Data to Dollars: What Each Metric Means & How to Use It to Drive More Profits: Series #7 - Metric Three of “The Trifecta”: Job Profitability
When I first started working with builders on their financials, I’d walk into our meetings armed with accurate data, detailed reports, and carefully tracked metrics. I was confident and excited to share what I’d uncovered, knowing these numbers could transform their business.
But there was a problem: I might as well have been speaking another language. It became very clear very quickly that my clients didn’t just struggle to understand the reports—they didn’t know what the metrics meant, let alone what actions to take, if any.
By the time I explained the significance of the metric, I’d already lost their focus. And the worst part? We never got to the best part—the actionable insights that could actually drive their dollars to meet their goals!
Enter: The Data to Dollars Series and The Playbook for Builder Profitability! In this series, we’ve broken down the key metrics residential construction companies need to track, what they mean for your business, and—most importantly—what to do with them to drive profitability and growth. We’re currently taking every metric covered in the series and packaging them altogether into one Playbook especially for Builders. Armed with this Playbook, you’ll know exactly what to do when with what you find in your financial reports.
Let’s dive into this week’s metric and see how it can help you turn some data into dollars.
#7 - The Trifecta #3: Job Profitability
What is “The Trifecta” -
The next three metrics are of utmost importance for tracking the finances of your individual projects so they meet your overall business profitability criteria. Therefore, we have aptly named them “The Trifecta for Financial Project Management.”
The Trifecta —WIP Report Accuracy, Overhead Allocation Comparison, and Project Profitability—represents the three critical metrics every custom home builder needs to master for profitable and efficient financial project management.
Each metric offers a unique perspective:
WIP Reporting Accuracy compares a project’s actual costs incurred with its percentage completion and revenue recognized. WIP analyzes the Est vs Actuals, Change Orders & Revised Budgets, Committed Costs, and Estimated Cost to Completion with Estimated Gross Profit Margin to manage a job’s progress.
Overhead Allocation Comparison ensures operational costs are fully absorbed by your jobs.
Job Profitability shows whether individual projects are meeting financial expectations.
Together, they provide a 360-degree view of a project’s financial health, helping you identify inefficiencies, refine estimates, and drive better results.
With this in mind, let’s take a look at your Job Profitability-
What It Is -
Job Profitability tracks how much profit your company makes on each individual project after all costs—direct and indirect—are accounted for. This metric compares your estimated costs and actual costs to determine whether the project is meeting your financial goals.
How we calculate it -
Job Profitability = (Revenue from Project - Total Costs) ÷ Revenue from Project × 100
For example, if a project generates $500,000 in revenue and costs $400,000 to complete:
Job Profitability = ($500,000 - $400,000) ÷ $500,000 × 100 = 20%
This means the project is generating a 20% profit margin after all costs are accounted for.
Why We Track It -
Tracking Job Profitability helps you understand whether your projects are performing as expected or falling short. It allows you to identify which projects are most profitable and which ones are not delivering the expected returns.
Why You Need to Know It -
Job Profitability shows the actual profit of each project, allowing you to adjust pricing, control costs, and ensure that every project contributes to your overall profitability.
Good: A positive profit margin means the project is on track and generating a return.
Bad: A negative or low profit margin signals issues with estimating, cost control, or project execution that need to be addressed immediately.
What Job Profitability Tells You -
Good: A healthy profit margin (8%-12%) indicates you’re managing costs well and pricing projects appropriately.
Bad: A low margin (<8%) suggests cost overruns, inefficiencies, or pricing errors that need to be addressed quickly.
Negative Margin: If the job is at a loss, it’s a clear sign that either your estimates were too low or your costs are too high—both need to be reviewed.
Action Steps Based on Job Profitability -
If Job Profitability Is High (10%-20%):
Celebrate! You’re pricing and managing costs effectively.
Leverage your success by refining your estimating system and applying lessons from profitable projects to others.
Reinvest profits into growing your business or expanding to larger projects.
If Job Profitability Is Low (<8%):
Review Estimating Processes: Are you underpricing jobs or failing to account for all costs? Adjust pricing for future bids and ensure that estimates reflect reality.
Track Costs More Closely: Look for areas where costs are overrun—labor inefficiencies, material wastage, or unforeseen issues—and address them with your project managers.
Improve Project Execution: Ensure better time management, quality control, and adherence to project scopes.
If Job Profitability Is Negative:
Reassess the Project: Determine if the project can still be salvaged or if changes are needed to avoid further losses. Are there supplier discounts or negotiations you could take advantage of?
Track Change Orders, Committed Costs and Additions: Ensure that any client-approved changes are documented and billed properly and make sure you haven’t been overbilled according your agreements with your subcontractors.
Check for Unbilled Expenses: Are there expenses accounted towards the job but you haven’t invoiced the homeowner/investor for?
Review Contract Terms: Are there clauses that allow you to pick up revenue?
Conclusion
Job Profitability is the most direct way to assess whether your projects are actually paying off. By tracking this metric, you can catch financial issues early, fine-tune your estimating process, and ensure that every project adds to your bottom line.
At Catalyst Construction Accounting & Consulting (Catalyst CAC), we specialize in helping residential construction businesses just like yours track and understand key metrics like GPM and more. Whether you need help with construction bookkeeping (data accuracy, essential construction financials), construction controllership (holistic oversight over construction financial processes & strategic financial guidance), or a construction CFO advisor (forward-looking, strategic, big-picture financial guidance), we’ll work with you to eliminate financial chaos and give you the tools to drive profitability and growth.
Let us help you turn your data into dollars. Contact us today, and stay tuned for the next episode in the Data to Dollars Series as we continue uncovering metrics that drive profitability and scale your business!
