Show Notes
Find out what's costing your contracting business jobs and profit: https://bit.ly/ContractorFightScorecard_mvm1 Are you adding 50% markup to your jobs and assuming you're making 50% gross profit? You might be making a lot less than you think. Most contractors know they need to charge more than a job costs to produce. They calculate their labor, add materials, apply a markup, and assume the difference is their profit. But there's a problem. Markup and gross profit margin are NOT the same thing. If a job costs $1,000 and you add a 50% markup, your selling price is $1,500. That doesn't give you a 50% gross profit margin. It gives you approximately 33%. And when you're making that mistake on every job, you can stay busy, grow your revenue, and still wonder where all your money went. In this episode, Tom Reber breaks down the difference between markup and margin, why confusing the two can seriously underprice your contracting jobs, and how to build a pricing system that produces the gross profit your business actually needs. Tom walks through real pricing examples to show why achieving a 50% gross profit margin requires a 100% markup on your direct job costs. He also explains how your gross profit margin directly affects how much revenue you need to generate, how many jobs you need to sell, and how many leads your business needs just to break even. And even when your pricing formula is correct, inaccurate labor, material, and subcontractor costs can destroy the margin you thought you were protecting. You'll learn how to calculate your actual gross profit, build target margins into your estimating process, stop negotiating against your own numbers, and identify where your pricing might be costing your business money. In this episode: Why a 50% markup only produces approximately 33% gross profit margin The difference between markup and margin when pricing contracting jobs How incorrect markup calculations can leave contractors busy but unprofitable Why achieving 50% gross profit requires a 100% markup on direct job costs How gross profit margin affects your break-even revenue Why lower margins mean you need more jobs and leads to cover the same overhead How inaccurate job costing can turn an expected 50% margin into 35% Why your estimating system should use actual costs and target margins instead of guesswork How discounting your price can destroy the margin your business needs How to audit your last five completed jobs to identify pricing and profitability problems
Chapters: 00:00 — Why 50% markup doesn't mean 50% gross profit 01:01 — The difference between markup and margin 02:06 — What else is costing your contracting business money? 02:35 — Why markup and gross profit margin aren't interchangeable 03:06 — How bad pricing math keeps contractors busy and broke 04:12 — How to price jobs at 50% gross profit 05:02 — How gross profit affects your break-even revenue 06:46 — Why inaccurate job costs destroy your margins 07:57 — Building your target margin into your estimating system 08:47 — Why you need to hold your price 09:36 — Your fight: Audit your last five completed jobs 11:10 — Find out what's holding your contracting business back Your challenge: Pull your last five completed jobs and find out how much gross profit you actually made. For each job: Find your selling price: What did you actually charge the customer? Calculate your actual job costs: Include the real labor, materials, subcontractors, and every other direct cost required to produce the job. Calculate your gross profit margin: Subtract your actual job costs from your selling price, then divide that difference by your selling price. Compare your results: Did you produce the margin you originally intended, or did the job finish at a much lower percentage? Identify the problem: Were your estimated costs inaccurate? Did production take longer than expected? Was your markup formula wrong? Did you discount the price without adjusting your costs?
