What is the difference between gross and net profit?

Gross profit is revenue minus the direct costs of the job — materials and job labour. Net profit is what remains after you also subtract overhead such as insurance, vehicles, tools, software, and admin time. Gross profit measures whether a job is priced well; net profit measures whether the business actually makes money.

Can you have high gross profit but low net profit?

Yes, and it is common. A contractor can run a healthy 40% gross margin on every job and still end up with a 5% net margin if overhead is high. The jobs are profitable individually, but the fixed costs of running the business — spread across all of them — eat most of the result.

Which profit number matters more for contractors?

Both, for different decisions. Watch gross profit per job when pricing and quoting to see if specific work is priced correctly. Watch net profit to judge whether the business overall is working and whether to raise rates, cut overhead, or hire. Tracking them separately tells you which lever to pull.

Gross Profit vs Net Profit for Contractors

Two profits, two questions

"Profit" is two different numbers, and confusing them is how contractors end up busy and broke at the same time.

Gross profit is what's left after you subtract the direct costs of doing a job — the materials and the labour that went into that specific work — from what you invoiced. It answers one question: did this job, priced this way, make money on its own terms?

Net profit is what's left after you also subtract everything it costs to keep the business running whether or not you're on a job: insurance, vehicle payments and fuel, tools, software, phone, advertising, accounting, and your unpaid admin time. It answers the bigger question: after everything, did the business actually make money?

Gross profit is a job-level number. Net profit is a business-level number. You need both, and they tell you different things.

Why a great gross margin can still leave nothing

Say you invoice $20,000 in a month. Direct materials and job labour come to $12,000. Your gross profit is $8,000 — a 40% gross margin, which sounds healthy.

But your monthly overhead — insurance, truck, fuel, tools, software, advertising, the hours you spend quoting and chasing payment — runs $7,000. Subtract that and your net profit is $1,000, a 5% net margin. Same business, same month: a strong-looking 40% gross margin and a thin 5% net margin.

This is exactly how a contractor can feel like every job is profitable — because each one shows a solid gross margin — while the bank account never grows. The jobs are profitable at the gross level. It's overhead, spread invisibly across all of them, that eats the result. Understanding that load is the subject of overhead and profit for contractors.

Which number should you watch?

Both, for different decisions.

Watch gross profit per job when you're pricing and quoting. It tells you whether a particular job, client, or service type is priced correctly. A healthy trade job runs 35–50% gross margin; consistently below 20% means that work is underpriced regardless of how the rest of the business is doing. This is the number job costing reveals.

Watch net profit when you're deciding whether the business as a whole is working — whether you can take a draw, hire, raise your rate, or cut overhead. A business can fix a weak net margin in two ways: improve gross margins (better pricing) or reduce overhead. You can't tell which lever to pull unless you track both numbers separately.

One more distinction worth getting straight while you're here: margin versus markup. They're not the same percentage, and mixing them up quietly underprices jobs — see markup vs margin for contractors.

Making both numbers visible

Most contractors can estimate revenue easily and have no idea about either profit number, because the data is scattered across invoices, receipts, and memory. The fix is to capture, per job, what you invoiced, what materials actually cost, and how many hours it actually took — then the gross profit calculates itself, and over a month the net profit becomes visible too.

You can work a single job by hand with the job profit calculator to see gross profit, margin, and markup instantly. To see it automatically across every job, Fieldpaid compares quoted margin to real margin on each paid invoice — so gross profit per job stops being a guess, and the pattern in your net result becomes obvious.

Gross Profit vs Net Profit: The Difference That Decides If You Actually Make Money