# Profit Margin Calculator

> Enter your revenue, then the costs of the job: materials, labor, subcontractors and other direct costs, plus your overhead as a percent. You get gross profit and margin, net profit and margin, and the price that reaches a target margin. A $10,000 job with $7,000 of direct costs has a 30% gross margin.

Canonical: https://receiptscanner.co/tools/profit-margin-calculator
Updated: 2026-10-28 · Sources re-checked by: 2027-10-28

This is a free interactive calculator that runs in the browser. Nothing you type is stored or sent. Results are estimates.

## How it works

Direct costs = materials + labor + subcontractors + other direct costs. Gross profit = revenue − direct costs, and gross margin = gross profit ÷ revenue. Overhead = revenue × your overhead percent (rent, insurance, trucks, software and office pay). Net profit = gross profit − overhead, and net margin = net profit ÷ revenue. Markup on direct costs = gross profit ÷ direct costs. Price for a target net margin = direct costs ÷ (1 − overhead percent − target margin). If overhead plus the target add up to 100% or more, no price can reach the target.

**Price needed on $7,000 of direct costs, with 10% overhead**

| Target net margin | Price | Net profit |
| --- | --- | --- |
| 5% | $8,235.29 | $411.76 |
| 10% | $8,750.00 | $875.00 |
| 15% | $9,333.33 | $1,400.00 |
| 20% | $10,000.00 | $2,000.00 |
| 25% | $10,769.23 | $2,692.31 |

**Where each margin sits in the chain**

| Line | What it shows |
| --- | --- |
| Revenue | What the customer pays |
| Direct costs | Materials, labor and subs that exist because of this job |
| Gross profit | Revenue less direct costs: the money left to cover overhead |
| Overhead | Costs that exist even with no job: rent, insurance, trucks, office |
| Net profit | What is left for the owner after everything |

## Worked example: a $10,000 job with 10% overhead and a 15% target

1. Direct costs: 3,000 + 2,500 + 1,000 + 500 = $7,000.00.
2. Gross profit: 10,000 − 7,000 = $3,000.00. Gross margin 30%.
3. Overhead at 10%: $1,000.00. Net profit: 3,000 − 1,000 = $2,000.00. Net margin 20%.
4. Markup on direct costs: 3,000 ÷ 7,000 = 42.9%.
5. To reach a 15% net margin with 10% overhead: 7,000 ÷ (1 − 0.10 − 0.15) = $9,333.33.

## FAQ

### How do I calculate profit margin?
Subtract your costs from your revenue to get profit, then divide the profit by the revenue. $3,000 profit on $10,000 of revenue is a 30% margin.

### What is the difference between gross and net margin?
Gross margin only subtracts the direct costs of the job. Net margin also subtracts overhead, so it shows what the business keeps. Net margin is always the lower of the two.

### What is a good profit margin for a contractor?
It varies by trade, by market and by how overhead is counted, so there is no single number. Compare your net margin month by month, and set a target you can live on after your own pay.

### How do I set my price to get a target margin?
Divide your direct costs by one minus your overhead percent minus the margin you want. That is the price box on this page. If the answer is blank, overhead plus target are 100% or more.

### Should my own pay count as a cost?
Yes, if you work on the job. Put your wages in labor, or in overhead if you pay yourself as a salary. Otherwise the profit looks bigger than it is.

### Why can the margin be negative?
If the costs are bigger than the revenue the job lost money, and the margin shows below zero. Raise the price, cut the cost or turn the job down next time.

## Sources

- [Profit margin: gross, operating and net margin, as percentages of revenue](https://en.wikipedia.org/wiki/Profit_margin) (checked 2026-10-28)
- [Gross profit: revenue minus the direct cost of goods or services sold](https://en.wikipedia.org/wiki/Gross_profit) (checked 2026-10-28)

This calculator is an estimate for planning. It is not accounting or tax advice, so check your figures with your bookkeeper before you rely on them.