Contractor Margin Calculator

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

It varies sharply by trade and business model — cleaning and service work usually carry higher gross margins than installation and remodeling, where materials and labor take a bigger share. There's no reliable published figure by trade, so use your own P&L and track it monthly. Falling 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. Cost per lead gets tracked far more often than CAC, but CAC is the one that predicts whether you're profitable. Judge it against the gross profit a job earns, not the ticket: if winning a job costs more than about half its gross profit, there's little left for overhead and profit. For recurring services, compare CAC with a customer's first-year gross profit.

What's the relationship between CAC and LTV?

LTV (lifetime value) is the gross profit a customer brings over the whole relationship: first job plus expected repeat jobs plus referrals, times your margin (the LTV Calculator works it out). Compare it with CAC using the same rule this site applies everywhere: about 4:1 (CAC is a quarter of lifetime gross profit) is a comfortable plan; below 2:1, acquisition takes more than half and overhead rarely gets covered; below 1:1, you lose money on every customer. Well above 4:1, there's usually room to spend more if you have the capacity.

What's the lowest CAC I can realistically achieve?

Depends on your trade, ticket size and channel mix, so judge it as a share of the gross profit a job earns rather than a flat figure. Four things usually push CAC down: (1) LSA verified with a strong review profile; (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 a $1,500 average ticket to $2,500 raises gross profit per job by two-thirds at the same margin, 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), which often moves buyers toward the middle option. 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. Without this calculation, it's easy to run flat-revenue months without realising you're below breakeven.

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

Because many contractors over-estimate close rate. If you're estimating a very high close rate without separating channels, you're probably blending high-converting referrals into your number and over-estimating paid-channel performance. Always calculate close rates by channel from your own CRM — referrals and Local Services Ads usually close higher than paid social or shared-lead platforms, but your numbers are the ones that matter.

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

It's a strong result for most contracting businesses: net margin after labour, materials, marketing, overhead and owner pay is usually well below that, and reaching it takes strong pricing and systems. Compare against your own history and, if you can get it, your trade association's cost studies. 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 (shared-lead marketplaces can fall into this); (4) fleet costs from poor route optimization. A net margin above 25% usually 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 to match the new capacity (in steps, watching cost per booked job). 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. Confusing the three leads to underestimating your true cost structure. Healthy levels vary too much by trade and business model for one target to mean much, so benchmark against your own history. 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.