Project Profitability for Trades: How to Know What a Job Really Earned

Project profitability for a tradesperson is what is left from a job’s price once you have paid every cost that job caused: materials, your time or your labour’s time, travel, hire, waste and a fair share of the cost of running the business. Work it out as a pound figure and as a percentage of the price, job by job, and you will know which work to chase, which to reprice and which to turn down.

Being busy is not the same as being profitable. A recent report on Scottish plumbing contractors makes the point: a business can stay full of work while earning less if materials, labour, vehicles, insurance, energy, admin and finance costs rise faster than contract values. This guide shows how to measure each job, what to include, and how to use the results to price the next one.

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TL;DR

Job profit is the price you charge minus every cost the job caused. Margin is that profit divided by the price, as a percentage.
Mark-up and margin are different. A 30% mark-up gives a 23% margin, not 30%.
Count the awkward costs too: mileage, parking, skip hire, waste, return visits and your own admin time.
Check the job at milestones, not only at the end, and write down what went wrong so the next quote is better.
Keep receipts and mileage as you go. Reconstructing a job from memory at the weekend is where profit figures go wrong.

What project profitability means on a trades job
The formula: profit and margin
Which costs to include
A worked example
Track the job as it happens
Using the numbers to price the next job
Our perspective
Doing this with TradeTally
FAQ
Sources

What project profitability means on a trades job

Office-based businesses talk about project profitability for large, multi-month projects. For a sole trader the “project” is simply the job: a bathroom refit, a rewire, a fence, a set of windows. The question is the same each time: after everything this job cost me, what did I actually make?

There are two levels worth knowing:

Gross profit is the job price minus the direct costs of that job. Productive’s guide draws the same line: direct costs come off to give gross profit, and overheads come off after that to give net profit.
Net profit is what remains once you also cover a share of your overheads: insurance, van, tools, accountancy, software, quoting time and admin.

Gross profit tells you whether the job itself worked. Net profit tells you whether the business can survive on jobs like it. You need both, because a job can look healthy at gross level and still lose money once overheads are shared out.

The formula: profit and margin

The calculation is short:

Job gross profit = job revenue minus direct job costs.
Job gross margin = gross profit divided by job revenue, multiplied by 100.

That is the method set out by Method for contracting jobs, and it works for any trade. Net margin uses the same sum with overheads deducted as well.

Why the percentage matters

Pound profit alone can mislead. Window News argues that percentage margin is more informative because the same cash profit can be a poor return on a much larger job. £800 profit on a £2,000 job is a healthy 40%. £800 on a £16,000 job is 5%, and a small overrun would wipe it out.

Mark-up is not margin

This catches out plenty of experienced traders. The same Window News article gives the example: add 30% mark-up to £1,000 of direct cost and you charge £1,300, but your gross margin is 23%, not 30%. To get a true 30% margin you need a mark-up of about 43%.

Pro tip: decide whether your target is a mark-up or a margin before you quote, and use the same one every time. Mixing them is how a “30% job” quietly becomes a 23% one.

Which costs to include

The most common mistake is counting only materials and labour. The Federation of Master Builders says every quote should recover full direct costs, business overheads and a realistic margin, and lists overheads as management, quoting and admin time, vans, fuel, tools, insurance and accountancy.

For a job-by-job check, work through this list:

Direct costs (charge these to the job)

Materials, including delivery, waste and the offcuts you cannot reuse
Labour: subcontractors and any employees. If you do the work yourself, put a day rate on your own time, otherwise your “profit” is just your wage in disguise
Plant and tool hire, skips, access equipment and consumables
Travel to site and parking
Return visits and snagging

Window News also notes that gross profit normally deducts materials, labour, installation costs including vehicle costs, access equipment and consumables, and sales costs, with overhead taken off afterwards to reach net profit.

