How To Calculate Profit In Construction Project

How to Calculate Profit in a Construction Project

In this blog, I’m going to walk you through some of the most common questions we’ve been getting about calculating profit in construction. My goal is to give you a perspective that makes the process clear, practical, and easy to understand. If you’ve ever thought, “I just want a high-level breakdown I can actually use,” then stay with us on this blog.

A Helpful Analogy

One of my favorite ways to explain profit tracking is through Monopoly.

When I used to play Monopoly with my kids, I kept my money neatly stacked, properties organized, and risks in mind. My kids, on the other hand, had money and cards scattered everywhere. The result? I always won. Why? Because I always knew exactly how much money I had, where it was coming from, and what risks were ahead.

Running a construction project is no different. You need to know:

• How much money you have now.
• Where more money will come from.
• What risks could impact your bottom line.

Construction really is Monopoly in real life, if you can’t see the whole game, you’ll lose profit.

Projection Sheet Details

This is where your projection sheet comes in. It’s the tool that gives you complete visibility. Here’s what it should show:

• Overall project budget.
• Total subcontractor budgets.
• % of buyout completed.
• % of buyout remaining.
• % of buyout contingency remaining.
• Contractor contingency.
• Owner contingency.
• Labor, equipment, and insurance gains.
• Self-perform profit (if applicable).
• Contractor fee.
• Gross profit (all gains + fee – overruns/risks).
• Corporate overhead charges.
• Project-level expenses (taxes, bonuses, etc.).
• Net profit.

Pair this with your risk and opportunity register, and you’ve got a full Monopoly board. You’ll know how much money you have, how much more you can make, and where your risks lie.

Financial Projection Tips

One rule I like to follow: if risks look like they’ll spill past your contingency and into your profit, that’s a red flag. That’s when you must take immediate action.

• Gross profit = project revenue – direct costs (+ gains/fee).
• Net profit = gross profit – overhead/expenses.

All of your financial applications should roll up into a single summary sheet so you can truly “play the game.”

FAQs About Profit

Q1: How do I calculate real profit on a project?

• Gross profit includes fee, self-perform, equipment, labor, and insurance gains.
• Subtract projected risks (beyond contingency).
• Then subtract G&A and overhead to get net profit. Track this weekly and make ethical, strategic decisions.

Q2: What factors kill profit after a job starts?
Four main categories:

1. Estimating mistakes – weak preconstruction planning.
2. Production loss in the field – often due to CPM instead of Takt systems.
3. Rework from quality defects – usually caused by rushing, panicking, or poor systems.
4. Schedule creep/drift – overruns lead to damages and spending your own money.

Q3: How does profit match the estimate?
The estimate shows fee, contingencies, and budgets. But profit also includes labor, equipment, and insurance gains, factors not always visible to the owner. That’s why a projection sheet is essential: it ties everything back together transparently.

The Profit Formula

Here’s the simplified formula:

Net Profit = (Total Budget + Gains + Fee – Risks/Overruns) – Overhead & Expenses

If you can see all of that on one sheet, you’ll know exactly where you stand.

Profit in construction isn’t about waiting until the end to see what’s left over, it’s about playing the game strategically every week with full visibility. Just like Monopoly, the organized player always wins.