In this article
1. Do a real takeoff
Quantify every material from the plans or the site visit. Round up for waste by material type. A bid built on a guess is a bid you'll regret on the last week of the job.
2. Price labor with burden, not wages
A crew member's cost is wages plus payroll taxes, workers' comp, liability insurance, benefits, paid time off and non-billable time. The burdened rate is often well above the wage. Use the burdened number, and estimate hours by task from your own job history, not from the plans alone.
3. Recover overhead
Rent, trucks, phones, software, insurance, the office, your own salary: add them up for the year and spread them across your expected billable volume. Every bid carries its share. Contractors who "forget" overhead on small jobs subsidise those jobs with the big ones.
4. Margin vs markup
A 20% markup on cost is a 16.7% margin on price. Decide which you're targeting and don't confuse them. Know your break-even margin (overhead divided by revenue) and bid above it on every job, or know exactly why you're not.
5. Price the cash-flow cost of the job
Here's the step most bidding guides skip. If you'll buy $30,000 of materials and run two weeks of payroll before the first draw, you're financing that gap. Whether you use your own cash, a line of credit or working capital, it has a cost: interest if borrowed, opportunity cost if not. Estimate it (amount carried × rate × time) and put it in the bid as a line or in the margin. On a slow-paying GC, factoring costs belong here too.
6. Set payment terms that protect you
Deposits where lawful, progress draws tied to milestones, retainage you've agreed to in writing, and a clear schedule of values. Terms are part of the price: net-60 is a more expensive job than net-15, and your bid should say so.
7. Price in customer financing, if you offer it
If a customer pays through a financing program with a dealer fee (common on promotional-rate offers), that fee is a cost of the job. Decide in advance whether you absorb it, build it into all prices, or offer only standard-rate financing with no fee. Never quote a cash price and a different financed price without explaining why; it looks like a hidden fee because it is one. See offering customer financing.
8. Contingency and the final check
Add contingency for unknowns (5 to 10% is common for renovation work with hidden conditions). Then sanity-check: does the bid cover cost, overhead, financing cost and margin? If winning requires cutting below that, consider not winning.
Frequently asked questions
How do you calculate a construction bid?
Takeoff for materials, burdened labor by task, subs and equipment, plus overhead recovery, plus the cash-flow cost of carrying the job, plus margin and contingency. Compare against payment terms.
Should contractors charge for financing costs?
Yes, explicitly or in the margin. Carrying materials and payroll before the draw costs money whether you borrow or not; a bid that ignores it is underpriced.
What margin should a contractor target?
Above break-even (overhead ÷ revenue) with enough left to earn a return on risk. Specific targets vary by trade and market; know your own numbers before benchmarking against anyone else's.