There’s one financial metric every contractor should know cold — and it’s not your net profit.

It’s your gross profit margin.

Gross profit is what’s left after you subtract direct job costs (materials, subs, labor) from your revenue. It tells you how efficient and profitable your actual work is — before you factor in office rent, marketing, admin, or insurance.

If your gross margin is too low, your business is going to struggle no matter how lean your overhead is. You can’t fix bad margins with cost-cutting — you have to fix it at the job level.

Most contractors don’t know their gross profit. And if they do, they’re guessing. But when you track it accurately, it becomes your most powerful tool for pricing, hiring, and scaling.

I helped a remodeler who was consistently breaking even — sometimes even losing money. His net profit was hovering around 1-2%. When we dug into his gross margin, we found it was only 22% — way below the 35–40% industry benchmark. He wasn’t marking up his materials enough, was underbidding labor, and eating change orders. We implemented a pricing review, added a change order system, and bumped his markup. Three months later, his gross margin was 36% — and his net profit jumped to 10%. That’s the difference margin makes.

Not sure what your gross profit margin is? Or if it’s high enough? Let’s fix that.

Pick up your free copy of my new book, “The 7 Minute Conversation-How to Hear the Story Your Small Business Financial Statements Are Telling You-CONTRACTOR EDITION”.  Go to www.7MinuteConversationBook.com

Ready to find out where your cash and profits are really going? Book your free 15-minute Profit and Cash Flow Call with me. No pressure. Just real clarity. I’ll help you see where your money’s hiding — and what to do about it. Schedule at www.CashFlowCallWithLarry.com