Time & Materials Benchmarks
Open-scope service work — the most variable and scope-creep-prone job type in contracting. Median gross margin is 35–40%, the lowest of any service category, and quote-to-invoice variance can be extreme without controls in place.
Key Finding
One job: quoted $2,720, invoiced $57,408 — a 2,011% overrun
This is an extreme case from real contractor data, but it illustrates the structural problem with T&M work: without formal scope controls, every job is a blank check. The customer received no updated scope acknowledgment before work began. Disputes followed. Only 9.6% of T&M quotes are formally sent to customers before work starts — the rest are internal tracking only.
For contractors running $1M+ in T&M annually, uncontrolled scope creep typically absorbs $80K–150K in unbillable overruns per year.
Time & Materials Benchmark Distribution
Percentile ranges from 2,200+ contractors. T&M variance data is among the most eye-opening in field service operations.
| Metric | Bottom Quartile | Median | Top Quartile | Note |
|---|---|---|---|---|
| Gross Margin | < 30% | 35–40% | 45%+ | Lowest margin of all service types |
| Quote-to-Invoice Variance | > 50% over quote | 15–30% over quote | < 10% over quote | Real outlier: +2,011% on a single job |
| Quote Send Rate | < 5% | ~9.6% | 50%+ | % of T&M estimates formally sent to customer |
| Scope Change Approval Rate | < 20% approved in advance | 40–50% | 90%+ approved before work | Written approval before scope additions |
| Average Markup on Materials | < 20% | 25–35% | 40–50% | Materials markup gap is often invisible to owners |
| Unbilled Labor Rate | > 15% of labor hours | 8–12% | < 5% | Travel, wait time, and callbacks unbilled |
What the data tells us
$2,720 quoted → $57,408 invoiced
A documented T&M job from our contractor financial reviews: original quote $2,720, final invoice $57,408 — a $54,688 overrun and 2,011% variance. The customer received no updated scope acknowledgment before work began. This is an extreme case, but T&M variance above 50% is common.
Only 9.6% of T&M quotes sent to customers
Across contractors analyzed, just 9.6% of T&M estimates were formally sent to the customer for acknowledgment before work started. The rest were internal tracking only — leaving contractors exposed to disputes on every overrun.
35–45% gross margin (lowest of service types)
T&M jobs run the thinnest margins of any service category. Uncontrolled scope, parts sourcing inefficiency, and travel time that doesn't get billed all compress margins below what the hourly rate math suggests.
Scope creep absorbs 8–15% of T&M revenue
Labor and materials added after initial scope without customer sign-off is the single largest margin leak in T&M work. Top performers require written approval for any scope addition over $500 before the work happens.
Frequently Asked Questions
What is a good gross margin for T&M work?
The median gross margin for time and materials jobs is 35–40%, with the top quartile reaching 45%+. This is the lowest margin of any service category. Uncontrolled scope, unbilled travel time, and inadequate materials markup are the primary margin compressors.
How much do T&M jobs typically go over budget?
The median T&M job runs 15–30% over the original quote. Bottom quartile contractors see 50%+ overruns. The most extreme case in our data: a job quoted at $2,720 that was invoiced at $57,408 — a 2,011% variance — with no updated scope acknowledgment sent to the customer.
Should contractors send formal quotes for T&M work?
Absolutely. Only 9.6% of T&M estimates are formally sent to customers before work starts — the rest are internal tracking only. Top quartile contractors send formal T&M quotes on 50%+ of jobs and require written customer approval for any scope addition over $500 before work begins.
What is scope creep costing T&M contractors?
For contractors running $1M+ in annual T&M revenue, uncontrolled scope creep typically absorbs $80K–150K per year in unbillable overruns. Labor and materials added after initial scope without customer sign-off is the single largest margin leak in T&M work.
What's your T&M variance number?
We'll pull your quote-to-invoice variance, scope change rate, and materials markup and benchmark them against the industry. 15-minute call. Free.