The profit margin on a service job is the share of the price you charged that you actually keep after the job's costs are paid: gross margin = gross profit ÷ price. This calculator adds up your labor, material, and other job costs, subtracts them from the price, and shows the profit, the margin, and the markup on cost side by side. Everything below the tool explains what each number means and how to read it without fooling yourself.
Calculate your job margin
Margin vs markup
The calculator shows both because they describe the same profit against two different bases, and mixing them up is the single most common pricing error in the trades.
- Gross margin is profit as a percentage of the price you charged:
margin = profit ÷ price. It answers "of every dollar the customer paid, how much did I keep?" - Markup is profit as a percentage of your cost:
markup = profit ÷ cost. It answers "how much did I add on top of what the job cost me?"
Take a job that costs $1,200 and sells for $1,630. The profit is $430. That is a 430 ÷ 1,630 = 26% margin but a 430 ÷ 1,200 = 36% markup — same job, same dollars, two very different-looking percentages. A markup always reads higher than the margin it produces, and the gap widens as profit grows. A quick reference: a 25% margin equals a 33% markup; a 33% margin equals a 50% markup; a 50% margin equals a 100% markup.
Which one you use is a matter of habit — many shops price up from cost using markup, then report profitability down from price using margin. Both are fine as long as you know which lens you're looking through. Margin is the figure that appears on a profit-and-loss statement, so it's usually the better one for comparing jobs.
How to use this number
Gross margin on a single job is a snapshot, not a verdict. A few ways to put it to work:
- Set a floor. Decide the minimum margin a job has to clear to be worth taking, and check quotes against it before you commit. If a job pencils out below that line, you can adjust scope, price, or walk away — but do it on purpose, not by surprise after the invoice.
- Compare like jobs. Run the same job type through the tool a few times and you'll see how consistent your margins really are. Wide swings usually point to inconsistent estimating or costs you aren't capturing.
- Remember this is gross margin. Gross margin covers only the direct costs of the job. It does not include overhead — office rent, software, advertising, unbilled owner time, and everything else that keeps the doors open. Your net profit is what's left after overhead comes out of gross profit, so a job needs a gross margin comfortably above zero to leave anything behind once overhead is paid.
To turn a target margin into a price before the job, or to build a defensible labor rate into your costs, start with the billable hourly rate calculator and the broader guide on how to price service jobs profitably.
Common mistakes
- Confusing margin with markup. Charging a "25% margin" by adding 25% to cost actually yields only a 20% margin. If you price with markup, convert to margin before you compare jobs or set targets — the two are not interchangeable.
- Forgetting overhead is not in "cost." The cost fields here are direct job costs only. Gross margin looks healthy right up until overhead eats it. Treat gross margin as necessary but not sufficient, and know your overhead separately.
- Using the wage instead of loaded labor cost. The labor figure should be your fully-loaded cost — wage plus payroll taxes, insurance, benefits, vehicle, and the rest — not the number on the pay stub. A wage-only labor cost makes every job look more profitable than it is. See job costing for service businesses for how to build that loaded number.
- Leaving out "other" costs. Permits, disposal fees, subcontractors, equipment rental, and warranty callbacks all belong in the job's cost. Drop them and your margin is fiction.
FAQ
What's a good gross margin on a service job?
It varies widely by trade, job type, and region, so treat any single benchmark with caution. The more useful test is against your own numbers: your gross margin has to clear your overhead with enough room left to be worth the work. Track your jobs for a while, learn your own baseline, and set a floor from that rather than a figure borrowed from another market.
Why is the markup percentage higher than the margin percentage?
Because they divide the same profit by different numbers. Markup divides profit by the smaller number (cost), so it always reads higher than margin, which divides by the larger number (price). They describe the same dollars of profit — just from opposite ends of the transaction.
Does this include overhead and my own time?
No. This is gross margin, which covers only the direct costs you enter — labor, materials, and other job costs. Office overhead, advertising, and unbilled owner time are not included, so a job needs a gross margin well above zero to leave a net profit after those are paid.
This calculator is for education and planning. It runs entirely in your browser — nothing you enter is sent anywhere. It is not tax or accounting advice.