How to Price a Job as a Contractor

Price from cost forward. Start with labor. Add the cost of employing that labor. Add materials and subcontractors. Recover overhead. Then apply profit margin. If one part is skipped, the price is incomplete.

Step 1: Calculate labor

Count the hours required to perform the work, not just the visible install time. What to include Crew production time on site. Setup, cleanup, loading, and disposal. Travel time if your company pays for it. Job-specific supervision or project management. Basic formula Labor cost = crew hours x base hourly pay If two technicians each spend 8 hours, that is 16 labor hours, not one 8-hour day.

Step 2: Add burden

Base wage is not true labor cost. Burden captures the cost of having that employee on payroll. Typical burden items Payroll taxes. Workers' compensation. Benefits and paid time off. Non-billable time, training, and downtime. Basic formula Burden = direct labor cost x burden rate Loaded labor = direct labor cost + burden

Step 3: Add materials and subcontractors

Use the cost you expect to pay, not a rough allowance. Materials Quoted supplier cost. Tax, freight, delivery, and waste. Consumables and small purchases. Equipment rental if tied to the job. Subcontractors Use current subcontractor quotes. Include permit or service fees passed through by the sub. Do not assume the sub number will stay flat. Carry clear scope so change work is visible later.

Step 4: Apply overhead

Overhead is the cost of running the business. It is separate from direct job cost and separate from profit. Common overhead costs Office and shop expense. Estimating and administrative time. Vehicles, software, insurance, and phones. General business supervision. Basic formula Overhead recovery = direct job cost x overhead rate Use one consistent method. Every job should carry part of the business cost.

Step 5: Apply profit margin

Profit comes after labor, burden, materials, subcontractors, and overhead are fully covered. Use a target margin Decide the gross margin the job must produce. Then calculate the sale price from that target. Basic formula Price = total cost after overhead / (1 - target margin) Example: a 15% margin means divide by 0.85. It does not mean add 15%.

Common mistakes

Pricing from wage only An hourly wage is not a billable labor rate. Burden and overhead still have to be recovered. Missing small cost items Delivery charges, dump fees, consumables, and waste often erase the margin on small jobs. Treating overhead as profit If overhead is skipped, the job may look profitable while the company still loses ground. Confusing markup and margin A percentage added to cost does not tell you the margin on the final sale price unless you calculate it correctly.

Simple example job breakdown

Example scenario: repair 40 feet of damaged cedar fence and haul away the debris. Direct labor: $960 Burden at 30%: $288 Loaded labor: $1,248 Materials: $920 Subcontracted haul-off: $180 Direct job cost: $2,348 Overhead at 12%: $282 Cost after overhead: $2,630 Target margin: 15% Final price: $3,094 Gross profit on this price is $464. If the market will not accept that number, change the scope, the production method, or the margin target. Do not hide the shortfall inside the math.