Contractor Markup Guide
What Percentage Should You Charge?

Markup vs. Margin — They're Not the Same

This trips up a lot of contractors. Let's clear it up:

• Markup is the percentage you add to your cost. If a job costs you $1,000 and you mark it up 50%, you charge $1,500.
• Margin is the percentage of revenue that's profit. On that $1,500 job, your $500 profit is a 33% margin.

A 50% markup = 33% margin. A 100% markup = 50% margin. The math matters because when someone says "you should be at 35% margin," that's a 54% markup — not 35%.

What Should Your Markup Be?

There's no single right answer, but here are healthy ranges by trade type:

Service Work (Repairs, Small Jobs)

• Materials markup: 25-40%
• Labor markup: 50-75%
• Overall markup on cost: 50-67% (33-40% margin)

Service work has higher markup because jobs are smaller, drive time is a bigger factor, and there's more variability. A $500 plumbing repair might take 2 hours including drive time. At $250/hr loaded cost, you need enough margin to cover that and still make money.

Remodeling and Renovation

• Materials markup: 20-30%
• Labor markup: 40-60%
• Overall markup on cost: 35-50% (26-33% margin)

Larger jobs mean more material volume (suppliers may give better pricing), longer labor blocks (less drive time per dollar), and more competition from other contractors. Margins are slightly lower but the total dollar amount is higher.

New Construction

• Materials markup: 15-25%
• Labor markup: 30-50%
• Overall markup on cost: 25-40% (20-29% margin)

New construction is high volume, competitive, and often relationship-based. Margins are thinner but jobs are bigger. A 25% margin on a $100,000 build-out is $25,000 in gross profit.

The Math in Practice

Let's say you're pricing a bathroom remodel:

• Materials cost: $3,000
• Materials markup (25%): $750
• Labor cost (your cost): $2,400 (24 hours x $100/hr loaded)
• Labor markup (50%): $1,200
• Subtotal: $7,350
• Permit and dumpster: $500
• Total to customer: $7,850

Your gross profit: $1,950 (25% margin). That's before any office overhead, which is why you want to be closer to 33-40% on smaller jobs.

Why Contractors Underprice

1. "I don't want to lose the job." You will lose some jobs at the right price. That's okay. Winning every job at low margins means you're working harder for less.
2. "My competitor charges less." Your competitor might be going broke. Seriously — the failure rate for contractors in the first 5 years is over 50%, and under-pricing is the number one reason.
3. "I feel bad charging that much." You're a licensed, insured professional with years of experience. A plumber who charges $500 to replace a faucet in an hour isn't overcharging — they're bringing 10 years of knowledge that prevents the homeowner from flooding their kitchen.

How to Communicate Your Price

You never need to justify your markup to a customer. But you can justify your price by showing what they're getting:

• Detailed line items showing every element of the job
• Warranty on your work
• Licensed, bonded, and insured
• Permits pulled properly
• Clean, professional communication

The Bottom Line

Markup isn't greed — it's survival. Every successful contractor charges enough to cover their true costs, handle the inevitable surprises, and still take home a fair wage. If you're below 25% gross margin consistently, you're running a charity, not a business. Price your work fairly, present it professionally, and let the customers who value quality find you.