Where quoted margin sits: labor vs materials
Across 2.2M+ contractor quote line items, recorded labor margin is 47.7% versus 23.6% for subcontracted work. These are quoted line-item observations, not realized job margins. The difference does not prove that changing service mix raises company profit.
Interpretation reviewed . This review does not change the original observation periods.
Gross margin by cost type
Quoted line-item margins. The canonical materials median is 31.5%; the preserved 29-34% legacy rounded reference is not an observed interval. These are not revenue-weighted company margins.
| Cost type | Gross margin | Note |
|---|---|---|
| Labor | 47.7% | Quoted line median; actual burden must be verified |
| Materials / Parts | 31.5% | Canonical quoted median. Legacy rounded reference: 29-34%, not an observed interval. Margin is not markup. |
| Equipment | 25.5% | Quoted line median; realized costs not tested |
| Subcontractor | 23.6% | Quoted line median; commitments need final invoices |
Source: The Level Index, 2.2M+ quote line items. Aggregated and anonymized. Also in the machine-readable JSON.
The mix changes the arithmetic
Mix matters arithmetically when revenue weights and complete cost margins are known. The fictional FAQ sensitivity uses 60% labor, 30% materials and 10% subcontractor versus 30% labor, 40% equipment and 30% subcontractor. It shows how assumed weights change a modeled result, not what an actual company will earn. A median across quote lines is not a weighted margin across the dollars in your completed jobs.
Pick a completed job and bridge the quote to final invoices, credits, loaded labor, freight, equipment and subcontractor costs. Keep missing costs visible; do not call them zero. Compare quoted and realized margin on the same scope and cutoff before pricing a similar job. Review the service-agreement book separately: recurring work still requires its own delivery cost and renewal checks.
Frequently asked questions
Where am I actually making money, labor or materials?
The quoted line-item observations differ: labor about 47.7%, materials 31.5% (the preserved 29-34% legacy rounded reference is not an observed interval), equipment 25.5% and subcontractor 23.6%. These are quoted margins, not realized job margins. They do not establish that shifting toward labor, service or maintenance causes higher company profit. Reconcile completed-job revenue, actual labor burden, purchasing, subcontractor invoices and credits before deciding where you actually make money.
Why is labor higher margin than materials for contractors?
The recorded quote-line margin is higher for labor. This dataset does not measure the cause or prove that each quote includes full labor burden. Trace what each cost field contains: base wage versus loaded cost, supplier freight and rebates, subcontractor commitments versus final invoices. Unrecorded travel, callbacks or overtime can reduce realized profit even when the quoted labor margin looks attractive.
How does revenue mix change my blended margin?
As a sensitivity example, one assumed shop is 60% labor, 30% materials and 10% subcontractor; another is 30% labor, 40% equipment and 30% subcontractor. Applying assumed margins of 47.7%, 30%, 25.5% and 23.6% gives 39.98% and 31.59% weighted margins. This is fictional arithmetic, not observed company profit; materials at 30% is a rounded scenario assumption. A line-item median cannot be substituted for an actual revenue-weighted company margin. Hold job scope and complete costs constant before testing a change in mix.
How is quote-line margin measured?
The 2.2M+ quote-line records group recorded selling prices and costs by labor, materials, equipment and subcontractor. The published cost-type medians describe quoted line items, not completed-job profitability, complete labor burden or a revenue-weighted company cohort. The figures are aggregated and anonymized; no individual company is identified. Use the canonical JSON definition and limitation with every citation.
Operating review
Questions before repricing the work
The margin, cash, and operating questions we check first when reviewing your numbers.
Is the margin report using complete costs?
Entered job costs can omit later supplier bills, labor burden or the overhead needed for the decision.
How much of the price is subcontractor pass-through?
A blended margin can hide very different contributions from purchased work and work performed by your own crew.
Should labor and materials carry the same markup?
A common markup does not show which component funds productive capacity and overhead.
Analysis by Sam Yang, Founder, Level. Compiled from Level's proprietary contractor benchmark research.
Source: The Level Index, Contractor Quote-Line Margin Benchmarks, 2.2M+ quote line items. US contractors. Data vintage 2022 to 2026, last updated Q3 2026. Aggregated and anonymized.
Suggested citation: "The Level Index, Contractor Quote-Line Margin Benchmarks, Level (levelcfo.com), 2026." Method: see the benchmark methodology.
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