Learn how to run a job profitability analysis for a UK trades business: what to count, how to treat VAT, a worked example, and how to act on the results.

Colouring-book title card for job profitability analysis

Job profitability analysis means working out, for each individual job, what you charged, what the job really cost you and what was left. Do it job by job and you quickly see which types of work pay, which only break even and which quietly lose money. This guide shows you what to count, how to handle VAT, a worked example, and what to do with the numbers.

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TL;DR

  • Job profit is the price you charged minus every cost the job caused: labour, materials, subcontractors, travel and a share of overheads. Margin is that profit divided by the price.
  • Work on ex-VAT figures throughout. VAT you collect is not your income.
  • Use your true labour cost, not your charge-out rate, and add wastage, fuel and an overrun allowance.
  • Tag every job by type, customer and lead source, then compare after 60 to 90 days of clean data.
  • Feed what you learn back into your quotes, so the next job is priced on real costs.

Table of Contents

What job profitability analysis actually is

Your accounts tell you whether the business made money last year. They rarely tell you which jobs made it. A busy month can hide a bathroom refit that lost money, balanced out by two profitable boiler swaps.

Job profitability analysis fixes that. For every job you record the revenue, the costs and the profit, and then compare jobs against each other and against the quote. It is not complicated, but it needs discipline. The numbers only mean something if every job gets the same treatment.

The pay-off is practical. You find out where money is walking out the door: the job type you underprice, the customer who always needs three extra visits, the lead source that brings in tyre-kickers.

The formula for a single job

The basic sum is simple. Job profit is revenue minus the total of materials, labour, subcontractors and other job costs, and margin is job profit divided by revenue.

UK job-profit guidance gives the same sum in terms of the selling price: profit equals the selling price minus total job costs, and margin is profit divided by the selling price, times 100.

Two points trip people up:

  • Margin is not markup. Margin is measured against the price you charge. Markup is measured against your cost. A 25% margin is not cost plus 25%. To price for a target margin, divide the total cost by (1 minus the margin as a decimal), so for 25% you divide by 0.75.
  • Stay consistent. Use ex-VAT figures for both price and costs, every time.

If you want the pricing side done for you, our job pricing calculator works out a price for the margin you want.

What to include in the costs

This is where most job profitability sums go wrong. Teams forget travel, procurement, admin time, waste and overheads, so profit looks higher than it really is.

A workable set of cost lines for a trades job:

  1. Labour. Use your true labour cost, not what you charge the customer per hour. True labour cost includes employer’s NI, holiday pay, sick days and overhead tied to the worker. Another UK guide describes labour for job costing as total wages plus payroll taxes and benefits for everyone working on the project.
  2. Materials. The purchase cost, plus a wastage factor (typically 10 to 15%) and delivery where it applies.
  3. Subcontractors. Whatever you pay them for the job, ex-VAT.
  4. Travel and fuel. Every trip to site, to the merchant and back for the part you forgot.
  5. Equipment. Hire costs, or a usage allocation for kit you own.
  6. Overhead share. A daily contribution towards fixed running costs such as insurance, tools, software and vehicle.
  7. Overrun allowance. A 5 to 10% buffer on the estimated duration is one way to stop a slipping job eating your margin.

Trade job costing is often summed up as labour plus materials plus overheads equals total job cost, with your profit margin added on top to set the price. The list above is the same idea with the detail spelled out.

Hidden travel and equipment costs

Travel is the cost most often left out, because nobody writes it down. If you run several vans or move equipment between sites, mileage and idle time add up fast. Tools that log trips and locations, such as GPS tracking for small equipment, can help you see where time and journeys actually go, so you can put a real figure against each job.

The easiest habit, though, is logging expenses against the job at the moment you spend. Our expenses feature is built for that: receipts and costs go straight onto the job they belong to.

How to treat VAT

Get this wrong and every margin you calculate is off.

For a normally VAT-registered business, HMRC says sales and purchases in the accounts are exclusive of VAT, and VAT does not normally enter into the computation of trade profits. In plain terms: take VAT off your invoice total and off your supplier bills before you work out the profit.

One practical wrinkle from UK job-profit guidance: if there is VAT you cannot recover, treat it as part of your costs. If you are not VAT-registered, you pay VAT on materials and cannot reclaim it, so that VAT is simply part of the material cost.

If you are unsure which position applies to you, ask your accountant. It affects every figure in your analysis.

A worked example

A worked example

Here is a UK boiler installation example from a trade-business guide. Revenue is £2,800. Materials cost £1,200. Labour is 8 hours at a loaded cost of £35 an hour, which is £280. Travel is £20, and there are no subcontractors. Direct costs come to £1,500, so the gross margin is (£2,800 minus £1,500) divided by £2,800, which is 46.4%.

That 46.4% is a gross margin on direct costs. Your overheads still have to come out of it. Here is how to carry it further, using our own illustration with made-up overhead figures:

Line Amount
Price, ex-VAT £2,800
Materials £1,200
Labour (8 hrs at £35) £280
Travel £20
Direct costs £1,500
Gross profit £1,300
Overhead share (example: £60 a day for 2 days) £120
Job profit after overhead £1,180
Margin after overhead 42.1%

The point of the exercise is not the exact percentage. It is that you can now compare this job with a bathroom refit or a service visit on the same basis.

