The four numbers you need
Pull these together for one job:
- Contract value. The total the client will pay you, including approved change orders.
- Percent complete. How far along the work actually is. (See percent complete methods: measure installed work, not money spent.)
- Cost to date. What you've actually spent so far (burdened labor, materials, equipment, subs).
- Cost to complete. Your best estimate of what's left to spend. (See cost-to-complete forecasting.)
That's it. Everything else is arithmetic.
The 5-minute check, step by step
Step 1: Forecast your final cost
Estimated cost at completion (EAC) = cost to date + cost to complete.
Step 2: Forecast your final profit
Forecast profit = contract value − EAC.
Step 3: Turn it into a margin
Forecast margin = forecast profit / contract value.
Step 4: Compare to the margin you bid
Pull the profit margin you planned when you priced the job. Is your forecast margin holding, slipping, or gone?
A worked example
Deck build. Contract value $40,000. You bid it at a 20% margin, so you planned to keep about $8,000.
- Cost to date: $22,000
- Cost to complete: $14,000
- EAC = $22,000 + $14,000 = $36,000
- Forecast profit = $40,000 − $36,000 = $4,000
- Forecast margin = $4,000 / $40,000 = 10%
You bid 20% and you're forecasting 10%. The job is still profitable, but it's earning half of what you planned. That's your signal to find out why now. Labor overrunning? A material price jump? Scope creep that should've been a change order?
What the answer tells you to do
- Margin holding. Good. Keep tracking; don't get complacent.
- Margin slipping. Dig in. Which cost category is running hot? Is there unbilled change-order work you should be charging for? Can you tighten the remaining scope?
- Margin gone or negative. Act immediately. Price any legitimate change orders, control what's left of the spend, and make sure the next bid doesn't repeat the mistake.
The whole point of doing this mid-job is timing. An overrun caught at 50% complete can still be managed. The same overrun discovered at close-out is just a loss you get to explain to yourself.
Do it on a rhythm
Run this check on every open job at least monthly, and weekly on your biggest ones. It takes minutes and it's the difference between contractors who feel busy and contractors who know they're profitable. If your check keeps showing margins below what you bid, the problem may be upstream in pricing. Revisit markup vs margin to make sure your bids carry the profit you need.
Keep your cost-to-complete honest by cross-checking unit costs against the Construction Price Index.
Where this fits
This margin check is the everyday, practical face of earned value tracking, and of construction project management that actually protects your profit.
Put it to work
TradesMetrics runs this check for you continuously. Build the estimate in the free estimating tool, log your costs and progress, and see your forecast margin on every job update automatically. See how it works.