What Profit Margin Should I Target?
Quick Answer
Target net profit of 10–20% on turnover
Typical markup: 15–25% on materials, 30–50% on labour. Gross margin should be 25–45%.
Markup vs Margin
- Markup: Percentage added to cost. £100 cost + 20% markup = £120 sell price
- Margin: Profit as a percentage of sell price. £20 profit on £120 = 16.7% margin
- A 20% markup = 16.7% margin. A 50% markup = 33.3% margin.
Typical Markups by Category
- Materials: 15–25% markup (5–15% for high-value items like kitchens/bathrooms)
- Labour (subcontract): 10–20% markup
- Labour (own): 30–50% markup on cost
- Plant/equipment: 10–15% markup
Healthy Margins by Business Size
- Sole trader: 15–25% net (your “profit” includes your wages)
- Small company (2–5 people): 10–20% net profit
- Medium company (5–20 people): 8–15% net profit
- Large contractor: 3–8% net profit
Common Mistakes
- Forgetting to include overheads (van, insurance, tools, phone, accountant)
- Not pricing for non-billable time (quoting, admin, travel)
- Confusing markup and margin — they are not the same
- Racing to the bottom on price — compete on quality and reliability instead
Last updated: April 2026. Margins are indicative for UK construction and trade businesses. Seek professional accounting advice for your specific situation.