Top 10 ways to improve your margin

When costs jumped in 2021 and 2022, fixed-price builders took the hit. The Reserve Bank found their margins shrank as material and labour prices outran their contracts.¹ The builders who came through well had already settled which jobs to take, what to charge and how to hold the price. These ten moves make the biggest difference, and most of them start with your next enquiry.

1. Pick your jobs and say no to thin ones

Check budget, fit and funding before you spend estimating time on an enquiry. Pricing a home properly can take days to weeks of work for you, your trades and your suppliers, and many builders sign only one or two quotes in ten.² Quote for volume and you might close 10 to 20%. Quote only the jobs you expect to win and that can rise to 75 to 95%. One family firm that had run jobs at 9 to 10% set a 20% floor and told anyone who found it too dear that they weren’t the right fit. Its revenue doubled to $6 million.³

Write down your minimum margin and the three things a job needs before you price it.

2. Charge for preliminary pricing and design

A free detailed quote is unpaid work with a low win rate. Charge for a preliminary stage before the full price, and make it worth paying for: costings, designer meetings, selections and a detailed proposal. One builder charges an engagement fee of $5,000 to $10,000, depending on the job, and takes it off the price if the customer goes ahead.⁴ Another walks away from customers who won’t sign a preliminary agreement.⁵

Set your fee, and decide now whether it comes off the contract price.

3. Back-cost labour while the job is running

Labour hours can drive about 80% of a job’s profit, so the best builders forecast hours for each stage to within 5%.³ One Brisbane builder gives every line of a 63 page quote its own material and labour cost, and his crew logs time against the line they’re working on. His preliminary estimates now land within 5% of the final cost.⁵ Check hours and invoices against the estimate while the job runs, when a shortfall can still be fixed.

Put the allowed hours for each stage where the crew can see them, and check them weekly.

4. Estimate from quantities and current costs

Square metre rates hide the real quantities, so the gap shows up at purchase order stage and comes out of your profit. A custom home builder won’t use them, because a tight block on a busy street next to a school costs more than the rate assumes.⁶ One volume builder saw the rate swing 10 to 15% between similar-sized houses on shape alone.³

Old rates are just as risky. Cotality’s Cordell index has residential construction costs up 29.5% over the five years to June 2026,⁷ and the ABS has house construction prices up 5.9% in the year to the June quarter.⁸ Re-price your rates from current supplier and trade quotes every quarter.

5. Set a margin target and price backwards from it

Decide the gross margin and net profit you need, then price back from the margin. Healthy building businesses aim for a gross margin of 20% or more, overheads of 8 to 12% and net profit of at least 10%. On $800,000 of cost, a 20% margin means a $1,000,000 price. That’s a 25% markup, so a builder who adds 20% to cost earns less than planned.⁹ As one owner puts it: under 10% net and “you’re cooked”, while 12 to 14% is excellent.⁵

Price equals cost divided by one minus your target margin. If your spreadsheet adds a percentage to cost, it is working out markup.

6. Work out your true overhead and recover it on every job

A healthy-looking margin still loses money if it doesn’t cover overhead. Count every cost the business carries, down to the phone bill and the car repayments, instead of adding a flat 10%.¹⁰ Take three months of your P&L and strip out the costs already priced into jobs. What’s left is your overhead. One owner runs his business on overheads of 15% of turnover and says his peers sit closer to 10%.⁵ Another found overheads eating 35% of revenue. He left the office, cancelled stray subscriptions and hired trades in, and his monthly overheads fell from about $85,000 to $90,000 to about $40,000 to $45,000.³

7. Price risk on purpose

A thin allowance on an unknown turns into a big variation or a loss. Keep two contingencies: one for problems you’ll wear and one for the customer’s hidden conditions. Use provisional sums only for real unknowns backed by site data, and get the geotechnical report before contract on any site with fill or slope.

Site data also limits what you can charge later. In Victoria, a builder generally can’t pass on a variation for something they should have picked up, such as rock the foundation data already showed.¹¹ Rules on provisional sums, variations and price escalation vary by state and contract, so check yours and get legal advice on any clause you rely on.

