Definition
Gross profit is revenue minus the direct costs of doing the work (cost of goods sold / COGS). Gross margin is that profit expressed as a percentage of revenue. For contractors, COGS includes labor, materials, subcontractors, and equipment directly tied to jobs — not office overhead. Gross margin tells you how much of each dollar of revenue is left after paying for the actual work.
Why It Matters
Gross margin is the first profitability checkpoint. If your gross margin is too thin, no amount of cost-cutting on overhead will save you. A residential remodeler typically targets 30–40% gross margin; a GC with heavy sub work may run 15–25%. Knowing your gross margin by job type, crew, or customer tells you where to focus your business.
Field Example
A contractor does $200,000 in revenue this month. Direct costs: labor $70,000, materials $55,000, subs $25,000 = $150,000 COGS. Gross Profit = $50,000. Gross Margin = $50,000 ÷ $200,000 = 25%. That 25% must cover all overhead AND leave a net profit.
Calculation / Formula (if applicable)
Gross Profit = Revenue − COGS
Gross Margin % = (Gross Profit ÷ Revenue) × 100
COGS = Direct Labor + Direct Materials + Subcontractor Costs + Direct Equipment Costs
Software Application
Display gross profit and gross margin % prominently on the dashboard and P&L report. Show it per job as well as company-wide. Alert when gross margin falls below a user-defined threshold. Break down COGS by category so the user can see which cost type is eating margin.
Tooltip Version
Gross profit is revenue minus direct job costs (labor, materials, subs). Gross margin % shows how much of each revenue dollar survives after the work is done — before overhead.
Related Objects
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