Gross Margin Per Job: The Formula That Finds Lost Money

Gross margin per job is what a single job left behind after every cost that only existed because you took that job: invoiced revenue (ex VAT) minus material at cost, minus loaded labour hours, minus travel time and van running, minus consumables and waste, minus any subcontract or card fee. Written as a formula: Gross margin = revenue − direct costs. Then divide it by the chargeable hours you spent to get contribution per chargeable hour, which is the number that actually tells you whether the job paid. It is not profit. Overheads still have to come out of it. For most 1–10 person trades firms the honest target is roughly your overhead per chargeable hour plus your profit target — commonly somewhere in the £40–£55 per hour range for a small firm with a yard and vans, but you must calculate your own line rather than borrow anyone else's.

Why the annual accounts hide the losing jobs

Your year-end P&L nets everything together. A month with four excellent jobs and three bad ones looks like a decent month. The bad ones are invisible, so you keep quoting them the same way, and they keep coming.

Job-level margin breaks that averaging. It is the same idea Swedish firms call täckningsbidrag per jobb — contribution per job — and it is worth doing in 2026 specifically because the inputs have moved. Cable, switchgear, timber, insulation and copper have all repriced since 2023, and wage costs have moved with them. Any rule of thumb you set before 2024 — "materials plus 20%", "£55 an hour is fine", "double the material" — was calibrated against costs that no longer exist. Owners are re-checking job-level margin instead of trusting the annual result, and they are finding that the pricing rule survived while the maths under it did not.

The formula, with nothing left out

The whole thing turns on one distinction: direct costs exist only because the job exists. If you had not taken the job, you would not have spent the money. Overheads would have been spent anyway — office rent, insurance, your accountant, software, the phone, your own admin time on a Sunday.

Work strictly ex VAT on both sides, or the ratios lie.

Revenue side (ex VAT)

• Labour charged at your charge-out rate
• Materials as charged to the customer (after your mark-up)
• Call-out or minimum charge
• Approved variations and additional work — the Swedish trades call these ÄTA; in the UK it is a variation or extra. Count only what the customer actually approved and you actually invoiced

Direct cost side

A worked example: the service call that felt like a good day

A two-man electrical firm's job: fault-find plus a consumer unit replacement in a 1970s semi. Booked as a day. Ran long. The invoice looked healthy.

Invoiced (ex VAT)

• Labour 8.0 h × £68 = £544
• Materials charged = £420
• Call-out = £95
• Approved variation (2.0 h, extra circuit) = £180
• Total revenue: £1,239

Direct costs

• Material at cost: £310
• Variation material: £46
• Site labour 10.0 h × £34 loaded: £340
• Travel 1.4 h × £34: £47.60
• Van 62 miles × £0.45: £27.90
• Mid-job wholesaler run 0.6 h × £34: £20.40
• Waste and an uncredited wrong-part return: £58
• Card fee 1.4%: £17.35
• Total direct cost: £867.25

Gross margin = £1,239 − £867.25 = £371.75, or 30.0% of revenue. On paper that sounds fine. Most owners would take 30% and move on.

Now divide by the chargeable hours. £371.75 ÷ 10.0 chargeable hours = £37.18 of contribution per chargeable hour. Divide instead by the 12.0 hours the technician was actually away from home and it is £30.98. That is the number that matters, and it is the number nobody looks at.

The line you have to clear: overhead per chargeable hour

£37.18 is only good or bad relative to what an hour of your firm costs to keep on the road. Work it out once a year, in four steps.

1. Count real chargeable hours per technician. Start at 2,080 (52 × 40). Take out statutory holiday (about 224 h in the UK), plus sick and training (say 60 h) → roughly 1,796 paid hours. Then apply honest utilisation. Small trades firms land around 65–72% once travel, quoting, tidying and waiting for materials are counted. At 68% that is about 1,220 chargeable hours per technician per year. Four technicians = 4,880 hours.
2. Total your annual overheads. Everything not already counted as a direct cost: owner's and admin salary plus their on-costs, yard or office, insurance, software, accountant, marketing, tooling, phones, bad debt. Say £195,000.
3. Divide. £195,000 ÷ 4,880 = £39.96 ≈ £40 of overhead per chargeable hour. That is your break-even line.
4. Add your profit target. Want 10% net on a £68 charge-out rate? Add £6.80. Your real target is about £47 of contribution per chargeable hour.

Go back to the consumer unit job. It produced £37.18 an hour against a £40 break-even. Ten hours × the £2.82 shortfall means the job lost about £28 before anyone thought about profit — and it was £98 an hour short of the £47 target, roughly £980 of missing profit across the day. It felt busy. It felt like 30% margin. It was a loss.

What the numbers say to change

Once you can see per-hour contribution by job, the fixes are obvious and specific rather than vague resolutions to charge more.

• The variation was underpriced. Two hours plus £46 of material invoiced at £180 is £67 of contribution per hour before you count the wholesaler run. That is under the £47 target only because the extra dragged the day out. Variations should carry your normal rate and your normal mark-up, not a rounded-down goodwill number.
• The wholesaler run cost more than the part. £20.40 of paid time for a £9 fitting. One picking list against the quote before the van leaves removes it.
• £58 of waste is 16% of your margin. Uncredited returns and offcuts are pure contribution. Book returns the same week.
• Materials were marked up 35%. That is not generous once the price rise has landed. If the wholesaler moved a line 12% since your last quote and you are quoting off a stale price list, the mark-up is fiction.
• Travel is unpriced. 1.4 h of paid travel on a one-day job is 12% of your chargeable capacity given away. Either a call-out that reflects it, or tighter geographic scheduling.

Making this happen every week, not once a year

None of this survives if it needs a spreadsheet evening. The margin calculation is easy; the data capture is the hard part. It only works if four things land on the job automatically:

• Hours logged against the job, not the week — and travel logged separately from site time
• Material at true cost, pulled from imported supplier price files, and supplier invoices attached to the job they belong to (photograph them from the job card before they get lost)
• Variations recorded when the customer says yes, on site, not reconstructed at invoicing
• The invoice built from the same records, so revenue and cost sit on the same object

That is exactly what a field-service system is for. In OdinTask the geofenced time clock puts hours on the job, supplier price-file import and job-card invoice capture put real material cost on the job, and variations and the invoice come off the same record — so the margin per job is a by-product of running the work rather than a monthly exercise. Whatever you use, the rule is the same: if a cost is not captured against the job, it is not in your margin, and you will price the next one exactly as wrong.

Three checks worth doing this month

1. Take your last ten completed jobs. Calculate contribution per chargeable hour for each. Do not average them — rank them.
2. Look at the bottom three. They will share a pattern: a customer type, a job type, a distance, or one estimator.
3. Re-price that pattern, or stop selling it. A job below your overhead line is not a small win. It is capacity you paid for and gave away.

The uncomfortable part of measuring gross margin per job is that busy and profitable turn out to be different things. The useful part is that once you know which is which, you can fix it in a fortnight. Try OdinTask free for 14 days and see what your last ten jobs actually left behind.