Profit Margin Benchmarks for Trade Businesses (2026)
Average gross and net margin targets for every trade plus step-by-step tracking so you know if jobs are actually profitable.
You're working 50-hour weeks, your calendar is full, customers are paying on time. But when you look at your bank account, there's barely enough left after expenses. You're busy, but are you profitable?
Keep your cash collection tight with How to Get Paid the Same Day in the UK, Service Business Pricing Mastery 2026, and Quote to Payment in 48 Hours.
This guide shows you what profit margins should look like in your trade, how to calculate yours accurately, and practical strategies to improve profitability without working harder.
1. Gross Margin vs Net Margin Explained
Most contractors confuse these two numbers. Understanding the difference is critical because they tell you different things about your business health.
Gross Profit Margin
What it is: Revenue minus cost of goods sold (COGS), expressed as a percentage of revenue.
COGS includes:
- Materials and supplies used on jobs
- Subcontractor labor
- Direct job costs (permits, equipment rental for specific jobs)
COGS does NOT include:
- Your salary or employee wages (these are operating expenses)
- Van costs, insurance, rent (operating expenses)
- Marketing, accounting, software (operating expenses)
Gross Profit Margin Formula:
(Revenue - COGS) ÷ Revenue × 100
Example:
- Revenue: £50,000
- Materials: £15,000
- Subcontractors: £5,000
- COGS Total: £20,000
- Gross Profit: £30,000
- Gross Margin: 60%
What it tells you: How efficiently you're pricing jobs and controlling direct costs. This is your first line of defense against unprofitability.
Net Profit Margin
What it is: What's left after ALL expenses are paid, expressed as a percentage of revenue.
Operating expenses include:
- Salaries and wages (you and employees)
- Van payments, fuel, maintenance, insurance
- Office/workshop rent and utilities
- Marketing and advertising
- Software subscriptions
- Accounting and legal fees
- Equipment depreciation
- Loan interest payments
Net Profit Margin Formula:
(Revenue - COGS - Operating Expenses) ÷ Revenue × 100
Example (continuing from above):
- Gross Profit: £30,000
- Your salary: £10,000
- Employee wages: £8,000
- Van costs: £3,000
- Other overhead: £4,000
- Total Operating Expenses: £25,000
- Net Profit: £5,000
- Net Margin: 10%
What it tells you: Your actual profitability after running the business. This is the money you can reinvest, save, or take as distributions.
You can have great gross margins but terrible net margins if your overhead is too high. Conversely, razor-thin gross margins make it nearly impossible to achieve good net margins no matter how efficiently you run operations.
2. Profit Margin Benchmarks by Trade
These benchmarks come from industry data, accounting firms specializing in trades, and real business financials. Use them as targets, not guarantees.
Cleaning Services
Gross Margin: 30-50%
Net Margin: 10-20%
Why margins vary: Residential cleaning has higher margins (40-50% gross) because you're selling labor. Commercial cleaning has lower margins (30-40% gross) because it's more competitive and often includes supplies.
Target for health: 40% gross, 15% net
Plumbing
Gross Margin: 20-35%
Net Margin: 8-15%
Why margins vary: Emergency work and service calls have better margins (30-35%) than big installation jobs which are materials-heavy (20-25%). Parts markup and labor rates significantly impact profitability.
Target for health: 30% gross, 12% net
HVAC / Heating Engineering
Gross Margin: 25-40%
Net Margin: 10-18%
Why margins vary: Service and maintenance contracts provide steady high-margin work (35-40%). System installations have lower margins (25-30%) due to equipment costs but higher absolute profit per job.
Target for health: 35% gross, 14% net
Electrical
Gross Margin: 30-45%
Net Margin: 10-20%
Why margins vary: Residential rewires and service calls have excellent margins (40-45%). Commercial electrical work is more competitive (30-35%). Material costs are lower relative to labor compared to plumbing.
Target for health: 38% gross, 15% net
Carpentry / Joinery
Gross Margin: 35-50%
Net Margin: 12-22%
Why margins vary: Custom work commands premium pricing (45-50% gross). Standard carpentry and fit-outs are more competitive (35-40%). Skilled labor shortage supports higher margins in 2026.
