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For large main contractors, 3% to 5% pre-tax is what the industry treats as healthy: Willmott Dixon’s chief financial officer told The Construction Index that 3% to 5% is where people expect a firm to be, and that any healthy firm should be above 2%. No published source gives an equivalent benchmark for small contractors.

No. Markup is profit as a percentage of cost. Margin is profit as a percentage of the selling price. Adding 20% to a cost of £100,000 gives a price of £120,000 and a profit of £20,000, which is a margin of 16.7%, not 20%. Pricing with markup and reporting in margin is a common reason a job looks less profitable than planned.

Margin tracking software compares each job’s budget and contract value with what has been committed, invoiced and paid, and shows the forecast final margin as costs come in. For contractors it usually sits on top of the accounting system (Xero, QuickBooks or Sage) and adds purchase orders, invoice approval, variations and a monthly forecast that accounting software does not do on its own.

At least monthly for every live job, as part of a cost value reconciliation (CVR), and weekly on jobs that are running hot. The check that matters is the forecast final margin (cost to date plus cost to complete against the expected final value), because the margin to date can look fine until the last third of the job.