A margin floor protects the price. It does not protect the outcome. Those are different things, and most of the money is lost in the gap between them.
Written by JD Davenport, who still sells for a living. Updated 4 November 2026.
A margin floor is a rule that says no job may be sold below a set margin. It is one of the most common controls in contracting and one of the most commonly misunderstood, because of what people expect it to do.
A floor is a rule applied at one moment, on one number, by one person: the moment a price is set, on the estimated margin, by whoever is selling. Everything it can influence happens before the customer signs.
That is genuinely valuable. It stops discounting to win, it makes the pricing conversation explicit, and it gives a salesperson something to point at that is not their own judgment. If your problem is that work is being sold too cheap, a floor fixes your problem.
What it cannot do is reach anything that happens next.
The test is simple and you can run it on your own closed jobs. Take the jobs that lost money or came in well under their estimated margin. Check what margin each one was sold at.
If most of them were sold below the floor, you have a pricing problem and the floor is either not being enforced or is set too low. That is a real finding and an easy fix.
If most of them were sold at or above the floor, the floor is working exactly as designed and the money is leaving somewhere it cannot see. In the audits I have run, that is the answer far more often than the first one. Jobs priced correctly, executed expensively.
Run that test before you raise the floor. Raising a floor that is already being met costs you work you would have been paid for and changes nothing about the jobs that are actually losing.
Because it is the only lever that is fully inside your control and takes ten minutes to pull. The costs that are actually escaping are in labor, material, second trips and scope drift, and every one of those requires somebody else to change something, over weeks, in a way you cannot verify from a desk.
So the floor gets raised, the sales team absorbs the difficulty, close rate drops, volume drops, and the jobs that were losing money carry on losing money at a slightly higher sold margin.
Three things, and none of them is a stricter floor.
Per-job cost you can state at line level. A floor compares estimated margin against a rule. Nothing compares delivered margin against anything until you can close a job's real costs. Without that you are enforcing a rule about a number you never check.
A gate before material is ordered. The floor asks whether the price was right. This asks whether the job is ready, which is the other half and the half that gets skipped.
A record of what the job actually took, written on the day. Filled in by whoever was there, not reconstructed later by whoever has the spreadsheet open.
One: as a fail-safe inside a commission plan, so a job that lost money cannot pay out as though it did not. That is the floor doing something a floor is uniquely good at, because it is a rule about a number at a moment, which is exactly its shape.
Two: as a pricing discipline, so nobody negotiates against themselves in a kitchen.
Neither of those is "protecting margin". They are narrower and they are achievable, and calling them what they are stops the floor from being asked to do a job it was never built for.
And one rule if you change it: never apply a new floor to work already sold. Historical jobs stay on the terms they were sold under. That is the difference between a change people accept and a change people resent.
The margin fail-safe, the fault standard that decides when a miss belongs to the salesperson and when it belongs to the company, and the agreement language are The Commission Standard. Stating delivered margin per job is The Job Cost Standard. More answers on the questions page.