How to Compute Profit: A Practical Guide for Tradespeople

TradeProfitApp works in most English-speaking nations. When you sign up, it sets your currency, tax and fuel units for your country, so the figures make sense wherever you work.

Knowing how to compute profit is the most important number skill in any trade business, and most tradespeople get it wrong. Not because the sum is hard, but because they leave costs out of it. Ask most tradespeople how business is going and they’ll tell you how busy they are. Busy is not the same as profitable. Plenty of tradespeople work flat out all year and end up with less money than they expected, because some of their jobs were losing money and they never knew which ones.

This guide shows you how to compute profit on a single job and across your business, step by step. It covers the profit formula, the difference between gross and net profit, how to work out your profit margin, the costs that usually get missed, and a full worked example with real-world figures.

The Basic Profit Formula

The formula is simple:

Profit = Price charged − Total costs

If you charge £1,200 and the job costs you £845, your profit is £355. That is the whole calculation. Everything that goes wrong with it goes wrong in the “total costs” part, because most people only count the costs they have a receipt for.

Money coming into your bank account is turnover (also called revenue or sales). It is not profit. A £2,000 job that ran over, needed a second trip to the merchant and tied up a labourer for an extra day might have made you less than a £600 job you finished in a morning.

Gross Profit vs Net Profit

There are two profit figures worth knowing, and they answer different questions.

Gross profit is what a job makes after you take away the costs that job caused: materials, labour you paid for, travel, consumables and extra visits. It tells you whether the job itself was priced properly.

Net profit is what is left after you also take away your overheads: the running costs of the business that you pay whether you are working or not. That includes public liability insurance, your phone, software, accountant’s fees, advertising, tools and equipment, and anything else that isn’t tied to one particular job. Net profit is what you actually live on.

A job can show a healthy gross profit and still leave you with very little net profit if it took up too many days of your time. That is why you need both.

How to Compute Profit on a Job, Step by Step

Step 1: Start with the price. Use the price you charged the customer, before VAT or sales tax. Tax you collect is not yours, so leave it out of your profit sums.

Step 2: Add up materials. Include the extras bought on the day and the waste and offcuts you paid for but didn’t use, not just the materials on your original list.

Step 3: Add the labour you paid for. A labourer or subcontractor, at what they actually cost you for the hours they actually worked on this job.

Step 4: Add travel. Multiply the miles driven for the job, including every return visit, by a proper cost per mile. Fuel alone is not your travel cost.

Step 5: Add consumables and extras. Blades, sealant, fixings, dust sheets, tip charges, parking and congestion charges all count.

Step 6: Take total costs away from the price. That gives you the gross profit on the job.

Step 7: Divide by the days the job took you. This gives you the day rate the job really paid you, which is the most honest test of whether your price was right.

Step 8: Take off your share of overheads. Work out your overheads per working day and multiply by the days the job took. Take that from the gross profit and you have the net profit on the job.

The Costs That Quietly Eat Your Profit

Travel

Travel is the cost most tradespeople underestimate. Fuel is only part of it. Your van also wears tyres, brakes and clutches, needs servicing, and loses value with every mile. A sensible cost per mile covers all of that, and once you work it out, jobs on the edge of your area often look very different.

There’s also a units problem. In the UK, for example, you buy fuel by the litre but your van’s economy is measured in miles per gallon, so working out a true cost per mile in your head is fiddly. Most people don’t bother, and guess instead.

Labourers and helpers

If you pay a labourer by the day, a job that runs from two days to three increases your labour cost by 50%. That extra day comes straight out of your profit, not the customer’s pocket.

The second and third trip

Every extra visit costs fuel, time and a slot in your diary. A job that needs four visits instead of two can wipe out the profit, even when the materials and the price were right.

Your own time

If a job ties you up for three days, those are three days you couldn’t spend on another job. Your own time doesn’t show up as a cost on a receipt, which is exactly why you need to compute the day rate each job paid you.

A Worked Example

Here’s a typical job, with figures shown before tax.

You quote £1,200 for a job. You expect it to take two days with a labourer, using £350 of materials.

What actually happens:

• Materials: £380 (an extra trip to the merchant for fixings and a replacement length)
• Labourer: three days at £120 = £360 (the job ran a day over)
• Travel: five round trips of 30 miles = 150 miles at 40p per mile = £60
• Consumables and tip charge: £45

Total costs: £845

Gross profit: £1,200 − £845 = £355

That £355 is what you earned for three days of your own work, which is about £118 a day. Your quote assumed two days and about £550 profit, around £275 a day. The job didn’t lose money, but it paid you less than half the day rate you thought you were charging.

Now take off overheads. Say your overheads come to £15,000 a year and you work 250 days. That is £60 for every working day. The job took three days, so its share of overheads is £180.

Net profit: £355 − £180 = £175

So for three days on site, you earned £175, or about £58 a day. If the job had gone to plan, it would have made roughly £430 net over two days, about £215 a day. Without computing profit job by job, you’d never know, and you’d quote the next similar job the same way.

How to Compute Profit Margin and Markup

Once you know the profit on a job, you can turn it into a percentage. There are two ways to do this, and mixing them up is one of the most common pricing mistakes in the trades.

Profit margin = Profit ÷ Price × 100

Using the worked example: £355 ÷ £1,200 × 100 = 29.6% gross margin. Out of every pound the customer paid, about 30p was gross profit.

