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📚 Understanding Profit Margins
What is Gross Margin?
Gross margin is the percentage of revenue you keep after covering direct costs. It's calculated as: (Revenue - Costs) ÷ Revenue × 100
Why 50% Starting Margin?
- ✅ Protection: Covers unexpected costs, mistakes, and delays
- ✅ Fair Pay: Ensures you're compensated for your expertise and risk
- ✅ Growth Fund: Provides the cash you need to expand
- ✅ Equipment: Allows you to reinvest in better tools and training
Margin Guidelines by Business Stage
(Not a recommendation to decrease—just an industry reality check):
| Premium Positioning |
60%+ |
| Available at any stage with strong branding and sales process. |
| Startup (0–2 years) |
50–60% |
| You need cushion for learning curves and marketing. |
| Growing (2–5 years) |
45–50% |
| As you gain experience, your efficiency improves. |
| Established (5+ years) |
35–45% |
| Larger volume and streamlined systems can sustain slightly lower margins—but it's not required. |
⚠️ Important:
Don't feel pressured to drop your margins over time. Many of the most successful contractors maintain 45–50% margins no matter how big they get. A healthy margin is what keeps your business strong and your stress low.
💎 Want to Charge 60% Margins?
Established contractors have earned the capacity to compete at lower rates through years of experience, systems, and reputation. But here's the secret: You can charge premium rates at ANY stage if you have:
- ✅ Social Proof: Reviews, testimonials, before/after galleries
- ✅ Professional Branding: Logo, uniforms, wrapped vehicles, quality website
- ✅ Solid Sales Process: Professional quotes, clear communication, follow-up systems
- ✅ Confidence: Belief in your value and ability to solve problems
Bottom line: Premium pricing isn't about years in business—it's about positioning yourself as the premium choice.