RHACOVA

Job costing and profitability

How to Calculate Job Profit

Profit is the number left when the job is finished and everything it cost has been paid. Not the deposit, not the contract value, not the cash in the account.

The short answer

Job profit is total revenue minus total cost for that job — including approved change orders on both sides. Express it as a margin (profit ÷ revenue) to compare jobs of different sizes, and as a markup (profit ÷ cost) only when you need to know what was added on top of cost. Revenue is not profit, and a deposit is not profit either.

Definitions

Contract price
What the customer agreed to pay for the original scope.
Change-order revenue and cost
Approved additional scope. Both sides must be counted; adding the revenue and forgetting the cost is one of the most reliable ways to overstate profit.
Job cost
Every cost the job caused, at the loaded rate — the subject of true job cost.
Profit margin
Profit ÷ revenue. The share of the customer's money you kept.

The formulas

Revenue = contract price + approved change-order revenue

Cost = job cost + change-order cost

Profit = revenue − cost

Profit margin = profit ÷ revenue

Markup on cost = profit ÷ cost

Worked example

A $24000 contract that cost $17500 to deliver, plus a change order adding $2200 of revenue and $1600 of cost:

  • Revenue: $26,200.00
  • Cost: $19,100.00
  • Profit: $7,100.00
  • Profit margin: 27.10%
  • Markup on cost: 37.17%

The change order was priced at a thinner margin than the base contract, so it pulled the whole job's margin down even though it added profit in dollars. Both facts are true at once, and only one of them is visible if you look at dollars alone.

When markup has no answer

If cost is zero, markup is undefined — you cannot express profit as a percentage of nothing. RHACOVA reports that as unknown rather than printing 0% or infinity, because a fabricated number in a profit report is worse than an admitted gap. The same discipline applies to margin when revenue is zero.

Profit is only final when the job is

A job's profit changes until the last invoice, the last subcontractor bill and the last warranty visit. Mid-job, what you have is a projection: committed costs plus forecast plus actuals to date. Treating a mid-job number as final is how a profitable job becomes a surprise. Comparing the final result back to the estimate is the subject of estimate vs actual.

Common mistakes

  • Counting change-order revenue and forgetting change-order cost.
  • Treating the deposit, or the bank balance, as profit.
  • Comparing jobs by profit dollars instead of margin.
  • Closing out a job before the final subcontractor invoices arrive.
  • Excluding the owner's site hours, which makes small jobs look far better than they are.

Quick answers

Do change orders count in job profit?
Yes, on both sides. Approved change-order revenue increases revenue and its cost increases cost. Counting only the revenue overstates the profit.
Can profit be negative?
Yes. If costs exceed revenue the job lost money, and reporting it as a small profit only delays the correction.

Run the numbers

Revenue including approved change orders, total cost, profit in dollars, profit margin and markup on cost.

Open the Job Profit Calculator

Free, no account, and the answer stays on the page.

Let the job keep score for you

A RHACOVA Job carries a frozen baseline, actual and committed costs, approved change orders and a projected profit that updates as costs land.

Open Jobs

How RHACOVA defines these terms

Every calculator, estimate and job in RHACOVA uses one set of financial definitions, and they are written down rather than implied. Read the RHACOVA methodology for the full list of definitions this article relies on.

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