Use the same categories as your budget
Group actual costs in the same way as your estimate: labour, materials and subcontractors. Include recurring small costs if you can allocate them to the project. Use amounts excluding VAT when that VAT is recoverable for your business.
A worked example
Suppose a project brings in €12,800. Direct costs total €9,440. That leaves €3,360 before general business overheads and taxes. The project margin is €3,360 divided by €12,800: 26.25%. These are fictional amounts.
Margin and markup are different
To calculate markup, divide the difference by your costs. In this example, the markup is €3,360 / €9,440, approximately 35.6%. The same job therefore has a margin of 26.25% and a markup of about 35.6%. Use consistent definitions in your budget.
Don’t forget your own time
If you work on the job yourself as a self-employed builder, include a suitable internal hourly rate for your labour. Otherwise, those hours appear to have cost nothing. This internal figure helps you manage estimates; it is not automatically a wage expense for tax purposes.
Learn something specific from the difference
- Which tasks took more hours than budgeted?
- Which materials cost more or were used in greater quantities?
- Has all approved extra work been invoiced?
- Which time allowance or purchase price should you adjust for the next quote?
Don’t wait for the final invoice
During a longer project, check whether costs and progress still match the budget. You can then discuss materials, planning or changes while there’s time to act. After handover, use the final comparison to learn from the job.