Profit Margin Calculator

Profit margin is the percentage of the total amount charged that remains after all overhead and construction costs are paid.

Example

• Project Charge: $11,000
• Overhead & Construction Costs: $9,000

Step 1: Calculate Profit

Profit =Total Charge − Total Costs

$11,000 − $9,000 = $2,000

Step 2: Calculate Profit Margin

Profit Margin = Profit / Total Charge

2,000 / 11,000 ​=0.1818

Multiply by 100 to convert to a percentage: 0.1818 × 100 = 18.18%

While profit is the amount of profit remaining after all overhead and construction costs are paid in a project, markup is the amount you increase to any overhead or construction costs. For example, if your construction costs are $5,000, but you charge the client $5,500, your markup would be $500, or 10% ($500/$5,000 = .10).

However, while your markup is 10%, your profit margin is only 9.09%. This is because your profit margin is based on the total amount you charge, not the total of amount of your expenses.

While there are no rules on how much profit you can make on any given project, it seems like most residential home builders and remodelers agree that a 20% profit margin is standard. There are many factors such as the economy, type of project, unique client requirements, and much, much more that can drastically increase or decrease a projects profit margin, so it’s best to consider all factors before setting your profit margin for any given project.