You’ve priced your jobs, you’ve won the work, and your gross profit looks healthy. But here’s the real question: how much are you actually keeping once everything is said and done?
Welcome to the world of net profit margin – one of the most important numbers in your construction business.
What is Net Profit Margin?
Net profit margin is what’s left after all expenses are taken into account.
That includes things like:
- Insurance
- Fuel and van costs
- Office wages
- Phone bills
- Software subscriptions
- Repairs
- Accountancy fees
It’s the difference between running a busy business and running a profitable one.
Formula: Net Profit Margin = (Net Profit ÷ Turnover) x 100
Example: If your turnover is £600,000 and your net profit is £60,000, then your net profit margin is 10%.
Why It Matters to Construction Businesses
A strong net profit margin means:
- You’re actually making money after covering your running costs
- You’ve got funds to reinvest in your business
- You can pay yourself properly
- You’re more resilient during quiet periods
Far too many construction business owners are busy on site, but not earning what they should. Money’s coming in, but it’s not sticking.
Common Issues That Eat Into Net Profit
- Underestimating or ignoring fixed overheads
- Mixing personal and business expenses
- Letting small monthly costs go unnoticed
- Not making your money work for you (idle cash, missed investment opportunities)
These are the silent killers of construction profits.
How to Improve Your Net Profit Margin
- Review your overheads regularly – and cut what you don’t need
- Set a budget and stick to it
- Track profitability by job, client, or service type
- Use proper accounting software to get real-time data
- Get support from finance professionals who understand your industry
Net Profit = Long-Term Success
Your gross profit tells you if you’re pricing your jobs right.
But your net profit tells you if your business is actually working.
Don’t wait until your accountant hands over your year-end report to find out. Track your numbers monthly. Understand where your money’s going. And take control of your business future.
Need help?
We help construction business owners like you make sense of their numbers — and improve their profit margins in the process.
👉 Contact us today for a no-jargon chat about building a stronger, more profitable business.