Solution Aware

Job Costing 101: The Number Every Contractor Must Know to Stay Profitable

By England Hart, The Second Opinion Blog • May 20, 2026

You just finished a kitchen remodel. You quoted the homeowner $25,000.

You look at your receipts. You spent $10,000 on cabinets, counters, and materials. You paid your guys $5,000 in wages for the week.

You do the quick math in your head: $25,000 - $15,000 = $10,000.

You think you just made a 40% profit margin. You feel great. You take the crew out for beers.

But you are wrong. You didn't make 40%. In fact, you might have barely broken even.

This is the trap of "napkin math." And it is the reason why so many contracting businesses look profitable but are actually broke. If you want to survive in the trades, you have to master Job Costing.

What is Job Costing?

Job costing is the process of tracking every single expense associated with a specific project, rather than just looking at your business expenses as a whole.

It answers one simple question: *Did I actually make money on this specific job?*

Most contractors only look at their overall Profit & Loss statement at the end of the month. The P&L tells you if the *company* made money. But it does not tell you *where* the money came from.

Without job costing, you might be making a killing on your small repair jobs, but losing your shirt on the big remodels. The profitable jobs subsidize the losers, masking the problem until you run out of cash.

The Hidden Costs You Are Missing

When contractors do their own job costing, they usually only track Direct Costs: the materials they bought specifically for the job, and the hourly wages of the guys swinging the hammers.

But Direct Costs are only part of the equation. To get your true margin, you have to calculate your Labor Burden and allocate your Overhead.

1. The Labor Burden

When you pay a guy $25 an hour, he does not cost you $25 an hour.

He costs you $25 an hour *plus* employer payroll taxes (FICA, FUTA), workers' compensation insurance, general liability insurance, health benefits, and paid time off.

In the construction industry, the labor burden typically adds 25% to 40% to the base wage. If you are not factoring a 30% burden into your job costs, your labor estimates are wildly inaccurate.

2. The Unbillable Hours

Did your lead tech spend two hours driving to the supply house because someone forgot the right fittings? Did the crew spend an hour cleaning up the site? Did you spend three hours estimating the job before you even won it?

If you are not tracking and costing unbillable time, you are eating those hours out of your profit margin.

3. Allocated Overhead

Your business has fixed costs that exist whether you are working a job or not: truck payments, fuel, tool maintenance, office rent, software subscriptions, and your own salary as the owner.

These are overhead costs. A portion of these overhead costs must be allocated to every single job you do. If a job does not cover its share of the overhead, it is a losing job, even if the direct materials and labor came in under budget.

How to Fix Your Job Costing

If you want to stop guessing and start knowing, you have to build a system.

• Track Time Relentlessly: Your crews must clock in and out of specific job codes, not just "the workday." You need to know exactly how many hours went into demolition vs. installation.
• Assign Every Receipt: Every time a card is swiped at the supply house, that receipt must be tagged to a specific job in your accounting software.
• Calculate Your True Burden: Work with a professional to calculate your exact labor burden percentage and your overhead allocation rate.

This sounds like a lot of work. It is.

That is why we built Performance Bookkeeping.

As we explain in our Second Opinion Guide to Bookkeeping, you should not be spending your evenings trying to calculate labor burden formulas in Excel. You should be subbing that work out to experts who understand the trades.

When you let ProTouch handle your job costing, you get a clear report that shows you exactly which jobs are making you rich, and which jobs you need to stop bidding on.

Stop guessing at your margins. Start job costing.