Guide
How to price contractor jobs correctly
Most contractors price jobs using one of two broken methods: gut feeling, or cost-plus with the wrong percentage. The correct method accounts for every cost layer, applies overhead proportionally, and builds in a margin — not a markup.
The four cost layers
Every contractor job has four layers of cost. Missing any one of them produces an underbid.
Layer 1: Direct labor
Hours × true burden rate (not wage rate)
Layer 2: Materials
Supplier cost + material handling markup (typically 15–20%)
Layer 3: Subcontractors
Sub quote × markup for coordination and liability (typically 10–15%)
Layer 4: Overhead allocation
Monthly fixed costs ÷ monthly billable hours × job hours
The complete pricing formula
Total Job Cost = Labor + Materials + Subs + Overhead
Price = Total Job Cost ÷ (1 − Target Margin)
Worked example: kitchen renovation
| Cost item | Calculation | Amount |
|---|---|---|
| Direct labor | 120 hrs × $32/hr burden rate | $3,840 |
| Materials | $8,200 supplier cost + 18% handling | $9,676 |
| Electrical sub | $3,500 quote + 12% coordination | $3,920 |
| Overhead allocation | 120 hrs × $22/hr overhead rate | $2,640 |
| Total job cost | $20,076 | |
| Price at 25% margin | $20,076 ÷ 0.75 | $26,768 |
| Profit | $26,768 − $20,076 | $6,692 |
How to calculate your overhead rate
Your overhead rate converts fixed monthly costs into a per-hour charge applied to every job.
Monthly overhead = all fixed costs that occur regardless of job volume
Overhead rate = Monthly overhead ÷ Monthly billable hours
Example: $8,800/mo overhead ÷ 400 billable hours = $22/hr
Common overhead items:
- — Vehicle payments and fuel
- — Insurance (GL, business auto, umbrella)
- — Tools and equipment depreciation
- — Owner salary or draw
- — Office / admin costs
- — Software and subscriptions
- — Marketing and advertising
- — Accounting and legal
Target margin by job type
| Job type | Typical range | Notes |
|---|---|---|
| Service calls / T&M | 40–55% | High overhead per job, small scope |
| Small remodels ($5K–$30K) | 28–38% | High coordination, variable scope risk |
| Large remodels ($30K+) | 22–30% | Economies of scale, competitive bids |
| New construction GC | 15–22% | Large subs, thin margins are industry norm |
| Specialty / licensed trade | 30–45% | Expertise premium, less competition |
| Landscape install | 25–35% | Material-heavy, weather risk |
| Recurring maintenance | 35–50% | Low mobilization, repeat work |
Check your estimate before sending it
Bid Command takes your total cost and price and tells you whether your estimate hits your target margin — before you send it to a client.
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