Compare jobs, customers and types of work

One job tells you little. Patterns tell you a lot.

For decisions about what work to chase, gross margin by service type is the most useful metric. Group your jobs into types, such as installs, repairs, servicing and emergency call-outs, and compare the margins.

It also helps to tag jobs by type, customer and source. That lets you ask better questions:

  • Which job type has the best margin, and which has the worst?
  • Which customers generate the most extra visits or unpaid time?
  • Which lead sources bring in jobs that actually pay?
  • Do jobs from a particular source need more quoting time for less return?

If you want to know what you spend to win work, a guide to marketing budgets for contractors can help you work out what share of your income should go on finding customers.

What to record on every job

You cannot analyse what you did not write down. Start with the legal minimum. GOV.UK says self-employed people must keep records of all sales and income, all business expenses, VAT records if registered and PAYE records if they employ people, and the records must be accurate and able to identify business transactions.

For profitability, add the job-level detail. Track four cost categories on every job: labour (paid and unpaid), materials, travel and a share of overhead. Then compare actuals against what you quoted.

A simple record per job:

  • Quoted price and quoted costs
  • Actual hours, by person
  • Actual materials, with receipts
  • Travel and fuel
  • Subcontractor invoices
  • Job type, customer and lead source
  • Final invoice amount, ex-VAT

Use the same cost headings on every job. A consistent cost-code structure is what lets you compare one job with another, and checking actual spend against estimates at least weekly catches overruns while you can still do something about them.

If your accounting package does part of this, our guide to Xero job costing for trades covers the setup steps. For a wider look at the method, read job costing for contractors.

Turn the numbers into decisions

After 60 to 90 days of clean job-level data, you can see which jobs make money, which break even and which lose. Then you have three levers:

  1. Reprice. If a job type consistently lands below your target margin, your quote template is wrong. Fix the labour hours, add the wastage, include the travel.
  2. Investigate overruns. Compare actual hours with quoted hours. Is it the estimating, the scope creep or the site access?
  3. Drop or limit what loses money. Some job types are structurally unprofitable at the price the market will pay. Stop taking them, or take them only at a price that works.

Pricing is also about how you word the quote. A fixed quote protects your margin in ways an estimate does not, and our piece on estimate vs quote explains how to avoid being held to a loose price.

A simple monthly routine

You do not need a finance degree. Block an hour once a month:

  1. List every job finished this month.
  2. Check each has its actual costs logged.
  3. Work out profit and margin per job.
  4. Group by job type and note the best and worst.
  5. Pick one change to make to next month’s quotes.

One change a month adds up. In a year you have twelve better-priced decisions.

Our view: profit should be visible on the job itself

Most tradespeople we speak to don’t have a profit problem. They have a visibility problem. The quote sits in an email, the materials receipts are in the van, the hours are in someone’s head and the invoice is in another system. By the time you add it up, the job is long gone.

That is why we built Pipeline to keep the lead, quote, job, costs, invoice and payment in one place. When costs are logged against the job as they happen, the profit picture builds itself and you can see how a job is doing before the final invoice goes out.

Our pricing is flat, with no per-user fees. That matters here, because the people who know the true costs are the ones in the field. You shouldn’t have to think twice about adding another person to the system just to get their hours and receipts logged.

Chris

Put job costs and invoices in one place

Pipeline brings leads, quotes, bookings, job tasks, invoicing and payments into one platform for UK trades and service businesses, with a mobile app for the team in the field. It connects with Xero, QuickBooks and Stripe, so the figures you work from match your books.

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Plans are flat monthly prices with no per-user fees: Solo is £12 per month, Starter is £38 per month and Professional is £63 per month. Enterprise is available too. See the Pipeline plans and pricing, or look at how online invoicing ties payment back to each job. If you want a quick start, our free tools for UK trades cover pricing, VAT and CIS sums.

FAQ

What is the difference between gross profit and net profit on a job?

Gross profit is the price minus the direct costs of the job: labour, materials, subcontractors and travel. Net profit also takes off your share of overheads such as insurance, vehicle and software. Job profitability analysis usually starts with gross margin by job and then adds an overhead share.

Should I include VAT in my job profit calculation?

No. Use ex-VAT figures for the price and the costs. HMRC’s guidance for VAT-registered businesses is that VAT does not normally enter into the computation of trade profits. If you cannot recover some VAT, treat it as a cost, and ask your accountant if you are unsure.

How long before job profitability analysis tells me anything useful?

One job tells you whether that job paid. Patterns need more. With clean job-level records, 60 to 90 days of data is enough to see which job types make money and which lose it.

What margin should I aim for?

There is no single right figure, because it depends on your trade, your overheads and your market. Work backwards: add up your costs, decide what margin you need, then divide the cost by one minus that margin. Our job pricing calculator does the sum for you.

Sources

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