How to Calculate Profit Margins on AV Projects

Markup vs margin: they're not the same thing

This trips up more AV integrators than you'd expect. Markup and margin are related but they measure different things, and confusing them can cost you real money.

Markup is how much you add to your cost to get the sell price. If you buy a speaker for $100 and sell it for $150, that's a 50% markup.

Margin is the percentage of the sell price that's profit. That same $100 cost / $150 sell is a 33.3% margin — not 50%.

The formulas:

Why does this matter? Because if you think you're running at 40% and you're actually calculating markup instead of margin, your real margin is only 28.6%. Over a $50,000 project, that's a $5,700 gap between what you think you're making and what you're actually making.

Industry standard in AV is to talk in margin, not markup. Make sure your tools and your team are on the same page.

Gross margin: the number that matters most

For most AV integrators, gross margin is the key metric. It's the profit left after subtracting direct project costs (equipment, labor, freight) but before overhead (rent, insurance, admin salaries).

A practical example:

This project has a 39.2% gross margin, meaning $15,200 out of $38,800 is gross profit. That needs to cover your overhead and still leave net profit.

What margins should you target?

There's no single right answer, but here are industry benchmarks for healthy small AV firms:

• Equipment: 28–40% gross margin (lower on big-ticket, higher on accessories)
• Labor: 40–55% gross margin (your highest-margin component)
• Blended project: 35–45% gross margin
• Net profit (after overhead): 8–15% for a well-run small firm

If your blended project margin is consistently under 30%, you're either underpricing equipment, underestimating labor, or absorbing costs that should be billed to the client.

Why per-line-item margins matter

Project-level margin tells you if the deal is good. Line-item margin tells you where the money is — and where it isn't.

Consider two scenarios for the same $40,000 project:

Scenario A: Every line item runs 35–40% margin. Clean, consistent, healthy.

Scenario B: Most items are at 40%, but one room has a $12,000 LED display at 15% margin because the client price-shopped it. The blended margin still looks okay at 34%, but that one item is dragging the project down — and if anything goes wrong on the install, there's no cushion.

You can only catch Scenario B if you're tracking margins at the line level. Project-level averages hide problems.

How to protect your margins

1. Set minimum thresholds

Decide on a minimum acceptable margin per category. If equipment goes below 25% or labor below 35%, flag it. You can still approve exceptions — but they should be conscious decisions, not accidents.

2. Watch labor estimates

Labor margin erodes when estimated hours are too low. If you quoted 24 hours but the job takes 36, your labor margin just went from 50% to 25%. Track actual hours vs. estimated on every project and adjust your estimating over time.

3. Don't discount to win

It's tempting to shave margins on competitive bids, especially for commercial work. But every point of margin you give away is profit you'll never get back. If you need to compete on price, be strategic — discount specific items rather than applying a blanket cut. And always know what your floor is before you start negotiating.

4. Review before sending

Make margin review part of your quote workflow. Before any quote goes to a client, scan the margin on every line item and every room. This takes five minutes and can save thousands.

Tools that help

Tracking margins in a spreadsheet is possible but fragile. Purpose-built AV quoting software shows cost, sell price, and margin on every line item as you build the quote — not after. QuoteAV's free tier includes full margin visibility across equipment, labor, and project totals.