How Tradies Can Work Out Their Profit Margin (Without Needing a Finance Degree)

Most tradies know their hourly rate.

Most tradies know roughly what a job costs.

But far fewer actually know their real profit margin.

And here’s the problem: if you don’t know your margin, you don’t really know if you’re making money or just working hard.

At Sweet As Business, we see it all the time. Busy tradies doing great work but the numbers aren’t quite adding up.

So here’s the simple way to work out your profit margin, using plain language.

First: What Is Profit Margin?

Your profit margin is simply:

How much money you keep from a job after all costs are paid.

Not turnover. Not what the customer pays you.

What you actually keep.

Example:

Customer pays you: $5,000 Job costs you: $4,000

Your profit = $1,000

Your profit margin = 20%

The Simple Formula

Here’s the only formula you need:

Profit Margin = Profit ÷ Revenue × 100

In tradie terms:

Profit Margin = What’s Left ÷ What You Charged × 100

Example:

You charge $10,000 for a job.

Costs are:

• Materials: $4,000

• Labour: $3,000

• Subbies: $1,000

Total costs = $8,000

Profit = $2,000

So:

$2,000 ÷ $10,000 × 100 = 20% margin

Still with me.....?

The Costs Tradies Forget (This Is Where Profit Disappears)

The biggest mistake we see is tradies only counting materials and labour.

But your business has other costs.

These include:

• ACC

• Insurance

• Tools

• Fuel

• Vehicle costs

• Accounting & bookkeeping

• GST mistakes

• Office software

• Phone plans

• Downtime between jobs

This is called Overheads (OH).

If you don’t include OH, your profit margin is usually way lower than you think.

The 3 Numbers Every Tradie Should Know

To price properly, you need three simple numbers:

REV – RevenueWhat the customer pays you.

COGS – Cost of Goods SoldMaterials, labour, subbies.

OH – OverheadsRunning the business.

Then the magic number:

NP – Net Profit

The real money left for you.

Healthy Profit Margins for Tradies

While every trade is different, a rough guide is:

10% or lessYou're probably underpricing.

15–20%Healthy small business margin.

20–30%Very strong margin.

Many tradies we meet are sitting around 5–8% without realising it.

Which explains why they’re flat out busy but not getting ahead.

The Easiest Way to Improve Your Margin

You don’t always need to charge more.

Often it’s about:

• Pricing jobs properly

• Tracking materials better

• Quoting with margin built in

• Understanding your real hourly cost

Small changes in margin make a huge difference.

Example:

Turnover: $500k

Margin at 10% = $50k profit

Margin at 20% = $100k profit

Same work. Double the profit.

How Sweet As Business Helps Tradies

At Sweet As Business, we help tradies understand their numbers in plain English.

We can help you:

• Clean up messy books

• Track real job costs

• Work out true profit margins

• Set pricing that actually makes money

Because running a business shouldn’t mean guessing whether you're profitable.

If you're busy but the bank balance doesn’t match the workload, it’s probably time to look at the numbers.

And we can help you make them Sweet A

s.