What Is the Margin Health Indicator?
Understanding your margin health indicators starts here. The Margin Health Indicator is a live signal in the pricing panel of the estimate builder that tells you, at a glance, whether your current pricing is set to hit your profit target. It updates automatically every time you add or change a cost, apply a discount or pick a different department. When you open a saved estimate, click Recalculate to check its margin.
Think of it as a sanity check — a visual guardrail that prevents you from sending a proposal priced at a loss or below your minimum acceptable profit.
The indicator compares your projected margin (based on your current costs and proposed sale price) against your target margin (set in Business Settings, or per department).
Reading the Indicator Colours
How Margin Is Calculated
QuickEstimate uses gross profit margin — the standard in the construction industry — not markup percentage. These are fundamentally different calculations and it's critical to understand the difference.
Total Costs = Direct Costs (materials, labor, equipment, subcontractors, permits) + Overhead + any sales commission
The Total Costs figure in this formula includes both your direct costs (materials, labor, equipment, subs) and your overhead allocation for the project. This is why setting your overhead % accurately is so important — a wrong overhead figure produces a misleading margin reading. Try our margin calculator to see this formula worked out with your own numbers.
Why Margin Matters More Than Markup
Many contractors think in terms of markup — adding a percentage on top of costs. The problem is that markup and margin produce different results, and confusing them is one of the most common causes of underpricing in the trade industry.
| Metric | Formula | Example (on $10,000 costs) |
|---|---|---|
| 20% Markup | Costs × 1.20 | Sale price = $12,000 → 16.7% margin |
| 20% Margin | Costs ÷ (1 − 0.20) | Sale price = $12,500 → 20% margin |
If your target is 20% profit margin and you're using 20% markup, you're actually earning 16.7% — leaving significant money on the table across hundreds of jobs a year. QuickEstimate always operates in margin terms to eliminate this confusion.
The "double-dip" trap: Some contractors accidentally apply their overhead percentage twice — once in their cost calculation and again in their markup. If your indicator shows green but your bank account tells a different story, check that your overhead is only entered in Settings, not also baked into individual line item costs.
Common Reasons Margins Go Red
- Underestimated labor hours — the most common cause. Add a contingency buffer of 10–15% to labor on complex jobs
- Using unconfirmed subcontractor estimates — rough verbal quotes often come in higher when formal bids arrive
- Forgetting waste factor on materials — offcuts, spillage, and delivery minimums add real cost
- Overhead % is too low — if your default was set with last year's costs and you've since hired staff or moved offices, it may be understated
- Competitive pressure leading to price cuts — discounting without adjusting costs is the fastest way to go red
Adjusting Your Estimate to Hit Your Target
When your indicator is yellow or red, you have four levers to pull:
Reduce or remove the discount
The quickest lever. A discount comes straight off your margin, so check the Sales Info step. The indicator shows the new margin as soon as you change it.
Reduce costs
Review your line items for any that can be reduced — cheaper material alternatives, tighter labor hours, renegotiating a sub bid. The system recalculates as you edit.
Check your markups and equipment
Subcontractors and permits use their own markups (set in Business Settings), and equipment is added at cost. If those markups are low, your overall margin will sit below target even with no discount. Raise them in settings if your prices allow.
Review your overhead percentage
If multiple estimates are consistently red even with reasonable pricing, your overhead % may need recalculating. See the Calculate Your True Overhead % guide.
Setting Your Margin Target
Your default profit margin target is set in Management → Business Settings → Target Profit Margin (%). The right target varies by trade, location and business size.
A good rule of thumb: Set your target margin at the minimum acceptable profit you'd take on any job — not your ideal margin. This way, the indicator is a floor, not a ceiling.
Need a different target for some work? Each department can have its own overhead and profit margin (Management → Departments). Choosing that department on an estimate uses its target instead of your company default. This is useful for repeat clients who negotiate lower rates, or high-volume, lower-margin work.