It's the question behind every late night doing paperwork: am I actually making money at this? Revenue doesn't answer it — plenty of contractors run six figures and keep almost nothing. The answer is a single number most owners never calculate: net margin. Here's what a healthy one looks like, and how to find yours.
The real numbers
According to NAHB's most recent cost-of-doing-business data, the average remodeler runs a gross margin of about 29.9% and a net profit margin of about 6.3% — the highest in decades, and still thin. Operating expenses (overhead) eat roughly 23.6% of revenue on the way from gross to net. Net margins have climbed from around 3% in 2011 to 6.3% today, but this has never been a fat-margin business.
Gross margin vs net margin
Two different numbers, and mixing them up is how "profitable" jobs hide an unprofitable business:
- Gross margin = revenue minus your direct job costs (materials, labor, subs), as a share of revenue. This is job-level profit.
- Net margin = what's left after you also subtract overhead — your office, vehicles, insurance, admin, and your own pay. This is business-level profit.
A job can post a healthy gross margin while the business runs at a loss, simply because overhead never got counted. Net margin is the honest number.
Where profit actually comes from: break-even
Overhead is a fixed cost you carry whether you book one job or twenty. So the first slice of your gross profit each year doesn't go in your pocket — it pays off overhead. Only revenue above your break-even turns into net profit. The formula:
The higher your overhead or the thinner your gross margin, the more you have to bill just to get to zero. Knowing that number tells you the floor your revenue can't drop below — and how much of your year is spent simply covering the cost of being in business.
A worked example
Here's a small remodeler's year, end to end:
| Line | Amount |
|---|---|
| Total revenue (all jobs) | $286,000 |
| Total direct cost | $204,100 |
| Gross profit (28.6%) | $81,900 |
| Overhead | $65,700 |
| Net profit (5.7%) | $16,200 |
This business grosses a respectable 28.6% but nets 5.7% — just under the industry average, because overhead takes most of the gross profit. Its break-even is $65,700 ÷ 0.286 ≈ $229,000: everything up to that revenue just paid for overhead, and only the last $57,000 of revenue produced the $16,200 of net profit.
Margin of safety
One more number worth knowing: how far revenue could fall before you cross back below break-even and start losing money. Here it's (286,000 − 229,000) ÷ 286,000 ≈ 20%. A comfortable cushion means a slow quarter won't sink you; a thin one is a signal to cut overhead or raise margins.
Busy but broke
The most common trap in remodeling isn't slow work — it's being fully booked and still broke. It happens when gross margins are fine but overhead quietly grows, or when jobs get priced to keep the calendar full instead of to hit a real margin. The only way to see it is to put revenue, direct cost, and overhead in one place and look at the net. Being busy feels like success; net margin tells you whether it is.
How to find your number
- Total your jobs. Revenue and direct cost for every job this year, rolled up.
- Total your overhead. Everything no single job carries — office, vehicles, insurance, admin, your pay, software, marketing.
- Do the subtraction. Revenue − direct cost − overhead = net profit. Divide by revenue for net margin.
- Compare. Against your break-even, and against the ~6.3% average. Then decide what to change — margins, overhead, or mix.
See your number without building a spreadsheet from scratch
The BidSolid Contractor Business Dashboard rolls every job and all your overhead into one net-margin number, with your break-even and margin of safety, and puts you right next to the remodeler benchmarks. One clean figure — no stacked "savings," no guesswork.
See the dashboard — $199Frequently asked
How much should a remodeler make?
The average nets about 6.3%, on a gross margin near 30%. A well-run small remodeler often nets 6–10%. The number that matters is net margin, not revenue.
What's a good profit margin for a contractor?
Around 30% gross and 6–10% net is healthy for remodelers. Below a few percent net is a warning; a net loss means overhead is outrunning gross profit.
Gross vs net margin?
Gross is revenue minus direct job costs; net is what's left after overhead too. Net is the number that says whether the business made money.
How do you calculate break-even?
Break-even revenue = overhead ÷ gross margin ratio. It's the revenue you must bill just to cover overhead; everything above it, at your gross margin, is net profit.
Sources: remodeler net margin 6.3%, gross 29.9%, operating expenses 23.6% of revenue (FY2024) — NAHB Remodelers' Cost of Doing Business Study, 2026 edition. Break-even and margin of safety are standard managerial-accounting measures. Dollar examples are illustrative.