Remodeling profit margins

The IRS reports what one-owner businesses filing Schedule C earn, by sector. Remodeling falls under Construction of buildings. For tax year 2023, 795,086 returns reported $113.9 billion in receipts, $51.3 billion in cost of sales and $15.0 billion in net income less deficit (the table gives thousands of dollars):

The owner's own draw is not an expense on a Schedule C, so that net margin is mostly the owner's wage, not profit on top of it.

Remodeling is materials, subs and your own crew's labor, with overhead carried for weeks per job. Change orders are where margin is protected or lost.

• Changes done without a signed change order
• Allowances that run over
• Subs who are late or come back
• Long jobs with slow progress payments
• Hidden conditions not priced as a contingency

Ways remodelers raise margin: get every change order signed before the work; set allowances that match the finishes customers pick; bill progress payments on milestones; price a contingency for hidden conditions.

The typical national prices from our sourced calculators are a check on whether your prices leave room for margin:

Work out the margin on each line of your menu, not just the big jobs. The usual remodeling menu: bathroom remodel; kitchen remodel; basement finishing; interior demolition; drywall install and finish; luxury vinyl plank, installed; tile floor, installed; insulation, batts; composite deck; siding, vinyl; window and door replacement.

Overhead comes out of the margin before profit. In remodeling it includes general liability insurance, which Insureon's customers who are general contractors pay an average of $162 a month for; commercial auto at $287 a month on the same figures.

Put one recent remodeling job into the calculator above, or switch it to "My margin for the year" to set your year next to the IRS benchmark. A 50% markup is a 33% margin; the markup calculator shows the rest.