Looking only at the final price on a quote tells you little about whether it is actually worth taking. A traffic light with more than a simple green and red helps distinguish shades of risk that otherwise stay hidden behind a single number.
The five states and what they signal
Green means the target margin has been met: the job pays what it should. Amber signals a margin below target but still acceptable, a zone worth judging case by case. Red means you have dropped below the minimum tolerable margin: the job still pays, but less than it ought to. Orange is more delicate: the price covers direct costs but offers no protection against a surprise — a delay, a mistake in the shop. Black is the alarm: the price does not even cover the real total cost, and the job is a certain loss.
Why two colours are not enough
A binary green/red light forces you to treat very different situations identically: a margin slightly below target and an outright loss both land in the same "avoid" bucket, throwing away information you need in order to decide how hard to negotiate, or whether to take the job anyway for strategic reasons.
Use it in the negotiation, not at the final costing
The real value of this system shows when it is visible in real time as you build the quote, not only after you have sent it. Watching the colour change as you apply a discount lets you stop before crossing a line you meant to hold, rather than discovering it at the final costing when the deal is already done.