Why 10% Profit is a Myth (And What to Aim for Instead)

You’ve been told: “Add 10% for overheads and 10% for profit - job done.”

It’s been passed around for years. You’ll hear it from business coaches, software tools, and even some accountants.

But the truth is: it’s not working.

Not for most construction or trades businesses. And probably not for you either.

You’re not daft. You’re quoting jobs, booking work, staying busy. You have a few lads on site, and an office setup to keep things ticking.

So why does it always feel tight?

Why is there never as much left over as you expected?

Because the 10 and 10 model is broken. It’s a relic - from a time when jobs were simpler, overheads were smaller, and risk was lower.

Let’s break this down properly.

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The “10 and 10” Rule: Neat on Paper, Useless in Practice

The rule sounds good in theory:

• 10% for overheads
• 10% for profit
• Add those on top of your costs
• Quote with confidence

On a £10,000 job, that means £1,000 to cover the business, £1,000 for the bottom line. You invoice £12,000, pay the bills, and bank the rest. Simple.

Except that’s not how reality works.

Because when I look at real numbers across dozens of small construction and trades businesses - builders, plumbers, landscapers, sparkies - the pattern’s always the same:

Net profit isn’t 10%. It’s usually 1–3%.

Even for decent operators.

Even when the books look “okay”.

And if you're making 1–3% net profit, you’re one bad job away from going down under.

Is it a surprise then why so many construction businesses go insolvent?

Why the Margins Don’t Add Up

Let’s talk about what’s actually changed.

1. Overheads are higher

You’ve got software, phones, vans on lease, admin help, bookkeeping, accounting, insurance, finance charges, training, compliance, recruitment - all climbing year-on-year. Most small firms I see have overheads around 15%–20%, not 10%.

2. You carry more risk

Clients delay payments. Jobs get held up by other trades. Materials spike overnight. You absorb the cost. That wasn’t built into the old model.

3. Margins get eaten quietly

If a job overruns by just one day, or someone’s off sick, or a skip doesn’t turn up - your “profit” vanishes. You still finish the job, but the money’s gone.

4. You’re not paying yourself properly

Many owners don’t pay themselves a real market-rate wage through the business. You pull drawings when you can, but that’s not accounted for in the profit. If your business isn’t making money after paying you properly, it’s not profitable.

So when you run the numbers honestly - what came in, what went out, what’s left - most firms are barely scraping a profit.

And no, that’s not just “how it is”.

That’s a sign your pricing model needs fixing.

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The Real Goal: 10% Net Profit After You’re Paid

Let’s be clear on this:

You’re not running a business to break even. You’re not doing all this to just “get by”.

You need profit - and not just theoretical numbers.

Profit is what allows you to:

• Breathe through a slow patch
• Invest in better kit or better people
• Take time off without stress
• Build up cash reserves
• Sleep at night

So what should you be aiming for?

At minimum, 10% net profit after your salary.

If your business turns over £500k, that’s £50k in real profit - after you’ve paid yourself a market-rate wage (say £50k as a working director).

That’s not greedy. That’s what it takes to run a sustainable, resilient business in today’s economy.

And if you’re not there yet, that’s okay - but now’s the time to face the numbers.

How to Check Your Real Profit

Forget annual accounts for a moment. Let’s look at the work you’ve actually done.

Here’s what I want you to do this week:

1. Review your last 6 completed jobs.

2. For each one, list:

• Total revenue
• Direct costs: materials, subcontractors, site labour
• Your wage/drawings for that job (realistically allocated)
• Overheads: office wages, rent, phones, software, etc. (divide your monthly costs across the jobs done that month)
• What was left over once all that’s taken out

3. Work out your net profit as a % of revenue.

If you’re seeing 1–3%, you’re underpriced. No matter how hard you’re working.

If you’re seeing 0% or losses, it’s urgent.

And if you’re not sure how to calculate overhead per job - that’s a sign your numbers need sorting.

Try This: Stop Guessing with “10 and 10”

Ask yourself:

• Does my pricing model actually reflect my real overheads?
• Am I building in time risk, payment delays, and rework?
• Or am I just copying the 10% rule because I don’t know what else to do?

If you’re guessing, then you’re gambling - and construction/trades is already risky enough without winging the finances.

Margins should be built, not hoped for.

You should know that every job has enough baked in to cover the business and still leave you something at the end.