Quick converter
Job price build-up
Price (cash)
$0
- Converter: price at this markup
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- Converter: margin this markup produces
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- Converter: markup for the target margin
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- Overhead
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- Cash-flow cost
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- Contingency
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- Break-even
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- Gross profit at target margin
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- Price if customer uses promo plan
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Illustrative only. Not an offer of credit, a quote or financial advice. Lenders and contractors set real prices and rates.
Markup vs margin: why the difference costs contractors money
Markup is what you add to cost. Margin is the share of the price that is profit. A 25% markup on a $10,000 cost gives a $12,500 price, but the margin is only 20% ($2,500 of $12,500). To earn a 25% margin you need a 33.3% markup. Contractors who set "25% markup" believing they're earning 25% margin leave a fifth of their intended profit on the table on every job. The converter above makes the relationship explicit.
How to use the job price build-up
- Direct cost is everything the job itself consumes: materials with waste, labor with burden (payroll taxes, workers' comp, insurance, PTO, often 25% to 40% on top of wages), subcontractors, equipment, dumpster, permits.
- Overhead recovery spreads the cost of running the company (office, trucks, insurance, sales, software, your salary) across jobs. Divide last year's overhead by last year's direct costs to get the percentage.
- Cash-flow cost is the interest on money you've spent before the customer pays, at your line-of-credit or loan rate.
- Contingency covers the surprises every job has.
- Target margin is applied on price, not cost, which is what the calculator does.
- Dealer fee shows what the price needs to be if the customer takes a promotional financing plan that charges you a fee; many contractors quote a cash price and a financed price.
Worked example
Direct cost $22,648, overhead 18% ($4,077), 45 days to payment at an 18% cost of capital ($503), 4% contingency ($906): break-even about $28,100. At a 25% margin on price the bid is about $37,500; if the customer chooses a 0% plan with a 6% dealer fee, the financed price is about $39,750. Our guide to how to bid construction jobs walks through this build-up line by line, and contractor financing explains dealer fees.
What the calculator leaves out
- Change-order pricing, which is where margin is often won or lost after the bid.
- Taxes on profit and owner's compensation structure.
- Whether your overhead percentage is current; recalculate it each year.
- Market pricing: a bid can be correct and still too high for a given customer, which is where offering a monthly payment helps. See why contractors lose jobs without financing.
Frequently asked questions
What markup equals a 30% margin?
About 42.9%. Markup = margin ÷ (1 − margin). The converter above does this for any number.
What is a typical contractor markup?
It varies widely by trade and region. Many residential contractors target 20% to 35% gross margin on price after full direct costs and overhead, which corresponds to 25% to 54% markup on cost. Specialty and emergency work can carry more.
Should overhead be a percentage of direct cost or of price?
Either works if you're consistent. This calculator recovers overhead as a percentage of direct cost, then applies margin on price, which is the most common contractor method.
Do I add the dealer fee to every bid?
Only to jobs where the customer chooses a promotional plan that charges you a fee, and only where your lender agreement and state rules allow a different financed price. Many contractors quote both prices or absorb the fee on larger jobs.
Is contingency the same as profit?
No. Contingency covers expected surprises (decking rot, weather days); profit is what's left after everything, including surprises. Budget both.
Sources and further reading
Primary sources we rely on for this page. Program rules change, so check the source before you rely on a figure.