Where did the profit go? A remodel estimate versus actual costs
Reconcile a $30,000 remodel line by line, identify the costs that changed, and use the worksheet to improve the next estimate.
Reconcile your job
Actual gross profit: $5,000 · 16.0% margin
Change in gross profit: -$4,000
Gross profit is before business overhead, financing costs, and income taxes. Include owner labor consistently in direct costs; approved revenue is not necessarily collected cash.
The estimate and the final cost
This fictional bathroom project was sold for $30,000 against $21,000 of planned direct costs. The original gross profit was $9,000, or 30% of revenue. The team later approved $1,200 of additional revenue, but actual costs reached $26,200.
| Direct cost | Estimated | Actual | Difference |
|---|---|---|---|
| Labor, including owner labor | $9,000 | $11,400 | +$2,400 |
| Materials | $7,000 | $8,100 | +$1,100 |
| Subcontractors | $4,000 | $5,200 | +$1,200 |
| Disposal and permit costs | $1,000 | $1,500 | +$500 |
| Total | $21,000 | $26,200 | +$5,200 |
Follow the $4,000 profit reduction
Final revenue of $31,200 less $26,200 of costs leaves $5,000 of gross profit: a 16.0% margin. Approved extras recovered $1,200 of a $5,200 cost increase. The $4,000 difference explains the decline from the original $9,000 plan.
Separate causes before changing your prices. Labor could reflect missed work, lower productivity, rework, or a changed customer selection. Material variance could come from quantity, unit price, freight, or waste. Record an evidence-backed cause for each variance instead of calling everything an overrun.
Change the next estimate, not just this spreadsheet
For the next comparable job, include protection and cleanup hours explicitly, confirm subcontractor exclusions before quoting, and put a selection deadline next to every allowance. Hidden conditions should trigger a documented review of price and schedule.
Review estimated and actual costs under the same categories. Keep approved change revenue, invoicing, and collected cash separate. A positive gross profit does not establish that the business covered overhead or that the customer has paid.
Your checklist
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