Target for health: 42% gross, 17% net
Landscaping
Gross Margin: 15-30%
Net Margin: 5-12%
Why margins vary: Maintenance contracts have better margins (25-30%) because they're labor-focused. Big landscaping projects with hardscaping have lower margins (15-20%) due to materials and equipment costs.
Target for health: 25% gross, 10% net
General Building / Construction
Gross Margin: 20-35%
Net Margin: 8-15%
Why margins vary: Small refurbishments and extensions have better margins (30-35%). Larger projects with more subcontractors have thinner margins (20-25%) but higher revenue per project.
Target for health: 28% gross, 12% net
Roofing
Gross Margin: 25-40%
Net Margin: 10-18%
Why margins vary: Emergency repairs and small jobs command premium pricing (35-40%). Full roof replacements are more competitive (25-30%). Weather dependence affects annual profitability.
Target for health: 32% gross, 14% net
If your margins are significantly below these benchmarks (5-10+ percentage points), you have a pricing problem, a cost control problem, or both. Don't assume "that's just how the industry is." These numbers represent sustainable, healthy businesses.
3. How to Calculate Your Margins
Monthly Calculation Process
Do this every month to track trends and catch problems early.
Step 1: Calculate Total Revenue
- All invoices paid during the month
- Don't include unpaid invoices (track separately for cash flow)
Step 2: Calculate COGS
- Materials purchased for jobs completed this month
- Subcontractor invoices paid
- Direct job costs (permits, equipment rental)
Step 3: Calculate Gross Profit
- Revenue - COGS = Gross Profit
- Gross Profit ÷ Revenue = Gross Margin %
Step 4: Calculate Operating Expenses
- Wages and salaries (including your own if you take one)
- Van costs (fuel, insurance, maintenance)
- Rent/mortgage for business premises
- Utilities, software, marketing, accounting
- Everything NOT included in COGS
Step 5: Calculate Net Profit
- Gross Profit - Operating Expenses = Net Profit
- Net Profit ÷ Revenue = Net Margin %
Example: Plumbing Business Monthly Calculation
Revenue: £25,000
Materials: £5,000
Subcontractor: £2,000
COGS Total: £7,000
Gross Profit: £18,000 (72% margin - excellent)
Your salary: £4,000
Employee wages: £6,000
Van expenses: £1,500
Other overhead: £3,000
Operating Expenses: £14,500
Net Profit: £3,500 (14% margin - healthy)
Per-Job Margin Tracking
Track margins on individual jobs to spot which types of work are most profitable.
Job Profitability Template
Job Revenue: £850
Materials Used: £120
Subcontractor: £0
COGS: £120
Job Gross Profit: £730 (86%)
Note: Don't include your labor time in COGS. That's an overhead cost spread across all jobs. This shows how profitable the job was before overhead allocation.
4. What's Eating Your Profit
Common Margin Killers
1. Underpricing Jobs
- Forgetting to mark up materials (minimum 20-30% markup)
- Underestimating time required for jobs
- Competing on price instead of value
- Not raising rates annually with inflation
2. Material Waste and Theft
- Ordering excess materials that aren't returned
- Poor van stock management leading to duplicate purchases
- Theft from vans or job sites
- Not tracking material usage accurately
3. Inefficient Operations
- Poor route planning wasting fuel and time
- Callbacks for incomplete or poor-quality work
- Admin time not being tracked or billed
- Too much time between jobs (scheduling gaps)
4. Overhead Creep
- Van payments on vehicles you don't need yet
- Software subscriptions you barely use
- Commercial space larger than necessary
- Equipment sitting idle instead of being rented out
5. Scope Creep
- "While you're here..." requests done for free
- Not charging for change orders
- Extras included to make customers happy
- Warranty work extending beyond reasonable terms
6. Unpaid Invoices
- Work completed but payment never collected
- Bad debt eating 2-5% of revenue
- No deposit policy allowing customers to cancel after work starts
Track Every Job's Profitability
Toolfy shows you exactly which jobs make money and which don't. Track materials, labor, and margins in real-time so you can spot problems before they kill your profit.
