Running the numbers on a contracting business
Markup versus margin, why profitable jobs still run you short on cash, and the arithmetic that decides whether a year of hard work leaves anything behind.
The short answer
Two numbers decide whether a contracting business survives: the margin you price at, and the timing of the cash. They are separate problems. A job can be priced at a healthy margin and still leave you unable to make payroll, because profit is measured when work is done and cash is measured when money moves.
Nobody starts a trades business because they wanted to do arithmetic. But the two calculations on these pages are the ones that quietly decide whether the year was worth it.
Two different questions
It helps to keep them apart, because they have different fixes and people routinely try to solve one with the other.
| The profit question | The cash question | |
|---|---|---|
| What it asks | Was this job worth doing? | Can I pay people on Friday? |
| What it depends on | Your pricing and your costs | The timing of money in and money out |
| Where it shows | Profit and loss statement | Bank balance and cash flow statement |
| How you fix it | Price at a real margin, know your true job costs | Deposits, staged billing, terms that match your subs |
| The trap | Confusing markup with margin | Reading a deposit-heavy balance as a cushion |
A thin margin cannot be fixed with deposits, and a timing gap cannot be fixed by raising prices next year. Diagnosing which one you actually have is most of the work.
Guides in this section
Markup vs margin
The two formulas, a conversion table, and the specific arithmetic mistake that quietly prices contractors below the margin they think they are earning.
Updated July 27, 2026
Why profitable jobs still leave you short on cash
Profit and cash are measured at different moments. Here is why a good year on paper can still mean an empty account, and the four timing gaps that cause it.
Updated July 27, 2026
Back to all guides, or see how job costing works in WIPKeep.