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More from The Contractor Fight with Tom Reber
See if you've built a business worth having: https://bit.ly/BuildABusinessWorthHaving_itf1 Craig and Naomi spent years running an electrical contracting business that kept them busy but left them with little profit and almost no freedom. Craig was doing everything in the field. Naomi was handling the office. They were bringing in revenue, but the money was disappearing as quickly as it came in. Then a serious car accident exposed just how dependent the business was on Craig. They were faced with a decision. Change how they ran their business or potentially walk away from everything they'd built. In this episode of Inside The Fight, Tim and Derek sit down with Craig and Naomi, owners of Titan Electric LLC in Northeast Ohio. They share how they went from struggling to make a profit and questioning the future of their business to building a growing electrical company that's giving them more financial stability and freedom with their family. After generating $300,000 in revenue last year, they're now projecting approximately $750,000 for 2026. But the biggest change isn't how much money they're bringing in. It's that they're finally building a business that doesn't require them to sacrifice their family to keep it running. Check out Craig and Naomi's electrical contracting business, Titan Electric Services: https://www.titanelectricservices.com/ They break down: • How a serious car accident exposed the danger of building a contracting business that depends entirely on its owner • Why working nonstop and generating revenue wasn't translating into actual profit • How changing their pricing and implementing 50% gross profit principles helped them build a more financially stable business • Why pre-qualifying customers stopped Craig from wasting time chasing estimates and underpriced jobs • How they went from running everything themselves to hiring employees, adding service vans, and moving into a shop • Why raising their prices felt like a huge risk and what actually happened when they did it • How knowing their daily operating costs and tracking their numbers gave them financial peace of mind • Why learning to delegate responsibilities is essential to building a business that can grow without consuming its owners • How they started reclaiming time with their three daughters and measuring success by more than revenue Chapters 00:00 From Owner-Operator to Building a Real Business 02:31 Changing the Mindset That Keeps Contractors Stuck 05:29 Why Being Busy Doesn't Mean You're Profitable 06:51 Stop Chasing Customers Who Aren't Right for Your Business 14:34 When Your Contracting Business Puts Your Family at Risk 18:27 From $300K to a Projected $750K in Revenue 23:17 How Knowing Your Numbers Creates Financial Security 30:27 Why You Can't Keep Doing Everything Yourself 37:24 What Actually Happened When They Raised Their Prices 40:11 Measuring Success by the Freedom Your Business Gives You Craig and Naomi's story isn't just about growing revenue. It's about learning to charge what their work is worth, building a team they can depend on, and creating a business that no longer requires them to do everything themselves. Because a successful contracting business shouldn't leave you exhausted, financially stressed, and missing the moments that matter most. The goal isn't just to build a bigger business. It's to build a business worth having. Tom Reber is the founder of The Contractor Fight. He is the host of Contractor Fight TV, an entrepreneur, speaker, podcaster, and former HGTV host. For over 20 years, Tom has helped hundreds of thousands of contractors build businesses worth having by helping them become the kind of people capable of building them. On this channel, you'll find straight-talk training on sales, pricing, profit, leadership, and mindset for contractors who want to build a Strong You, a Strong Home, and a Strong Business. The first fight is always with yourself. Join The Fight. 👊
See what needs your attention in your contracting business: https://bit.ly/BuildABusinessWorthHaving_cto Do you know what it actually costs to operate your contracting business for one hour? Most contractors know what they charge customers. They know what they pay their employees. But they don't know what one billable hour actually costs their business. And that difference could be costing them thousands of dollars in profit. In this episode, Tom Reber breaks down how to calculate your true hourly operating cost so you can stop guessing and start understanding what your contracting business needs to produce. Using an example with four field employees, Tom walks through how to calculate realistic billable hours, allocate company overhead, and account for the true cost of field labor. The result? A business paying an employee $30 an hour could actually be spending $92 per billable hour before making a single dollar in profit. Understanding this number doesn't tell you what to charge. It tells you what your business actually costs to operate so you can make better decisions about your jobs, your crews, and your profitability. In this episode: Why paid hours and billable hours aren't the same thing How to calculate your team's realistic annual billable capacity How overhead and labor burden determine your true hourly operating cost Why a $30-per-hour employee could cost your business $92 per billable hour The difference between operating cost and what you should charge customers How wasted time and inaccurate estimates affect your profitability
