How to calculate job profitability for a contracting business

Start with the revenue that actually landed

Use the invoiced total including approved change orders, not the estimate. If change orders are logged on the invoice but never back onto the job record, every profitability number you calculate from the job system will be too low.

Count labor properly

Take the hours logged against the job and multiply by the burdened rate, not the hourly wage. Burden adds payroll taxes, workers' compensation, benefits and paid time off, and it typically adds 20% to 35%. Skipping it makes labor-heavy jobs look better than they are.

Add drive time. On a county as spread out as Baldwin, a job in Gulf Shores and a job in Spanish Fort do not cost the same to reach, and pretending they do will make your far-out work look artificially healthy.

Add materials, subs and equipment

Materials at actual cost, not at the estimate. Subcontractor invoices tied to the job. For equipment, a simple hourly rate covering depreciation, fuel and maintenance is close enough to be useful.

Then allocate overhead

Total your monthly overhead — office, insurance, software, admin salaries, advertising — and divide it across jobs by direct labor hours. It is not perfect, but a consistent method applied every month will show you which job types truly carry the business.

Group by job type, not by job

One job tells you nothing; any job can go wrong. Group six months of jobs by type and the pattern appears. That is the number worth acting on.