Net profit
Net profit is what's left after all costs — direct job costs plus overhead and operating expenses — i.e., the actual bottom line.
A contractor can have strong gross margins and still net little if overhead is high. Net profit is the number that matters for the health of the business. Knowing it requires both accurate job costing and tracking your operating expenses.
Related terms
- Gross profit — Gross profit is revenue minus the direct cost of the work (materials, labor, subs) — before overhead and other business expenses.
- Overhead — Overhead is the cost of running your business that isn't tied to one job — truck, tools, office, insurance, admin — recovered by adding it to every bid.
- Margin (gross margin) — Margin is profit measured against your price — the percentage of the sell price that's profit after costs.