Start Free Trial5. Improving Gross Margins
Pricing Strategies
Mark up materials properly:
- Minimum 20% markup on all materials
- 30-50% markup on small items (covers handling and shopping time)
- Consider flat-rate pricing instead of time-and-materials
Charge what you're worth:
- Calculate your true cost per hour (wages + overhead ÷ billable hours)
- Add profit margin on top of costs (don't just cover costs)
- Raise rates 3-5% annually minimum
- Don't compete solely on price
Value-based pricing:
- Price based on value delivered, not just time spent
- Emergency work deserves premium pricing (1.5-2x normal rate)
- Complex or specialized work commands higher rates
- Warranty and guaranteed results justify premium pricing
Cost Control
Material cost management:
- Buy in bulk for frequently used items (negotiate discounts)
- Track inventory to prevent duplicate purchases
- Return unused materials within return windows
- Get quotes from multiple suppliers
Reduce waste:
- Measure twice, cut once (literally and figuratively)
- Plan jobs carefully to minimize material waste
- Use leftover materials on future jobs when possible
Subcontractor management:
- Negotiate rates based on volume of work you provide
- Use subcontractors strategically (not for everything)
- Consider hiring employee for high-volume sub work
6. Improving Net Margins
Reduce Overhead
Vehicle costs:
- Can you use an older, paid-off van instead of financing new?
- Optimize routes to reduce fuel consumption
- Preventive maintenance cheaper than emergency repairs
- Shop insurance annually (can save £200-£500)
Workspace:
- Do you need dedicated office space or can you work from home?
- Can you share workshop space with another contractor?
- Sublet unused space if you have extra capacity
Software and subscriptions:
- Audit all subscriptions quarterly - cancel unused ones
- Negotiate annual pricing (often 15-20% cheaper than monthly)
- Consolidate tools (one system for scheduling + invoicing instead of two)
Marketing efficiency:
- Track which marketing actually generates customers (stop spending on the rest)
- Focus on referrals and repeat customers (lowest cost acquisition)
- Google My Business is free but highly effective
Increase Billable Hours
Better scheduling:
- Group jobs by area to minimize travel
- Book jobs tighter together (fill scheduling gaps)
- Use scheduling software to optimize routes automatically
Reduce admin time:
- Digital invoicing faster than paper
- Automate payment reminders
- Template emails for common customer questions
- Mobile app for job notes instead of paper then retyping
Minimize callbacks:
- Get it right first time (rushing causes expensive mistakes)
- Job checklist before leaving site
- Quality control process
- Train employees properly
7. When Low Margins Are Acceptable
Sometimes lower margins make strategic sense. But be intentional about it.
Acceptable Reasons for Lower Margins
Building reputation (first 6-12 months):
- Lower prices to get first customers and testimonials
- Time-limited strategy with clear end date
- Still must cover costs - never work at a loss
Strategic loss leader:
- Low-margin initial service that leads to high-margin repeat work
- Example: Discounted first clean for cleaning service (subsequent visits full price)
- Must track whether strategy actually generates repeat business
Filling capacity gaps:
- Slow season work at lower margins better than zero revenue
- Only if it covers direct costs and contributes to fixed overhead
- Don't let this become your normal pricing
Learning new service line:
- Lower margins acceptable while learning new service
- Gain experience and refine processes
- Raise rates once proficient
If you're constantly justifying low margins with "I'm building the business" or "It's slow right now," you don't have a temporary strategy - you have a pricing problem. Being busy and unprofitable leads to burnout and business failure.
