You can see which jobs make money from the gross margin per project: the revenue minus the direct costs of that job. Add those margins up per type of work and per customer group, and you see where your profit comes from. That is often somewhere other than where most of the turnover is.
In the worked example in this article, a roofing company earns the most turnover from contractors, but the least margin per euro. Maintenance and leaks are the smallest group, and earn the most per hour worked.
In short
- Gross margin is turnover minus direct project costs: hours at cost price, materials, equipment, waste and subcontracting.
- Compare not only the percentage, but also the margin per hour worked. In a roofing company, your crew's hours are limited.
- Every month, look at three figures: the gross margin of completed projects, the margin per hour and the deviation in hours from the budget.
All amounts and percentages in the examples were made up to show the method, excluding VAT. They are not industry figures and do not come from a customer.
In this article
- What is the difference between turnover and margin?
- How do you calculate the gross margin of one project?
- Which type of roofing work earns the most?
- Do you earn more from private customers, owners' associations or contractors?
- Which three figures do you look at every month?
- Does it help to measure margins per project?
What is the difference between turnover and margin?
Turnover is everything you invoice, excluding VAT. Gross margin is what remains of that turnover after the direct costs of the work. You pay your overheads out of the gross margin, and what is left after that is profit.
Direct costs are costs you can assign to one job. In roofing, those are the crew's hours at cost price, materials, hire of scaffolding or crane, waste disposal and any subcontracting. Overheads, such as the office, insurance and your own hours on quotes, are not included. They keep running, whatever work you take on.
If you steer on turnover, you can be busy and still earn nothing. A large job with a small margin fills the schedule but contributes little to overheads. That is why you look at margin, not turnover.
How do you calculate the gross margin of one project?
Deduct from the project's invoiced revenue all the direct costs you booked to the project code. Divide the result by the revenue for the percentage, and by the hours worked for the margin per hour.
Worked example
A flat roof is invoiced for €9,196. The direct costs are €8,910, including 84 hours of labour. The gross margin is €286, or 3.1% of revenue. Per hour worked that is €3.40. That is too little to carry the overheads, even though the quote looked fine.
The margin per project comes from the job costing. That only works if every job sheet, purchase invoice and hire receipt has a project code. In the accounts, such a code is often called a cost centre or an analytic account.
Which type of roofing work earns the most?
You only see that when you add up the projects by type of work. In the example below, a roofing company has €950,000 of turnover in a year, spread over flat roofs, pitched roofs, dormers and maintenance. Each group has its own margin.
| Type of work | Turnover | Gross margin | Margin % | Margin per hour |
|---|---|---|---|---|
| Flat roofs | €420,000 | €84,000 | 20.0% | €28.00 |
| Pitched roofs | €260,000 | €65,000 | 25.0% | €32.50 |
| Dormers | €180,000 | €27,000 | 15.0% | €18.00 |
| Maintenance and leaks | €90,000 | €36,000 | 40.0% | €45.00 |
| Total | €950,000 | €212,000 | 22.3% | €29.04 |
Flat roofs bring the most margin in euros, €84,000. Per hour, the company earns most from maintenance and leaks, €45 per hour. Dormers lag behind: 15% margin and €18 per hour. That can be due to the price, the hours or the purchasing. The job costings per dormer show which of the three.
The margin per hour is often the most useful figure for a roofing company. Your crew can only spend a limited number of hours on the roof. A job with a high percentage but a lot of travel time can earn less per hour than a large roof with a lower percentage.
Do you earn more from private customers, owners' associations or contractors?
That differs per company, and you only see it if you add up the margin per customer group. In the same example, work for contractors brings the most turnover, but the least margin per euro.
| Customer group | Turnover | Gross margin | Margin % |
|---|---|---|---|
| Private customers | €330,000 | €92,400 | 28.0% |
| Owners' associations | €280,000 | €61,800 | 22.1% |
| Contractors | €340,000 | €57,800 | 17.0% |
| Total | €950,000 | €212,000 | 22.3% |
In the example, contractors bring 35.8% of turnover, but 27.3% of margin. Private customers bring 34.7% of turnover and 43.6% of margin. That does not mean work for contractors is bad. It often provides large jobs and a full schedule. It does mean that every hour for a contractor contributes less to your overheads.
If you work as a subcontractor for a contractor, you shift the VAT to the contractor (Tax Administration, roles in subcontracting). That does not affect your margin, because VAT is not turnover. It does change your invoice.
Calculating per customer group is a well-known method in research. A case study of a producer of professional cleaning products showed how a company can calculate the profit contribution of customer groups and of individual customers. The article gives examples of what it brings to do this regularly (van Raaij, Vernooij & van Triest, 2003).
Which three figures do you look at every month?
Three figures are enough to see whether your jobs make money. All three come from the job costing of the projects completed that month.
Gross margin as a percentage, per type of work
If the percentage for a type of work falls for a few months in a row, your costs are rising faster than your prices. Look first at material prices and hours.
Gross margin per hour worked
This figure shows what an hour of your crew earns. Put it next to what you need to cover per hour in overheads. If it drops below that, you are working on those jobs without profit.
Deviation in hours from the budget
Actual hours divided by budgeted hours, per completed project. If your flat roofs are consistently 10% over budget, your standard is too tight, not your crew too slow.
A simple test for the whole: add up the month's gross margin and compare it with one month of overheads. If, for example, you have €150,000 of overheads a year, an average of €12,500 of gross margin must come in each month to break even.
Does it help to measure margins per project?
Research points that way, but with a caveat. A review of research on management accounting in SMEs found that smaller firms use such figures less than large firms, and in a different way. The review concludes that SMEs generally perform better with proper management accounting (Lavia López & Hiebl, 2015). Management accounting means keeping figures to steer the business, such as the margin per project.
That is a summary of many studies in different countries and sectors. It shows an association, not proof that one figure increases your profit. What is certain: without a margin per project you do not know which jobs you should or should not take on, and which price you need to adjust.
Sources
- Tax Administration, Roles in subcontracting and hiring out staff, accessed 17 October 2026. belastingdienst.nl
- van Raaij, E.M., Vernooij, M.J.A. & van Triest, S. (2003). The implementation of customer profitability analysis: a case study. Industrial Marketing Management, 32(7), 573-583. doi.org
- Lavia López, O. & Hiebl, M.R.W. (2015). Management accounting in small and medium-sized enterprises: current knowledge and avenues for further research. Journal of Management Accounting Research, 27(1), 81-119. doi.org