The most common reason small contractors fail is not getting enough jobs — it's pricing jobs incorrectly. This guide covers the complete formula for pricing any remodeling job.
The basic pricing formula
Job Price = (Material + Labor + Subcontractors) × Markup Factor
The markup factor is where most contractors go wrong. It's not just profit — it's profit + overhead.
What your markup needs to cover
- Direct labor — your hourly rate + burden (payroll taxes: ~18–22% on top of wage)
- Materials — cost from supplier (not retail, not list price)
- Overhead — vehicles, insurance, tools, office, phone, software, your own salary when not on a job
- Profit — the return on your business investment and risk
Markup vs. margin — the difference matters
| Markup | Margin |
|---|---|
| 30% on cost of $10,000 = sell for $13,000 | 30% on sell price = cost is $7,000 |
| Markup % = Margin % ÷ (1 – Margin %) | Most GCs target 35–50% gross margin |
Target margins by project type (2026)
- Kitchen remodel: 35–50% gross margin
- Bathroom remodel: 40–55% gross margin
- Exterior (roofing, siding): 30–45% gross margin
- New construction: 15–25% gross margin (higher volume, lower margin)
- Service and repair: 55–70% gross margin
How to calculate your overhead rate
- List every business cost for the year that isn't direct materials or labor
- Total them: vehicle, insurance, tools, software, phone, office, marketing
- Divide by your total annual billable hours
- That's your overhead rate per hour — add it to every labor hour
Example: $80,000/year overhead ÷ 2,000 billable hours = $40/hour overhead. If your labor rate is $75/hour, your fully-loaded cost is $115/hour.
The markup formula in practice
If your target gross margin is 40%: divide cost by (1 – 0.40) = 1.667 multiplier.
$20,000 in costs × 1.667 = $33,333 sell price = $13,333 gross profit = 40% margin.
Common pricing mistakes
- Using "industry standard" markup without knowing your own overhead rate
- Applying the same markup to material-heavy and labor-heavy jobs — they need different rates
- Forgetting burden on labor (payroll taxes add 18–22% to every employee wage)
The ConstruMate calculator applies your markup to every line item automatically — so every quote builds in your overhead and profit without manual math.
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