Contractor finance
Profit Fade Calculator
Compare the original job expectation to the current projection so lost profit is visible before closeout.
Inputs
Original profit = Original contract price - Original estimated cost
Current projected profit = Original contract price - Current projected cost
Profit lost = Original profit - Current projected profit
This tool assumes the contract price has not changed. If price changes, the projection should be updated before the result is trusted.
Results
These numbers show how much expected profit has changed.
Profit lost
$8,500.00
% margin reduction
8.7%
Status
Profit has faded
Projected cost has reduced expected profit. Review labor pace, purchasing, scope changes, and unpriced work.
Original vs current
Original projected profit: $20,000.00
Current projected profit: $11,500.00
Original margin: 20.4%
Current projected margin: 11.7%
What profit fade means
Profit fade is the reduction in expected profit after the job starts. The contract price may stay the same, but projected cost rises. As that cost moves up, the profit and the margin move down.
Why it matters
Early warning
Profit fade shows up before final billing. If it is measured early, there is still time to correct the work or recover cost through approved change work.
Better estimating
Repeated profit fade on similar jobs usually means the estimate, labor plan, or purchasing assumptions need adjustment.
Contractor example
A contractor signs a tenant improvement at $98,000 with an original cost estimate of $78,000. Mid-job, labor runs long and projected cost reaches $86,500. The job did not lose profit at the end. It began losing profit when the projection changed.
Related resources
Profit fade is easier to address when it is measured while the job is still open.