Overheads (share these across your jobs)

Van, fuel not tied to one job, tools and insurance
Accountancy, software and phone
Time spent quoting, chasing payment and doing paperwork

Getting mileage right

Most sole traders use HMRC’s simplified mileage rates rather than tracking fuel and servicing separately. For the 2026–27 tax year, HMRC’s manual gives 55p per business mile for cars and goods vehicles for the first 10,000 miles and 25p after that, and 24p for motorcycles, subject to its eligibility and consistency rules. The rate covers running costs such as fuel, servicing, repairs, insurance, vehicle excise duty and MOT. It does not cover business-only tolls, congestion charges or parking, which can be claimed separately and should be charged to the job too.

For a job costing, multiply the miles to and from site, for every visit, by the rate. Ten visits to a site 15 miles away is 300 miles, which is real money. If you want the record-keeping side, our mileage log guide covers what to write down.

HMRC mileage rates and a 300-mile job example

VAT

If you are VAT-registered, work out profitability on figures excluding VAT, because the VAT you charge is not yours to keep. HMRC’s Making Tax Digital for VAT factsheet says VAT-registered businesses must keep their VAT records digitally, and lists the value of supplies excluding VAT among the data the electronic account holds. If your business is partly exempt, HMRC says you generally cannot reclaim VAT on purchases used for exempt supplies, so ask your accountant how that affects the costs you count.

A worked example

The figures below are an illustration, not a benchmark. Say you quote £2,400 to refit a small bathroom.

Item	Cost
Materials	£620.00
Your own time: 4 days at a £200 day rate	£800.00
Mileage: 150 miles at 55p	£82.50
Parking	£18.00
Skip hire	£120.00
Direct costs	£1,640.50

Gross profit: £2,400 minus £1,640.50 = £759.50
Gross margin: £759.50 divided by £2,400 = 31.6%

Now share out overheads. If your records suggest a job this size should carry £180 of van, insurance, software and admin cost, net profit is £579.50, a net margin of about 24.1%.

Then the job overruns: a fifth day (£200) and £90 of extra materials after a pipe turns out to be corroded. Direct costs rise to £1,930.50, gross profit falls to £469.50 and gross margin to 19.6%. Nothing dramatic happened, yet the job’s profit dropped by more than a third. That is why variations need to be priced and approved in writing, not absorbed.

A worked example — overview diagram

Track the job as it happens

Costing at the end is better than nothing, but the useful habit is checking along the way. Affinity Accounting recommends comparing actual income and expenses with budget at milestones such as 25%, 50% and 75% completion, investigating overruns immediately and recording lessons for future pricing. On a three-day job, that might simply mean a quick check at the end of day one.

A simple routine:

Before the job: write down the quote, expected materials and expected days.
On site: photograph every receipt the moment you buy. Log days worked and any extra visits.
At each milestone: compare spend and time with your estimate.
At the end: record final cost, final profit and final margin, plus anything unpaid.

BookaBuilderUK suggests closing each job by recording the quoted price, estimated and actual materials, labour hours, subcontractors, waste, parking, delivery, hire, variations, discounts, refunds and unpaid amounts, then the final gross profit and margin. Our guide to tracking job expenses as a sole trader shows how to tag spending to a job so this list fills itself in.

Keep the records HMRC expects

Job costing and tax records are the same paperwork, so do it once. HMRC’s record-keeping factsheet says self-employed businesses should keep records of sales and takings, purchases and expenses, receipts, purchase invoices, bank and card statements, and motoring expenses and mileage. The same factsheet says records can generally be kept electronically if the method captures all the information on the document and can present it in readable form, and its general rule is to keep records for at least six years. Our Self Assessment records checklist turns that into a list you can follow.

Invoices belong in the same picture, because a job is not profitable until it is paid. A clear, prompt invoice shortens the gap, and this guide to HMRC-compliant invoicing for small businesses explains what a proper invoice needs to contain. Our own note on self-employed invoice records covers how to file them so they match each job.

Using the numbers to price the next job

The point of costing finished jobs is to quote better ones. Three habits pay off.

