Calculate profit margin per job: why revenue is not enough

A full order book feels good. But if you do not calculate profit margin per job, you still do not know which projects are really moving your business forward. High revenue can easily go hand in hand with jobs that leave very little behind.

That difference is often not in the product as a whole, but in the choices around it. One version sells easily and delivers a healthy return. Another requires expensive materials while your selling price does not rise enough to match. If you only look at revenue, you will spot that afterwards — if you spot it at all.

Why does revenue per job tell you too little about profit?

Revenue is the amount you charge the customer. You still need to deduct costs, such as materials. If you only look at the total at the bottom of the quote, two jobs with the same selling price may look equally attractive. They may not be.

Imagine you sell two similar patio covers for the same price. The purchased components for the first version are relatively affordable. For the second, the customer chooses a roof, side walls and accessories with higher costs. If your selling prices do not reflect that properly, less is left from the second job.

So it is not only about asking: what do we sell most? More useful questions are:

• Which products and versions deliver the highest margin?
• Which options have relatively high costs but add too little to the selling price?
• Where does a supplier price change have an immediate impact?
• Which quote looks large but is less financially attractive than you thought?

That is not a reason to only sell the version with the highest margin. Sometimes a certain choice simply suits the customer or the work you want to do better. But you do want to know what your decision means.

How do you calculate profit margin per job using cost price and selling price?

At its core, calculating margin is simple: compare the selling price with the cost price. The difference shows what remains on a line before you include your other business costs.

For a configurable product, it works best to do this per pricing rule. You record not only what you charge the customer for a size range, material or extra option, but also what that choice costs you. This gives you insight where the price is actually built up.

In Klantly, you can record a cost price alongside the selling price in your pricing rules. That cost price is internal. Your customer will not see it on the public page or in the quote. Only colleagues with the right permissions can work with it. That matters if you do not want to share your pricing structure widely. Also read how to protect cost prices with roles and permissions.

With a request or quote, you can then see not only what you are selling, but also the internal difference between cost and selling price. This lets you manage based on margin rather than revenue alone.

Where do margin differences show up in practice?

Take a company that offers custom products in different sizes, materials and optional extras. The standard version is priced well. But for one specific combination of material and accessory, the supplier has increased its price. The selling price was not updated because that combination is less common.

Without insight, little appears to be wrong. Requests keep coming in and revenue continues to grow. Only when you look back do you find that this particular version is chosen often and delivers less than other variants.

With a cost price and selling price for each line, you can spot where to look sooner:

1. Check which pricing rules have a smaller difference between selling price and cost price than you expected.
2. Look at whether this is caused by a supplier price change, a selling price that is too low, or a choice that costs more than you estimated.
3. Adjust your pricing rule if needed, then check again which versions are contributing well.

This also helps you make choices in your sales process. You may find that a certain option has a healthy margin and deserves more attention. Or you may discover that a popular add-on needs a closer look in your pricing structure.

The outcome is not that you should push customers towards one specific version. The goal is to avoid accidentally selling a product that earns less than you thought.

What should you do when supplier prices change?

A supplier price change is exactly when margin insight becomes valuable. If only your cost price rises, your margin drops without this being immediately visible in your revenue figures. After all, the quote still looks the same to the customer.

If you work with pricing rules, you can check your cost prices alongside your selling prices. For larger price lists, you can import existing prices from Excel. You can see what will change beforehand, and the previous version is kept. That makes it easier to apply changes without rebuilding your entire list.

A central pricing structure also prevents one colleague from calculating with an old supplier list while another is already using the new amounts. That is not only better for your margin on each quote, but also reduces the risk of differences between quotes. In the article about preventing calculation errors in quotes, you can read why managing prices in one place helps.

Margin insight does not replace expertise or current prices

Managing based on margin is useful, but the system does not automatically know whether your cost price is still correct. An incorrect or outdated cost price also gives you an incorrect picture. You still need to check supplier prices, especially after a price increase.

Technical choices also remain human work. A version with a healthy margin is not automatically the right version for this customer, home or situation. Your expertise still determines what is technically possible, what makes sense and what you do or do not want to offer.

See margin as information to guide your decisions. It helps you ask better questions before setting a price, promoting an option or processing a supplier change. Combine it with a clear quote, so the customer also understands what is and is not included in the price. A professional quote with a clear price breakdown makes that difference visible.

If you want more control over profit per quote, you do not have to wait until the end of the year. By recording selling price and cost price for each pricing rule, you can see sooner which choices contribute to a healthy margin. Want to explore what Klantly could mean for your business? Start for free.