CONTRACTOR RESOURCES
Know the business behind every build.
Clear, useful explanations for small contractors who want better estimating, cost control and margins.
Contractor markup versus margin: a simple example
Let's say your direct cost to complete a job is $10,000. If you apply a 30% markup to cost, the selling price is $13,000.
Your gross margin is not 30%. It's ($13,000 − $10,000) ÷ $13,000 = approximately 23.1%.
To achieve a 30% gross margin before overhead, you would divide $10,000 by (1 − 0.30), resulting in a selling price of approximately $14,286.
This simplified example assumes all relevant direct costs are included. Real jobs also require allowances for overhead, risk, financing, taxes and other expenses.
Five questions to ask before submitting an estimate
- Have I priced the full material list and deliveries?
- Is labor based on realistic production time?
- Are subcontractors and permit expenses accounted for?
- What contingency or allowance is appropriate for the actual job?
- Do I understand my margin after direct costs—and how overhead affects it?
Why organized job costs matter
A business can be busy, keep crews working and still underperform financially. Comparing estimates with job costs gives owners better information to use on the next project.