Clear formulas. Explicit assumptions.
How Contractor Money Lab calculates job profit, contribution, cash flow, hourly rates, markup, and changes.
Revenue, profit, and cash
Revenue is contract value or billed work. Estimated profit subtracts the modeled expenses from revenue. Cash flow follows when money is received and paid. These are different measurements, and none alone describes the health of a business.
Job profit and overhead
Direct costs are materials, labor, subcontractors, equipment, permits, and other job expenses. Gross profit excludes allocated overhead and expected contingency expense. Estimated job profit includes both. Allocate overhead consistently and avoid counting it twice. Unspent contingency reserve is not an expense.
Margins and markups
Margin is profit divided by revenue. Markup is profit divided by cost. A target margin uses cost / (1 − margin); a markup uses cost × (1 + markup). Zero denominators return unavailable. A target margin must be below 100%.
Break-even
Contribution per job is job revenue minus variable cost. We divide monthly fixed overhead by positive contribution and round up to whole jobs. Target profit is added to overhead before division. With zero or negative contribution, volume cannot cover positive overhead.
Labor rates
Annual wages are hourly wage times paid hours. User-entered payroll burden is applied to wages. Annual workers’ compensation, benefits, and allocated overhead are then added. Total annual cost is divided by billable hours and grossed up for the selected operating margin.
Cash-flow timing
Invoice month plus the whole-month payment delay determines regular collection. Retainage is withheld from the invoice balance after advance credit and collected at the later of the configured release month and regular due month. Advances arrive in month 1, offset earliest invoices, and are not extra revenue. Amounts beyond the displayed forecast are reported separately. Other cash flows affect cash, not project profit.
Change orders
Revised revenue includes the entered change amount; revised costs include direct, overhead, delay, and expected contingency expense. Incremental profit measures the change alone. Proposed changes remain scenarios until approved. Maximum total additional cost equals change revenue; remaining capacity deducts modeled added costs.
Precision and limits
All formulas use JavaScript floating-point numbers without intermediate rounding. Display uses U.S. dollars and percentages. This is estimating software, not a bookkeeping ledger. Inputs are limited to one trillion to prevent unrealistic magnitude and nonfinite results. End-of-month forecasts do not capture every daily cash shortage. Taxes and financing are excluded unless entered.