How to Calculate Job Profitability

Winning work is easy; making money on it is harder. Many trade and service businesses are busy but barely profitable because they never check whether individual jobs actually made money. Here is how to calculate job profitability properly.

The basic job profitability formula

Job profit is simply the revenue from a job minus all the costs of delivering it. The formula is: Job profit = Invoiced amount minus (labour cost + materials cost + subcontractor cost + plant and other direct costs). Divide that profit by the invoiced amount and multiply by 100 to get your job margin as a percentage.

What costs to include

The mistake most businesses make is only counting materials. To get a true number you need every direct cost attached to the job:

• Labour — actual hours worked multiplied by the real cost of each worker (wage plus on-costs like ACC, KiwiSaver or super, leave and tools), not just their charge-out rate.
• Materials — what you actually paid suppliers, including freight, not the quoted allowance.
• Subcontractors — any work you paid others to do on the job.
• Plant and equipment — hire costs, or an internal charge for owned plant and vehicles.
• Other direct costs — disposal, permits, parking, consumables.

Estimated vs actual

The real insight comes from comparing what you quoted against what it actually cost. If you budgeted 20 hours and the job took 32, that variance is where your margin disappeared. Tracking estimated versus actual on every job tells you whether your estimating is accurate and which job types are quietly losing money.

Why timesheets are the missing piece

Labour is usually the largest and most variable cost, yet it is the hardest to capture. If your team records time against the job — ideally from the field on a mobile app — you can attribute labour cost accurately. Without that, job profitability is guesswork.

Track it in real time, not at year end

Discovering a job lost money months later is too late to fix anything. The goal is live job costing: as timesheets, purchase orders and supplier bills are logged, your profit figure updates automatically. That lets you catch an overrun while the job is still running, adjust scope, and quote the next one better.