See what needs your attention in your contracting business: https://bit.ly/BuildABusinessWorthHaving_cf1 Contractor finances are about more than revenue. You can run a $2 million, $5 million, or even $10 million contracting business and still not know if you’re actually making money. Revenue tells you how big your business is. It doesn’t tell you how healthy it is. In this episode, Tom Reber breaks down the 6 numbers every contractor needs to know to understand the financial health of their business: revenue, gross profit, overhead, net profit, cash flow, and owner’s compensation. These numbers show you what your work is actually producing, what it costs to run the company, how much profit is left, whether you have enough cash to cover what’s due, and what the business is ultimately producing for you. If you want to get control of your contractor finances, you don’t need to become an accountant. You need to understand your numbers well enough to make better decisions. In this episode: The 6 financial numbers every contractor should know Why revenue alone doesn’t tell you whether your contracting business is healthy How gross profit shows what your jobs are actually producing Why Tom pushes contractors to bid at a minimum 50% gross profit How overhead affects what your business needs to produce every day Why more revenue doesn’t automatically mean more profit The difference between net profit and cash flow How accounts receivable can leave a profitable contracting business short on cash Why owner’s compensation matters when measuring what the business actually produces for you
See if you've built a business worth having: https://bit.ly/BuildABusinessWorthHaving_itf1 Jarrod was working sunup to sundown at least six days a week. He had moved to Colorado with his wife to build a new life, but instead of having the freedom to enjoy it, most of his time was consumed by work. Today, that's starting to look very different. In this episode of Inside The Fight, Tim and Derek sit down with Jarrod, owner of Alpine Design and Remodeling, to talk about how he went from grinding six days a week, not knowing his numbers, and struggling to step away from work to building a contracting business he can actually be proud to own. They break down: • Why working sunup to sundown six days a week was costing Jarrod more than just his time • How learning his numbers changed the way he thought about growing and scaling his business • Why moving from Minnesota to Colorado forced him to get uncomfortable and make major changes in his life • How coaching helped Jarrod build confidence, communicate better, and change the way he saw himself • Why head trash can limit what contractors believe they can accomplish and what they're willing to charge • How Jarrod went from feeling like he couldn't afford to take a day off to stepping away from the field without worrying about it Chapters 00:00 Jarrod's Move to Colorado and Starting Over 02:58 Building a Business Worth Owning 05:56 What Wasn't Working Before The Fight 08:32 How the Grind Was Affecting His Home Life 10:35 Realizing There Was a Better Way 14:32 The Coaching Moment That Changed His Identity 19:23 The Change Jarrod Resisted the Most 23:21 Learning to Track the Numbers That Matter 25:21 What His Business Allows Him to Do Now 33:42 The Head Trash Holding Contractors Back Jarrod didn't just need a better business strategy. He needed to change the way he thought about his business, his time, and what was actually possible for his life. Because building a successful contracting business isn't just about working harder or generating more revenue. It's about building something worth owning. Tom Reber is the founder of The Contractor Fight. He is the host of Contractor Fight TV, an entrepreneur, a speaker, a podcaster, and a former HGTV host. For over 20 years, Tom has helped hundreds of thousands of contractors build businesses worth having. He does this by helping them become the kind of people capable of building them. On this channel you will find straight-talk training for your business. We cover sales, pricing, profit, leadership, and mindset. Our goal is to build a Strong You, a Strong Home, and a Strong Business. The first fight is always with yourself. Join The Fight. 👊
https://bit.ly/BuildABusinessWorthHaving_tob Successful, Miserable, Trapped You got the trucks, the crew, and the revenue number you used to dream about. From the outside, it looks like you’ve made it. But you can’t take a week off. Every important decision comes back to you. And somewhere along the way, you stopped thinking about what the business could become and started focusing on getting through the day. In this episode, Tom Reber explains how a contractor can build a successful business and still feel miserable and trapped inside it. The usual scoreboard measures revenue, trucks, and head count. It doesn’t tell you whether the business pays you well for the roles you’re filling, gives you a life outside of work, or can function when you step away. In this episode: Three signs you may be trapped in the business you built Why a business that can’t run for a week without you has a serious problem How you can be the highest paid employee and the lowest paid owner Why being great at your trade can lead to years of reacting instead of building How to define what you need the business to pay you and how much time you’re willing to give it Which roles to start moving off your plate Why healthy margins give you room to make those changes