Contractor Margin Calculator

What's a healthy gross margin for home service contractors?

Varies sharply by trade. Roofing: 25-40%. HVAC install: 30-45%. Plumbing service work: 40-55%. Electrical: 35-50%. Remodeling: 20-35%. Solar install: 18-28%. Pressure washing / cleaning: 60-75%. Below trade-typical margins suggests either underpricing or labor/material cost issues — fix margin before scaling marketing spend, otherwise you're buying leads to lose money on.

How do I calculate Customer Acquisition Cost (CAC)?

Total marketing spend in a period ÷ booked jobs from that period = CAC. Example: $4,000/mo in Meta + Google + LSA = total marketing spend; 12 booked jobs from that spend; CAC = $4,000 / 12 = $333. Most contractors track 'cost per lead' but skip CAC — that's the metric that actually predicts whether you're profitable. CAC needs to be 5-10% of average ticket value for healthy unit economics.

What's the relationship between CAC and LTV?

LTV (Lifetime Value) = average ticket × repeat-purchase rate × years retained. The 'LTV : CAC ratio' tells you whether each acquired customer is profitable. Healthy contractors run 3:1 or better — meaning if your CAC is $300, your average customer should generate $900+ in lifetime gross profit. Below 1.5:1, you're acquiring customers at a loss. Above 5:1, you're underspending — there's room to scale ad budget without hurting unit economics.

What's the lowest CAC I can realistically achieve?

Depends on your trade and channel mix. Best-in-class contractor CAC by trade: HVAC $150-250, plumbing $130-220, roofing $200-350, remodeling $400-700, solar $500-1,000. The contractors hitting top-quartile CAC have 4 things in common: (1) LSA verified + 4.7+ stars; (2) under-60-second lead response; (3) service-specific landing pages; (4) maintenance plans + repeat-customer flywheel that lower marginal CAC over time.

Should I focus on lowering CAC or raising average ticket?

Almost always raise the average ticket first. Why: lowering CAC is a cap (zero is the floor), but raising ticket has no ceiling. Going from $1,500 average ticket to $2,500 doubles your gross profit per job without any change to lead volume or close rate. Tactics: (1) tighten your offer to a higher-margin service line; (2) bundle add-ons at point of sale; (3) introduce financing on installs over $5K; (4) present 3-tier proposals (good/better/best) — most homeowners pick middle, dragging average ticket up 15-25%. Once average ticket is maximized, then optimize CAC.

How does breakeven volume work for contractors?

Breakeven volume = fixed monthly costs ÷ (gross profit per job - CAC). Example: $30K monthly fixed costs (rent, salaries, vehicles, software). $1,800 gross profit per job ($4,000 ticket × 45% margin). $300 CAC. Breakeven = $30,000 / ($1,800 - $300) = 20 jobs/month. Below 20 jobs/month you're losing money; above, you're scaling profitably. Most contractors don't calculate this and end up running flat-revenue months without realizing they're below breakeven.

Why does the calculator show I need so many more leads than I expected?

Because most contractors over-estimate close rate. Real-world data: blended close rate across all sources is 7-18% for most home service trades. If you're estimating 30%+ close rate without separating channels, you're probably blending high-converting referrals into your number and over-estimating paid-channel performance. Always calculate channel-specific close rates: LSA 35-45%, Google Search 12-18%, Meta 8-15%, HomeAdvisor/Angi 5-12%, referrals 40-60%.

Is a 25% net margin good for a contracting business?

Above industry average. Home services net margins (after labor, materials, marketing, overhead, owner take-home) typically run 8-15% for owner-operators, 15-25% for established companies with 5+ trucks, and 25-35% for elite operators with strong systems. The biggest margin destroyers: (1) pricing on cost-plus instead of value-based; (2) labor inefficiency from poor scheduling; (3) marketing channels with high CPL but low close rate (most HomeAdvisor / Angi situations); (4) fleet costs from poor route optimization. Margin > 25% means you've fixed most of these.

How should I think about marginal cost vs marginal revenue when scaling?

The marginal job concept: would adding ONE more booked job make you more or less profitable? At low volume, every additional booked job adds gross profit minus CAC, plus zero fixed cost (because you've already covered fixed costs). At high volume, adding more jobs requires hiring (new fixed costs) — making the marginal job less profitable until the new hire is fully utilized. The right scaling rhythm: fill capacity at current team size, then hire ahead of next capacity ceiling, then scale marketing 25-50% to match the new capacity. Skip this rhythm and you either over-hire (negative cash flow) or under-hire (capped revenue).

What's the difference between gross margin, contribution margin, and net margin?

Gross margin = revenue - direct costs (materials + labor on the job) ÷ revenue. Contribution margin = gross margin - variable costs (fuel, marketing) ÷ revenue. Net margin = revenue - ALL costs (gross + overhead + admin + owner pay) ÷ revenue. Most contractors confuse the three and underestimate their true cost structure. Healthy ratios: gross margin 35-50%, contribution margin 25-40%, net margin 8-25%. Track all three monthly — if gross margin is fine but net margin is low, your overhead is bloated. If gross margin itself is low, your pricing or job-cost discipline is the problem.