Price from current costs, not old ones

An FMB presentation on preparing estimates that protect your profits advises using current prices and allowing for wastage, wear and tear, inflation, overheads and profit, rather than relying on square-metre rates or old spreadsheets. If your last three loft conversions each ran a day over, the next quote should carry that day.

Look for patterns

BookaBuilderUK points out that recurring patterns, such as extra merchant collections, return visits or specification changes, should feed into your future labour allowances, direct costs, scope wording and variation procedure. If every kitchen job loses a morning to collecting materials, that is not bad luck. It is a cost you have not priced.

Protect the margin in writing

The FMB’s advice on raising prices without losing work is to include all costs plus a realistic contingency and profit margin, define what the quote includes and excludes, agree variations in writing before the work is done, plan material orders and coordinate subcontractors, and compare estimated and actual cost after every job. Its presentation adds that profit leaks through panic buying, material delays, plant-hire extensions and unused or extra labour, and recommends stage payments and cash-flow forecasts to manage those risks.

When scope or prices are genuinely uncertain, a fixed price may not be the right contract at all. The Construction Leadership Council’s April 2026 guidance on prime cost and cost-reimbursable contracts explains that these arrangements can recover actual labour and materials plus a fee for overheads and profit, but they depend on detailed cost records. Day-by-day records are what make that kind of agreement workable.

Watch cash as well as profit

A profitable job that pays late can still sink you. The FMB’s guidance on why builders run into cashflow trouble names underpricing, especially leaving out overheads, as a common cause, and recommends a 12-month rolling forecast updated weekly and broken down by job into expected payments and costs.

Our perspective

We built TradeTally because the usual advice on job costing assumes you have an office, a spare evening and a good memory. Most sole traders have none of the three. The jobs that quietly lose money are rarely the big disasters. They are the ones where a receipt stayed in the van door, a return visit never got logged and the “quick extra” was never invoiced.

So our view is simple. The best costing system is the one you will actually use at 5pm in a lay-by. Capture costs where they happen, tag them to the job, and let the arithmetic happen by itself. Then spend your evening checking one number per job, the margin, instead of rebuilding the week from bank statements. And always put the margin target in the quote, not in your head: if a customer wants extras, the extras get a price before the work starts.

— Simon

Doing this with TradeTally

TradeTally is a UK web and mobile app for sole tradespeople that brings branded invoicing, quotes, expense and receipt capture, mileage and time tracking, CIS deductions and a live profit dashboard into one place, with tax-ready records and an SA103F export for Self Assessment. You can snap a receipt from the van, keep your costs where you can see them against income, and hand clean records to an accountant at year end.

The Starter plan is free, with limited invoicing. Professional is £12 per month or £120 per year, for unlimited invoices, receipts and tax exports. You can see both on the pricing page or start from the TradeTally home page. If you want to see what your profit means for your tax bill, try the Self Assessment tax calculator. For a weekly check-in habit, our phone-based profit routine takes only a few minutes.

FAQ

How do I calculate the profitability of a job?

Add up everything the job cost you: materials, labour (including your own time at a day rate), hire, travel, parking and waste. Subtract that from the price to get gross profit, then divide by the price and multiply by 100 for the margin. Deduct a fair share of overheads if you want net profit.

Is a 30% profit margin too high for a trade job?

Not necessarily, but check which 30% you mean. A 30% mark-up is only a 23% margin, while a 30% margin needs roughly a 43% mark-up. What counts as enough depends on your overheads and how much risk the job carries, so work backwards from what your business needs to cover.

Should I include my own time in the costs?

Yes. If your time is left out, a job that pays you less than you could earn elsewhere looks profitable. Give yourself a realistic day rate, treat it as a labour cost, and any profit above it is the return on the risk and the business itself.

How often should I check a job’s profit?

At milestones rather than only at the end. Checking when the job is about a quarter, half and three-quarters done lets you catch an overrun while you can still price a variation or change how you work. Always record the final margin so your next quote starts from real numbers.