Construction Profit Margin: How Much Do Builders Really Earn?

Profit margin is the slice of each pound that stays after you pay for everything on a building job. It tells you if the project is worth the effort.

What’s a typical margin?

In the UK most contractors aim for a net margin between 8% and 15%. Small residential jobs often sit around 10%, while larger commercial builds can push 12‑15% if everything runs smoothly.

How to calculate it

Take the total revenue you charge the client, subtract all direct costs – materials, labour, plant hire – and also the indirect costs like insurance, office rent, and admin. Then divide that profit by the revenue and multiply by 100. The result is your profit margin percentage.

For example, if you bill £200,000 and your total out‑goings are £170,000, your profit is £30,000. £30,000 ÷ £200,000 × 100 = 15% margin.

Getting the numbers right starts with a solid estimate. Use a spreadsheet or an estimating software that breaks down each trade, each material line, and adds a contingency buffer. Over‑estimating hurts your win rate, under‑estimating hurts your margin.

One easy way to lift the margin is to cut waste. Track every pallet of bricks, every metre of timber, and compare it to the plan. When you spot leftovers, reorder or find a reuse route. Less waste means lower material cost and higher profit.

Negotiating with suppliers can shave a few percent off material costs. Build relationships, buy in bulk, or ask for early‑payment discounts. Those small savings add up across multiple projects.

Time is money on a construction site. Delays eat profit fast. Keep a tight schedule, plan deliveries to avoid idle crews, and use project‑management tools that flag bottlenecks before they become expensive.

Change orders are a margin trap. When a client asks for a tweak, make sure you price the extra work before you start. A clear change‑order clause in your contract protects both sides and keeps your margin intact.

Don’t forget overhead like office staff, vehicle fuel, and insurance. Spread these fixed costs over many jobs so they only take a small bite out of each project’s profit.

Finally, review each finished job. Compare the estimated margin to the actual result. Identify where you missed the mark and adjust your next estimate. Continuous tweaking is the secret to staying in the 10‑15% sweet spot.

Using modern tech – mobile estimating apps, cloud‑based docs, and digital take‑offs – can speed up quoting and reduce errors, giving you a tighter grip on the numbers that drive your margin.