Worked example
Start with a $4,000 job price, $800 of materials, $250 of equipment, $300 of subcontractors, $150 of other cost, $35 true labor cost and a 25% target margin. Compare the calculated labor-hour ceiling with 60 currently planned hours.
| Result | Calculated value |
|---|---|
| Maximum total cost | $3,000.00 |
| Maximum labor spend | $1,500.00 |
| Maximum labor hours | 42.86 |
| Labor-hour buffer | -17.14 |
These are fictional defaults for explaining the calculation, not a price or outcome claim.
How the calculation works
Maximum labor spend equals price times one minus the desired margin, less nonlabor costs. A negative result means the margin target is impossible even with zero labor.
Read the related Serman Tools guide for definitions, limits and another worked example.
Workbook
The free calculator handles one scenario in your browser. Contractor Profit Toolkit keeps the related model in a downloadable workbook.
Frequently asked questions
What does a negative labor budget mean?
The nonlabor costs already exceed the total cost allowed by the chosen price and margin, even before labor is added.
Should crew hours be person-hours?
Yes. Two workers for five hours normally equal ten person-hours unless your cost model explicitly uses another basis.
Is this a market-rate recommendation?
No. It calculates from your inputs and does not claim a prevailing local price or guaranteed outcome.
How should overhead be entered?
Use a documented allocation that matches the period and cost pool, and avoid including the same overhead in another input.
What is the difference between markup and margin?
Markup divides profit by cost. Margin divides profit by selling price, so the same percentage does not produce the same price.
Can I use the result as a final quote?
Use it as a planning check, then confirm scope, taxes, terms, technical requirements and every cost that applies to the job.