For contractors bidding jobs, setting the right markup is the difference between running a profitable business and working hard for nothing.
Contractor markup = (desired profit / total job costs) x 100. If your total costs are $8,000 and you want $2,000 in profit, your markup is 25%. Most contractors use 15% to 35% on labor and materials, with specialty trades going higher on parts.
The formula is straightforward. Add up every direct cost on the job: labor at your true hourly rate (including payroll taxes and benefits), all materials at your purchase price, any subcontractor invoices, and equipment rental. That total is your cost base. Your markup percentage gets applied on top of that to generate your bid price and cover profit.
Where most contractors go wrong is forgetting overhead. Every job needs to carry a share of your fixed monthly costs: vehicle payments, insurance, license fees, office rent, tools, and administrative time. If you skip this and only mark up direct costs, you are paying your overhead out of your profit. Calculate your total monthly overhead, divide by the number of jobs you complete per month, and add that figure to every estimate before applying your markup.
Markup and margin are not the same number. A 25% markup produces a 20% margin, not a 25% margin. Many contractors underprice jobs because they target a "30% margin" but apply a 30% markup, which actually delivers only a 23% margin. If your bank account never seems to grow despite staying busy, this is often the reason.
Market rates also matter. Typical general contractor markup runs 10% to 20% on subcontractors and materials. Specialty trades like electrical, plumbing, and HVAC commonly use 20% to 50% markup on parts and 30% to 50% on labor. Check what your local competitors charge for similar work and make sure your total price is competitive, then work backward to verify your markup delivers the profit you need.
Contractor markup is the percentage added to total job costs to generate the final bid price. It covers profit and, when calculated correctly, overhead. A 20% markup on a $10,000 cost base produces a $12,000 bid with $2,000 in gross profit.
Get your exact markup and bid price in 30 seconds
Use the Free Contractor Markup Calculator →Divide your desired profit by total job costs, then multiply by 100. For example, if job costs are $5,000 and you want $1,250 profit, your markup is 25%. Your bid price is $6,250.
Most general contractors mark up 10% to 20% on subcontractors and materials. Specialty trades like electrical and HVAC often use 20% to 50% on parts and 30% to 50% on labor, depending on the job size and complexity.
Markup is calculated on cost. Margin is calculated on revenue. A 25% markup equals a 20% gross margin. Contractors who target a 25% margin but apply a 25% markup end up earning less than expected.
Most contractors mark up materials 10% to 30%. Hard-to-source specialty items can reach 50% markup. Lumber and standard concrete are typically marked up 10% to 15%.
General contractors typically add 10% to 15% on top of subcontractor invoices to cover coordination, warranty exposure, and project management. Some GCs use 20% for high-risk or fast-turnaround trades.
Not necessarily. A 50% markup on small specialty parts is standard in plumbing, HVAC, and electrical. The real question is whether your total job price is competitive in your local market for that type of work.
Add up monthly fixed costs (insurance, vehicles, tools, licenses, admin). Divide by monthly jobs completed. Include that per-job overhead amount in every estimate before applying your profit markup on top.
Start with a minimum of 20% to 25% on all costs. Many new contractors underestimate overhead and win jobs that lose money. Track actual costs on your first 10 jobs and adjust your markup accordingly.
If your total costs are $10,000 and you apply a 30% markup, add $3,000 for a bid price of $13,000. Your gross profit is $3,000, which is a 23% gross margin on the bid price.
Most contractors pass permit fees at cost or with a small 5% to 10% administrative fee. Marking up permits significantly can create client friction and may be restricted in some states.
This content is for informational purposes only and does not constitute financial, legal, or tax advice. Consult a qualified professional for guidance specific to your situation.