5 Reasons 50% Gross Profit is Important for Contractors

In this article, I’m going to go through some things that are crucial to you getting a 50% gross profit on your work.

Here’s the deal. We’re gonna talk about why 50% is important, first of all, then we’re gonna talk about some things that prevent you from getting it. Then, we’re gonna talk about three things that will ensure you get a 50% gross profit on your projects.

Check it out.

Contractor gross profit, summed up, is this: You land a $1,000 job, you spend $500 to do the work, then you’ve got $500 left – that $500 left is your gross profit. After you produce the work, pay the guys their hourly wages and work comp, pay for materials – what’s left is called ‘gross profit,’ and gross profit is what you pay your overhead with.

We wanna shoot for a 50% gross profit for all our work, and there’s a few reasons why we wanna do that. I’m gonna share those in this post.

So, why is it important to get a 50% gross profit?

1. It’s low-hanging fruit.

It is literally the fastest way that you can make money and capture profit. There’s a lot of profit sitting there, just waiting for you.

Back when I started, I was getting about a 32% gross profit – out of every $1,000 coming in, I had $320 left to pay the overhead, which was not enough. After one year of focusing on gross profit specifically, it jumped up to more than 50%. Easy profits.

It’s low-hanging fruit for you and your business that you need to focus on.

2. It’s only right.

You deserve the money. So much of what we talk about here is based around contractors fighting for the value that they’re worth. Don’t short-sell yourself, don’t short-change yourself. You’re going out there and investing thousands of dollars in tools, equipment, and training; you have years of experience, you’re delivering a great finished product for people – you deserve to be well-compensated for that. It’s very hard to be well-compensated when you’re not getting a 50% or better gross profit.

3. Less jobs / less leads.

When you have a higher gross profit, you actually need to do less jobs and get less leads each year to hit your breakeven and profit goals. You’re going to need more leads and more sales to continue to feed your overhead, so less of those is what keeps that amount of money in control.

4. You need it for overhead.

It’s expensive to run a contracting company. There are a lot of things that happen, and plenty of things to pay for. There’s insurance, phones, your shop, your office manager, marketing expenses, and all these other things that add up. The higher your gross profit, the easier it’s gonna be to recover your overhead, pay off all these things, and still have a net profit.

5. A better experience.

When you have a higher gross profit on your jobs, when you know that you’re keeping 50% or better, you can slow down and make it a better experience for the client. In turn, they’re gonna say nice things about you and refer you to their friends and colleagues, and it’s gonna continue to feed your business. Providing an amazing experience is more important than the deck you built or the paint job you completed. Trust me on this.

These are just five quick reasons why a 50% gross profit is important. Having a 50% gross profit or higher is the fastest way for your business to make more money – and that, along with great work, is what we all want at the end of the day. These tips can help you get it.