8. Price and sign every variation before work starts

Unwritten extras are unpaid extras. One builder wore a $160,000 basement excavation variation as a loss because nobody approved it in writing.³ In Queensland, variations must be in writing before work starts, and the QBCC names poorly recorded variations as one of the most common causes of serious building disputes.¹² Make it a rule that no extra work starts without a signed, priced variation, and send every variation through the office so crews aren’t agreeing to extras on site.

9. Control site productivity and procurement

Idle days, rushed orders and stacked markups all come out of margin. Cap live jobs at the number your supervisors can see every day. One builder who grew to a team of 15 on the tools spent his days putting out fires and dreaded every phone call.¹³ Book trades and order materials well ahead, put a purchase order on everything, and check trades’ supply-and-install prices against your estimate.

Work out what an idle week costs on a current job in interest, insurance and supervision, and keep that figure in front of your supervisors.

10. Hold your price

Every point you give away has to be made up with more work. On an $800,000 gross profit target, dropping from 20% to 19% margin means about $210,526 more work a year, roughly 16 and a half working days.³ Use a margin ladder, with higher margins on smaller jobs. If you’re booked out and leads keep coming, lift the margin on the next jobs before you add crews.

Where to next

If you are not sure your spreadsheet works out margin, read Margin vs markup first. Then check your quoting habits against Estimating mistakes that eat your margin.

Footnotes

1. Reserve Bank of Australia, “Box C: Financial Stress and Contagion Risks in the Residential Construction Industry”, Financial Stability Review, October 2022. https://www.rba.gov.au/publications/fsr/2022/oct/pdf/box-c-financial-stress-and-contagion-risks-in-the-residential-construction-industry.pdf ↩

2. “Why 70% of Home Designs Fail”, The Good Builder (podcast), 2025. ↩

3. The Professional Builder (podcast), 2026 episodes: “If You Price Jobs Like THIS, You Are Bleeding Margin”; “Why Accepting 10% Margins Forces You To Work For FREE”; “If You Quote Jobs Like THIS You Will Run Out Of Cash”; “How Outsourcing Administration Cut Overheads From 35% To 8%”; “Why Dropping Your Margin By 1% Costs You 16 Days Of LEAVE”. https://www.youtube.com/@theprofessionalbuilder ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶

4. “Brisbane Builder on Ambition, Fraud and Almost Losing It All”, Better Builder Podcast #66, 2025. ↩

5. “How To Build A Successful Construction Business In Brisbane (2025 Highlights)”, Better Builder Podcast #86, 2025. https://www.youtube.com/watch?v=xft4SMy9nFA ↩ ↩² ↩³ ↩⁴

6. “Why 1 in 25 Builders Don’t Survive a Decade”, The Good Builder (podcast), 2026. ↩

7. Cotality, “Construction costs rebound to steady growth”, July 2026. https://www.cotality.com/au/press-releases/construction-costs-rebound-to-steady-growth ↩

8. Australian Bureau of Statistics, “Producer Price Indexes, Australia, June 2026”. https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/producer-price-indexes-australia/jun-2026 ↩

9. “Building Better Businesses”, The Good Builder (podcast), October 2025. https://www.youtube.com/watch?v=yj1SyXRYq9g ↩

10. “The Godfather of Building Shares 40 Years of Wisdom”, The Good Builder (podcast), June 2025. ↩

11. Consumer Affairs Victoria, “Changing a domestic building contract price”. https://www.consumer.vic.gov.au/licensing-and-registration/builders-and-tradespeople/running-your-business/domestic-building-contracts/changing-a-domestic-building-contract-price ↩

12. Queensland Building and Construction Commission, “Contract variations”. https://www.qbcc.qld.gov.au/home-owner-hub/build-renovate/contracts-payments/contract-variations ↩

13. “The Cost of Biting Off More Than I Could Chew”, Better Builder Podcast #79, 2025. ↩