8. Margin Tracking Systems
Monthly Tracking Template
Track these metrics every month and compare to previous months and same month last year:
Essential Monthly Metrics
Software Tools
Integrated job management systems:
- Track revenue, costs, and margins per job automatically
- Generate monthly reports with one click
- See which service types are most profitable
- Examples: Toolfy, Jobber, Housecall Pro
Accounting software:
- QuickBooks, Xero, FreeAgent
- Good for overall financial picture
- Often need to export data to spreadsheet for margin analysis
Spreadsheet template:
- Simple and free option
- Requires manual data entry
- Easy to customize for your specific business
9. Red Flags to Watch For
Warning Signs of Margin Problems
Declining gross margins over time:
- Material costs rising but you haven't raised prices
- Bidding jobs too low to win work
- Giving too many discounts
Good gross margins but poor net margins:
- Overhead costs out of control
- Too many non-billable hours
- Inefficient operations eating profit
Revenue growing but profit flat or declining:
- Taking on low-margin work to hit revenue targets
- Adding overhead faster than revenue
- Hiring before you're ready
Busy but always cash-tight:
- Calendar is full but bank account is empty
- Working hard but not making money
- Sign that margins are too thin
If net margins are under 5% consistently, you're one bad month away from losing money. You don't have a sustainable business - you have a job that owns you. Raise prices, cut costs, or both. Immediately.
10. Real Trade Business Case Studies
Case Study 1: Cleaning Business (Residential)
Annual Financials
Revenue: £120,000
Cleaning supplies: £12,000
Gross Profit: £108,000 (90% margin)
Owner salary: £40,000
Employee wages: £30,000
Vehicle + insurance: £8,000
Marketing + software: £6,000
Other expenses: £4,000
Operating Expenses: £88,000
Net Profit: £20,000 (16.7% margin)
Why it works: Very low COGS (just cleaning supplies). High gross margins allow room for wages and overhead. Owner takes £40k salary plus £20k profit = £60k total annual income.
Case Study 2: Plumbing Business (Service & Repairs)
Annual Financials
Revenue: £180,000
Materials & parts: £45,000
Subcontractors: £15,000
COGS: £60,000
Gross Profit: £120,000 (67% margin)
Owner salary: £50,000
Employee wages: £35,000
Van expenses: £12,000
Insurance & licensing: £5,000
Marketing, software, misc: £8,000
Operating Expenses: £110,000
Net Profit: £10,000 (5.5% margin)
Analysis: Good gross margin but thin net margin. Owner takes £50k salary but only £10k profit. Could improve by raising prices 5-10% or reducing overhead. Business is sustainable but not highly profitable.
Case Study 3: Electrical Business (Commercial Focus)
Annual Financials
Revenue: £300,000
Materials: £75,000
Subcontractors: £30,000
COGS: £105,000
Gross Profit: £195,000 (65% margin)
Owner salary: £60,000
3 employees: £90,000
Vehicles (3 vans): £18,000
Workshop rent: £12,000
Insurance, tools, software, marketing: £20,000
Operating Expenses: £200,000
Net Loss: -£5,000 (-1.7% margin)
Problem: Decent gross margin but overhead is too high for revenue. Operating expenses are 67% of revenue (should be under 60%). Solutions: Raise prices 8-10%, reduce overhead (cheaper workshop? lay off one employee?), or increase revenue to spread fixed costs.
Conclusion: Know Your Numbers
You can't improve what you don't measure. Profit margins are the clearest indicator of business health - more important than revenue, more important than how busy you are.
Key takeaways:
- Gross margins show pricing health: If below industry benchmarks, you have a pricing or cost problem
- Net margins show business health: Under 5% is unsustainable, 10-15% is healthy, 20%+ is excellent
- Track monthly: Catch problems early before they become crises
- Price for profit: Don't compete on price alone - deliver value and charge accordingly
- Control costs: Every pound saved is a pound of profit (doesn't require selling more)
Calculate your margins this week. If they're below benchmarks, pick one strategy from this guide and implement it. Measure again next month. Small improvements compound over time into significant profit growth.
This week:
1. Calculate your gross and net margins for last month
2. Compare to industry benchmarks for your trade
3. Identify your biggest margin killer (pricing, costs, or overhead)
4. Implement one improvement strategy
5. Set monthly reminder to track margins going forward
Build a pricing command center in Toolfy
- •Quote templates, emergency premiums, and deposits all in one library
- •Real-time job costing shows margin before you send the quote
- •Scenario calculators feed straight into invoices and payment plans
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