The variable-cost rate plus desired profit margin must be below 100%. Do not double-count employee costs in the variable rate; owner salary and employee costs are excluded from overhead, and employee cost should include employer burden.
Planning estimate only, calculated locally in your browser. Verify figures with your accountant, lender, and actual records before making financial decisions.
Contractor field notes
Set a contractor revenue target that includes pay and profit
A revenue goal should reflect owner salary, employee costs, company overhead, variable project expenses, and the desired company profit. This calculator treats owner compensation and the employee budget as fixed costs, then solves for revenue that also leaves the selected net profit margin.
An $80,000 owner salary, $100,000 overhead budget, and two employees costing $60,000 each create a $300,000 fixed budget. With 40% variable costs and a 10% desired net profit margin, annual revenue must be $300,000 ÷ (1 − 0.40 − 0.10) = $600,000. That is $50,000 per month and $60,000 annual company profit after the modeled salary and costs.
Common estimating pitfalls
01Exclude employee costs and owner salary from overhead if entered separately.
02Variable costs plus desired profit margin must be below 100%.
Frequently asked questions
Is owner salary the same as company profit?
No. This model includes owner salary in the fixed budget and calculates desired company profit separately as a percentage of revenue.
What should annual employee cost include?
Include wages and employer-paid burden such as payroll taxes and benefits. Do not include those same costs again in the variable-cost percentage.
Does the monthly target account for seasonality?
No. It is the annual target divided by 12. Adjust your operating plan for seasonal sales, staffing, and expenses.
