Quick definition: The percentage of revenue you keep after subtracting labor, materials, overhead, and other business costs — before personal taxes.
Net margin is the true measure of whether your business makes money. For solo and small contractors, a healthy net margin runs 10-20%, depending on the trade.
The formula: (Revenue − labor − materials − overhead − other direct costs) ÷ revenue × 100.
Example: A $10,000 deck job with $3,000 labor + $4,000 materials + $1,500 overhead = $8,500 cost. Net profit: $1,500. Net margin: 15%. That is healthy.
Do not confuse net margin with markup or gross margin — they measure different things. Net margin is what is left after everything business-related, and it is the number you need to set an income goal you can actually hit.