Revenue minus the cost of goods sold—the profit remaining after covering direct costs but before overhead expenses.
Gross profit shows how much money you make from jobs after paying for the direct costs involved. If you charge $5,000 for a project and spend $2,000 on materials and subcontractors, your gross profit is $3,000. It doesn't include overhead like rent or insurance—just the direct costs tied to that specific work.
Gross profit tells you whether your pricing covers your job costs before considering your general business expenses.
The formula is straightforward:
For a contractor: if you bill $8,000 for a job and spend $3,500 on materials, permits, and a subcontractor, your gross profit is $4,500.
Gross profit only subtracts direct job costs. Net profit goes further, subtracting all operating expenses, overhead, and taxes. You might have healthy gross profits but still struggle if your overhead is too high. Both numbers matter for understanding your business's financial health.
Invoicer helps you track revenue so you can calculate your margins.
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