutes each way to site, that's 7.5 hours a week you're not billing for. On a 6-week job, that's nearly a full week of unpaid time. Factor site distance into your pricing.
• Scope creep without variation orders. "While you're here, can you also..." is the most expensive phrase in construction. Every change or addition needs a written variation with an agreed price. If you do extras for free, you're paying for the client's upgrades out of your profit.
• Paying subcontractors more than quoted. Your tiler quoted £900 but the job took longer and he wants £1,200. If you absorb that, £300 comes straight off your margin. Get firm prices in writing before the job starts.
• Underestimating programme duration. You quoted based on 5 weeks and it took 7. Those extra 2 weeks of van costs, fuel, insurance, and your own time aren't covered by the price. Build realistic float into your programme.
• Forgetting preliminaries. Skip hire, scaffolding, portaloo hire, temporary electrics, site protection — these costs are easy to forget when pricing but impossible to avoid when building.

The biggest margin killer isn't any single cost — it's not tracking costs as the job progresses. If you only calculate your profit after the job is complete, it's too late to do anything about it. Track costs weekly and you'll see problems while you can still address them.

7 Tracking Profit as the Job Progresses

The most important shift in how you think about profit is moving from a post-job calculation to a live one. Don't wait until the final invoice is paid to work out if you made money.

• Log every expense against the project as it happens. Material receipts, subcontractor invoices, skip hire — capture them in real time. If you use VoxTrade, you can scan receipts and allocate them to the project in seconds.
• Review costs weekly. Every Friday, compare what you've spent against what you quoted. If you're at 60% of the budget but only 40% through the work, you've got a margin problem developing — and you can still do something about it.
• Track your hours. Even a rough daily log of hours worked per project lets you see whether the job is running to programme or overrunning. Time is money, and your time is the most expensive resource on most jobs.
• Issue variation orders immediately. When the scope changes, price the variation the same day and get it agreed in writing before you do the work. Don't leave it until the end of the job when the client's memory of what they asked for differs from yours.

Live cost tracking turns profit calculation from a depressing post-mortem into a useful management tool. When you can see your margin in real time, you make better decisions — about procurement, programme, variations, and whether to take on similar jobs in the future.

Wrapping Up

Calculating profit on a building job isn't complicated — it's just arithmetic that most builders avoid. Revenue minus direct costs minus your share of overheads equals your true profit. The number is often smaller than you'd expect, and sometimes it's negative on jobs you thought were profitable.

The fix starts with knowing your numbers. Work out your annual overheads. Understand your weekly overhead rate. Quote jobs that deliver a genuine 20%+ net margin. Track costs in real time so you can see problems developing. And stop doing extras for free — every unpriced variation comes directly out of your pocket.

The builders who consistently earn well aren't the busiest — they're the ones who price accurately and track costs honestly. Once you know your real margins, every business decision gets clearer.

For more practical business guides for builders, browse the VoxTrade blog.