Contractor Gross Margin Benchmarks by Trade (2026 Data)

Gross margin is one of the most important numbers in your business, and it is also one of the most misunderstood. A lot of contractors think they have a great year because revenue is up, only to realize they actually made less money than last year because their margin slipped. Others are convinced they have a margin problem when their real issue is overhead. Knowing your gross margin and how it compares to your trade's benchmark is the first step to fixing either problem.

What Gross Margin Actually Is

Gross margin is the money left over after you pay for the direct cost of the work. Direct costs include the materials on the job, the labor you paid the tech who did the work (fully burdened), any subcontractor costs, and any equipment rental or direct job costs. Gross margin is not your profit. It is the money left to pay for everything else, overhead, marketing, the office, the owner, and then what is left after that is net profit.

The formula is simple. Revenue minus direct costs equals gross profit. Gross profit divided by revenue equals gross margin percentage. A $2,000,000 revenue shop with $1,100,000 in direct costs has $900,000 in gross profit and a 45 percent gross margin.

HVAC Benchmarks

HVAC companies in 2026 are targeting a 50 to 58 percent gross margin on service work and 28 to 38 percent on install work. A blended margin for a typical service-and-install HVAC shop lands around 42 to 48 percent. If you are below 40 percent blended, something is off. Usually it is underpricing, overstaffing, or uncontrolled material waste.

A healthy HVAC service shop doing $1,800,000 in revenue should see about $900,000 in gross profit at a 50 percent margin. If that same shop is only hitting $720,000 in gross profit, they have a $180,000 gap to close.

Plumbing Benchmarks

Plumbing companies in 2026 target 55 to 62 percent gross margin on service and repair, and 30 to 40 percent on new construction or remodel work. Drain cleaning specifically tends to run higher, around 60 to 68 percent because material costs are minimal. A service-heavy plumbing shop should blend around 55 percent.

The biggest drag on plumbing margin is usually labor inefficiency. If your techs are only billing 5 hours out of an 8 hour day, your effective labor rate is way lower than you think and your margin suffers. Billable hour ratio should be at 70 percent or better to hit the benchmark.

Electrical Benchmarks

Electrical contractors run a wider range. Residential service electricians target 50 to 58 percent gross margin. Commercial and industrial electricians run lower, around 25 to 35 percent because of the competitive bidding environment. Panel upgrades and EV charger installs tend to be the most profitable categories right now, often hitting 55 to 65 percent.

A Chicago-area electrical service shop shared their numbers with us recently. At $2,400,000 in revenue with $1,344,000 in direct costs, they were running at 44 percent gross margin. After auditing their price book and raising prices 9 percent across the board, they moved to 51 percent without losing any meaningful job volume. That is an extra $168,000 in gross profit with essentially no change in overhead, most of which flowed straight to the bottom line.

Roofing Benchmarks

Residential roofing in 2026 is sitting around 30 to 42 percent gross margin on traditional asphalt work and 35 to 48 percent on premium and metal. Storm work can run higher because of insurance billing dynamics, but it is less predictable. Roofing margins are tight because material is a huge percentage of job cost, typically 35 to 45 percent.

If you are a roofer running below 28 percent gross margin, you are not going to survive the next downturn. Either your pricing is too low or your waste and theft are too high. Both are fixable but both require attention.

Garage Door Benchmarks

Garage door service is one of the healthiest trades for margin. Service calls and spring replacements run 65 to 75 percent gross margin. Full door installs run 35 to 45 percent. A service-heavy garage door shop should blend around 60 percent gross margin, which is why this trade is so attractive to new entrants.

Appliance Repair Benchmarks

Appliance repair is surprisingly tight. Gross margins run 45 to 55 percent on straightforward repairs and significantly lower when parts are expensive or hard to source. The business works if you have volume and efficiency, but it is not a high-margin game like garage doors.

Landscaping and Lawn Benchmarks

Maintenance-focused lawn care runs 50 to 60 percent gross margin because labor is the main cost. Design-build landscaping runs 25 to 40 percent because materials and equipment eat a lot more of the revenue. Snow removal runs anywhere from 40 to 70 percent depending on the contract structure.

Pest Control Benchmarks

Pest control is one of the best margin businesses in the trades. Recurring service contracts run 60 to 75 percent gross margin. One-time treatments run 55 to 65 percent. The business scales beautifully because the labor per stop is low and the routes are efficient.

What the Benchmarks Do Not Tell You

Benchmarks are useful but they are not destiny. A shop in rural Nebraska should not be compared directly to a shop in downtown Boston. Labor costs, competition, customer expectations, and material prices all vary. Use benchmarks as a sanity check, not as a target you are obligated to hit.

That said, if you are more than 5 to 8 percentage points below the benchmark for your trade, something is probably wrong and worth investigating. If you are 10 to 15 percentage points above the benchmark, you may be overcharging and leaving revenue on the table by losing deals.

Why Margin Slips Quietly

Margin rarely crashes overnight. It leaks slowly. Material prices go up 3 percent and you do not adjust your prices. Labor goes up 6 percent and you do not raise rates. You add a new tech who is slower than the rest. You take on a low-margin job to keep the crew busy and then you take another one. A year later you look up and you are down 5 percentage points, which on a $2,000,000 shop is $100,000 in missing gross profit.

The fix is to check your margin monthly. Not annually. Monthly. If you are running through a good FSM platform, this number should be on a dashboard you look at every Monday morning. If it moves by more than 2 points in either direction, investigate.

The Labor Hidden Problem

A lot of margin issues trace back to labor accounting. If you are not fully burdening your labor rate with taxes, insurance, workers comp, vehicle costs, uniforms, training, and non-billable time, you are underestimating your labor cost by 40 to 60 percent. That means your "margin" is fake. The real margin is much lower than the number on your P&L.

A plumbing shop in Dallas thought they were running at 55 percent gross margin. When we helped them build a real burdened labor rate, their true margin came out to 41 percent. That is a 14 point gap, which on $1,600,000 in revenue is $224,000 in imaginary profit that was quietly going to labor costs nobody tracked.

Pulling It All Together

Gross margin benchmarks give you a reality check on how your shop compares to the rest of the trade. Use them to spot leaks, not to beat yourself up. The best contractors check their margin monthly, compare it to the benchmark for their trade, and make small pricing and efficiency adjustments whenever the number drifts. Small adjustments, made consistently, turn into large profit improvements over time.

For a complete playbook on running a profitable contracting business, see our Running a Profitable Home Service Business Guide.