Markup = Profit ÷ Costs × 100

Using the same job: £355 ÷ £845 × 100 = 42.0% markup. You charged 42% on top of your costs.

Same job, same profit, two very different percentages. The trap is this: if you want a 30% margin and you simply add 30% to your costs, you won’t get it. £845 plus 30% is £1,098.50, which gives a margin of only 23.1%.

To price for a target margin, use this formula instead:

Price = Costs ÷ (1 − target margin)

For a 30% margin on £845 of costs: £845 ÷ 0.70 = £1,207.14. Check it: £1,207.14 − £845 = £362.14, and £362.14 ÷ £1,207.14 = 30%.

Compare What You Quoted With What It Cost

Computing profit once tells you about one job. Computing it on every job, and comparing what you forecast with what it actually cost, tells you about your business.

Do this on every job and patterns appear quickly:

• You find out which types of job regularly overrun.
• You see where your materials estimates are consistently low.
• You learn which areas cost more in travel than you allow for.
• You learn your true day rate, not the one you think you’re charging.

Each finished job becomes evidence for your next quote. Over a few months your pricing gets sharper, and you stop working for less than you realise.

Why Notebooks and Spreadsheets Usually Fail

Most tradespeople start with good intentions: a notebook in the van, a spreadsheet on the laptop. Then the work gets busy. Receipts go missing, the spreadsheet doesn’t get updated, and by the end of the month nobody remembers whether the labourer did two days or three on the Smith job.

The problem isn’t discipline. It’s that the tool doesn’t fit how you work. You’re on site, on your phone, between jobs. If recording costs means sitting at a computer in the evening, it won’t happen.

How TradeProfitApp Computes Profit on Every Job for You

TradeProfitApp was built by a tradesperson for exactly this problem. You record each job’s forecast and actual costs, and it computes the real profit, job by job.

• Your dashboard gives you a clear view of how your jobs are performing, so you can see at a glance which work is making money.
• Forecast vs actual comparison puts what you quoted next to what the job really cost, so you can see where your estimates went wrong.
• Labourer costs are recorded against each job, so an overrun day shows up in your figures rather than disappearing.
• Cost per mile is worked out for you. You tell the app how you buy fuel and how your van’s economy is measured, and it handles the conversion.
• PDF and CSV export lets you send your figures to your accountant or keep your own records.
• It works on your phone, so you can update a job from the van rather than leaving it for the evening.
• Your figures are private. Only the account holder can see them.

When you sign up, the app asks for your country, your currency, whether you charge tax and how you price fuel. It then sets the right currency and tax handling and does the unit conversions, so the figures fit the country you work in.

What to Do Once You’ve Computed Your Profit

Knowing the real profit on every job is only useful if you act on it. Once you have a few weeks of figures:

• Raise prices on job types that keep coming in low. If a type of job regularly overruns, your price is wrong, not your workmanship.
• Set a minimum charge. Small jobs often cost more in travel and setting up than they bring in.
• Charge for distance. If jobs over a certain mileage consistently make less, add a travel charge or set a working radius.
• Build overruns into your quotes. If you’re always half a day over on a certain type of work, quote for it.
• Stop chasing work that doesn’t pay. Some customers and some job types are simply not worth having.

Start Your Free Three-Month Trial

You can try TradeProfitApp free for three months, with no card needed to sign up. Track your next few jobs, compare your quotes with what really happened, and see what your work is actually earning you.

After the trial, the Founder Plan is £4.99 a month or £49 a year, charged in your own currency, and the founder price stays locked in for as long as you stay subscribed. You can cancel at any time.

Start your free three-month trial of TradeProfitApp today.

Frequently Asked Questions

How to compute profit?

Take your total costs away from the price you charged. Profit = Price − Total costs. For a single job, total costs means everything the job caused: materials, paid labour, travel, consumables and extra visits. For net profit, you also take off your share of the business’s overheads.

What is the formula for profit margin?

Profit margin = Profit ÷ Price × 100. A job priced at £1,200 that makes £355 profit has a margin of 29.6%. Don’t confuse it with markup, which divides profit by costs instead of by price.

What is the difference between gross profit and net profit?

Gross profit is what a job makes after the costs that job caused. Net profit is what’s left after you also take off overheads such as insurance, phone, software, accountant’s fees and advertising. Net profit is what you actually earn.

What is the difference between turnover and profit?

Turnover is the total you charge your customers. Profit is what’s left after you take away your costs. A job can have high turnover and very little profit.

How much profit should a tradesperson make on a job?

There is no single right figure, because it depends on your trade, your area and your overheads. A better test is to compute the day rate each job actually paid you, after all costs, and compare it with the day rate you need to cover your overheads and pay yourself properly. If a job pays less than that, it is underpriced.

How do I work out my cost per mile?

Add up what your vehicle costs to run over a year, including fuel, insurance, tax, servicing, tyres, repairs and loss of value, then divide by the miles you drive. TradeProfitApp works out the fuel side for you based on how fuel is priced and measured in your country.

Can I use TradeProfitApp outside the UK?

Yes. TradeProfitApp works in the UK, Ireland, Australia, New Zealand, Canada, the USA and South Africa. It sets your currency and fuel units at sign-up.

Do I still need an accountant?

Yes, for your tax return and year-end accounts. TradeProfitApp isn’t accounting software. It shows you which jobs are making money so you can price better, and you can export your figures as a PDF or CSV to share with your accountant.

Our complete guide to Running a Profitable Trade Business eBook is available to download here.