Contractor Business
How to Price a Contractor Job for Profit
Use a straightforward contractor pricing formula that covers labor, materials, overhead, risk, and profit.
Profitable pricing begins with the true cost of doing the work—not a competitor’s number or a quick guess. Build the price in layers so you can explain it, repeat it, and improve it as your actual job data grows.
WORKED PRICING EXAMPLE
Build the price in seven steps
1. Direct labor: 40 hours × $35 burdened cost = $1,4002. Materials and delivery = $1,0503. Equipment, permit, and disposal = $3504. Job cost subtotal = $2,8005. Allocated overhead = $4206. Total cost = $3,2207. Add desired profit and check final margin before quotingExample only. Replace every figure with your business’s actual costs and target.Calculate the true labor cost
Start with the hours required for everyone working on the job. Multiply those hours by each worker’s burdened hourly cost: wages plus payroll taxes, insurance, benefits, and other direct employment costs. Include your own field time even if you do not pay yourself hourly.
Price materials, equipment, and subcontractors
Use current supplier costs, expected quantities, delivery, disposal, rentals, permits, and subcontractor quotes. Add a reasonable allowance for ordinary waste or price movement when appropriate. Write unusual job-site risks into the scope instead of hiding them in a vague number.
Recover overhead on every job
Overhead includes costs that keep the business running but do not belong to one job: office time, software, vehicles, phones, licenses, marketing, accounting, and shop expenses. Choose a consistent method—an hourly allocation, percentage, or daily rate—and review it as expenses change.
Add profit after costs and overhead
Profit is what remains after every job cost and overhead allocation is covered. Do not confuse markup with margin: a 20% markup on $1,000 creates a $1,200 price, but the $200 profit is only 16.7% of the selling price. Check the final margin before sending the estimate.
Compare the estimate with the completed job
After completion, compare estimated hours, quantities, and costs with what actually happened. Record why the job varied. A simple estimate-versus-actual review will make the next similar price faster and more accurate.
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