Why Most Ontario Contractors Don't Know If They're Profitable
Most Ontario contractors are not as profitable as they think
If you ask a contractor in Ontario how the business is doing, most will say "good, staying busy." Busy is not the same as profitable. The 2026 industry data is blunt: a lot of small contractors are losing money on jobs they think are making them rich.
Research tracking over 1 million contractor jobs found that 1 in 3 estimates do not match the final invoice. The reason is rarely scope creep. It is that most contractors are not counting their real costs.
The average general contractor in Canada and the US nets around 5 percent. Smaller shops can hit 5 to 10 percent because overhead is lighter, but one bad project can erase the entire year.
This post breaks down the 5 hidden costs killing your margin and how to know if your contractor profit margin is actually where it should be.
Hidden cost 1: Labor burden adds 30 to 40 percent
When you pay a worker $30 an hour, that worker actually costs your business $42 to $45 an hour once you add:
- CPP and EI employer contributions
- WSIB premiums
- Vacation and statutory holiday pay
- Health and dental benefits
- Tools and uniforms
- Vehicle and gas allocation
Most contractors price using the base wage. They forget that "burden" adds 30 to 40 percent on top of every hour.
If your burden rate was 35 percent in 2023 and is 45 percent now (which is the case for most Ontario shops with 2 to 5 employees), you are losing 7 to 8 percent on every labor dollar without seeing it on the invoice.
Hidden cost 2: Overhead eats 25 to 40 percent of revenue
Industry data shows small contractors carry overhead in the 25 to 40 percent range of revenue. Enterprise firms run leaner at 25 percent. Solo operators with no office and no employees can run as low as 8 to 15 percent.
Overhead is everything that is not direct job cost:
- Insurance (liability, vehicle, tools)
- Office or shop rent
- Phone, software, accounting
- Owner salary draw
- Truck payments, fuel, maintenance
- Estimating time (you are not billable while quoting)
- Bad debt and warranty callbacks
If your shop has 30 percent overhead and you mark up jobs by 30 percent, your real margin is roughly zero. You are running a charity with extra steps.
Hidden cost 3: The billable hours myth
Track your time honestly for a month and you will find you are billable for 50 to 65 percent of the hours you work. The other 35 to 50 percent goes to:
- Driving between jobs
- Estimating and quoting
- Picking up materials
- Answering calls and emails
- Paperwork, invoicing, payment collection
- Warranty work and callbacks
A solo contractor working 40 hours a week is realistically billing 22 to 26 hours. If you set your hourly rate by dividing your target salary by 40 hours, every job is priced 35 percent too low.
Hidden cost 4: 20 percent markup is not 20 percent margin
This is the most expensive math mistake in the trade.
A 20 percent markup on $10,000 in costs gives you a $12,000 quote. Your profit is $2,000. Your margin is $2,000 divided by $12,000, which is 16.7 percent. Not 20 percent.
To actually take home 20 percent margin, you need a 25 percent markup. To take home 30 percent margin, you need a 43 percent markup. The math is not symmetrical and most contractors price like it is.
| Target net margin | Required markup on cost |
|---|---|
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
Hidden cost 5: Using last year's numbers
Material costs rose 5 to 7 percent in 2025 on top of already-elevated post-pandemic levels. Field labor wages are up roughly 4 percent year over year. Insurance and WSIB premiums have ratcheted up. Fuel is volatile.
If your hourly rate, your overhead percentage, or your material markup has not been updated in the last 12 months, your prices are out of date and quietly costing you margin on every job.
What "profitable" actually looks like in Ontario
For Ontario residential trades in 2026, healthy net margin targets look like this:
- Solo operators (no employees): 25 to 30 percent, $150 to $180 profit per billable hour
- 2 to 5 employee shops: 10 to 15 percent
- Larger shops ($1M+ revenue): 5 to 10 percent
- General contractors: 5 to 8 percent (margins thin with size)
The single most useful operational metric is profit per billable hour, not revenue. A solo plumber doing $300,000 a year at $180 per billable hour is in a much healthier position than a 5-person shop doing $1.2 million at $120 per billable hour. The bigger shop just looks more impressive on paper.
How to actually find out
Most contractors do not know their numbers because the math is buried under a year of receipts and a sloppy bookkeeping setup. Telling someone "you might not be profitable" without showing them the number is useless.
The fastest way to see where you stand is to run a quick assessment. The free Contractor Profit Score scores your business across 7 dimensions including margin discipline, overhead, lead capture, and pricing. Takes under 5 minutes, no email wall.
Related reading: Contractor Markup and Profit Guide Ontario and How to Bid on Construction Jobs in Ontario.
For industry-wide benchmarks see the 2026 Construction Industry Cost Trends report.
See where your business stands: grizzli.app/score