How to Price a Job as a Contractor: An Ultimate Pricing Guide

There are more than 36,310 employed contractors just in the US. They are paid a satisfactory annual average salary of $71,726, and the average entry-level salary is around $41,000. The key to earning good money as a general contractor is to understand how to price a job as a contractor.

With experience, you can earn a maximum pay of around $1,22,000 or even more, depending on your company. These statistics clearly define that the industry and this profession are booming with a high-profit margin.

The hourly rate for construction employees in the US is stated to be $32.9/hour. The non-supervisory and production workers get around $30.5/hour. 

So, whether you work with a construction business for a salary or become an independent contractor with an hourly rate, you have the scope of earning good money in this profession. Focusing on some necessary elements is important to get it done perfectly.

Step-by-Step Guide to Price a Job as a General Contractor

The fundamental policy of running a contractor business is to be able to price the construction jobs perfectly. The potential customers will look for a satisfactory and budgeted construction cost estimate for their service requests.

Any delay in the quotation or improper pricing will drive them off to your competitors in the industry. 

When working as a contractor, you will need to take the job inquiry and give the price quote within a couple of days. 

In the case of a bigger job, you might have to visit the customer personally and discuss the construction project in detail for pricing it effectively. Irrespective of the type of construction jobs, each one of them should be quoted precisely. 

So here is the step-by-step guide for you to learn how to price a job as a contractor:

Step 1: Take note of all types of project overhead costs

The first step in pricing contractor jobs is calculating all project costs. The more you save on the overhead expenses, the better will be your profit margin. Here is a detailed elaboration on how to do that:

1. Labor costs

After getting the job inquiry in hand, you will decide on how many workers you need and how long they will have to stay for the project. 

Labor costs

Consider the project complexity and size of the job to determine the number of staff you will need for it. Then run your calculations to find the total labor costs associated with the project. 

If it is your hired team of staff members, you are already paying them an hourly rate for the job. But if you are outsourcing the staff members from a sub-contractor, you will have to compare the hourly rates of them all to find the team that will lessen your overall labor cost.

2. Material costs

After the labor cost is estimated, you need to move on and calculate the material costs as the next step. 

Get the cost estimate of all the materials that you will need for carrying out the job. Whether you need to stock all the materials or use the already available ones, you still need to add them to your complete material costs.

3. Other applied overhead costs

The applied overhead costs will include your office rent, software, and equipment depreciation. 

Even after estimating the material and labor costs, you still need to consider these overhead charges and add them to the price quotation. 

The best way of doing it is by adding a minimal percentage of overhead charges to the price quotation, which should be the same for all projects. 

Some of the overhead costs or business expenses that you must consider while deciding on a uniform percentage are as follows:

  • Business insurance
  • Office supplies (ink, writing supplies, and paper)
  • Business vehicle
  • Internet
  • Accounting, bookkeeping, and banking expenses
  • Safety gears
  • Phone expenses
  • Marketing and advertising costs
  • Water and electricity costs

Step 2: Analyze the market conditions

The next thing you must consider before you price contractor jobs is the market condition. 

Take a closer look at the national economy with general consideration. You need to judge if there is some restrictive strain in the economy which could affect the budget of your potential customers. 

For the next thing, you should research your industry insight to know if there is anything in particular that is impacting a specific market or trade. The factors that you should analyze are import duties, taxation, employment law, and regulations. 

Sign-up to some news portals where you can get timely updates on market regulations and other conditions that might impact your general contractor business. 

It will help you make an accurate estimate of the price for the jobs, without the risk of overbidding or underbidding them differently from the market.

Keep your brochure and price charts updated over time following any minor changes you make. Also, keep updated with your contact information like your email address.

Step 3: Set the profit margin for your business

When you are working as a general contractor or running an associated business, profitability is of major concern beyond the salary you have decided for yourself. 

Set the profit margin for your business

It is important because a higher profit margin will eventually give you the necessary funds to improve and excel your organization over time and keep it ahead of the competition. 

You need to run the research within the industry to determine the average profit margin percentage. As per the statistics, construction works attract profit margins of 17-19%, specialty work attracts margins of 26-34%, and remodeling work attracts margins of 34-42%

These profit margins can vary depending on location, economy, and other factors. Consider the same and set your own profit margin, which doesn’t seem too high or too low.

Step 4: Assess the location or job site for accurate job costing

Location will definitely impact how to price a job as a contractor. Not all the job sites are easily accessible or make it easy for the laborers to work. 

So, you need to consider three verticals while taking location into pricing consideration, which includes proximity, access, and conditions of the site. 

Suppose the site you are supposed to work in is just half a mile away and is accessible on the ground floor. In that case, the pricing will vary in comparison to the location that is in another city and on the top floors with challenging conditions. 

Apart from that, you should also take a closer look at any risk factors at the job site. Make early plans for the potential safety hazards and fairly priced contractor jobs for this aspect. 

These things should be considered in the price quote for a project, as every effort counts as payable in this industry to complete the job.

Step 5: The special client requests should be chargeable

In some instances, the clients make special requests from the general contractors to get materials of their choice or make necessary amendments to meet their expectations. 

Apart from that, ask your clients whether they need deep cleaning of the property after completion of the job or just a normal debris clearance. In that pursuit, you can add the price for these special requests in your final quotation.

Step 6: Use proper scheduling software to ease the task

Proper scheduling software will help you feed the verified insights and values to a portal and get the most accurate estimate price for jobs of all types. 

Not just that, but you can also use the same software for creating invoices for your customers with just a few clicks. 

Having a digital tool to organize the contractor jobs, determine their price, allocate laborers, and process payments will help make it easy for professionals to execute their construction job or contracting business operations.

Best Methods or Ways of Pricing Contractor Jobs

The above steps are more like the best practices for you to price your contract jobs better. But there are some pre-destined techniques or skill level methods to help you predict a fair price for projects. Choosing one among them will act as a proper pricing strategy for general contractor jobs.

Get a glimpse at these techniques, elaborated in brief:

1. Stick estimation

Stick estimation is the method where you have to count every material piece and determine labor hours. It is a recommended method only for the initial time being, but from a long-term contracting business perspective, this technique will fail. 

Stick estimation

It is said to be time-consuming to determine price quotes and might lead to oversights. Therefore, it is considered inefficient for long-term business plans.

2. Unit price estimation

Unit price estimation works on dividing a specific project into several elements for quoting the price. The elements are then considered units, and you will have to determine the overall cost for each. 

This will give you the total cost of the construction project. Following that, you can add up your overhead margin and profit margin to prepare the final price quote. 

This method is better applicable for specific jobs in rooms or spaces with identically sized units (e.g., cost per square foot, cost per workstation). Some of such jobs include roofing, drywall hanging, and office renovation.

3. Fixed pricing estimation

Most of the contractors within this industry also refer to fixed pricing for a big contract and to build long-term business relationships. 

Under such estimation or pricing method, the general contractor agrees to complete the project for a fixed cost. When asked, the contractor submits a quotation by considering the overall cost of the project. 

Here, the contractors do not bid or consider every bit of the expense in a project. When you get lump-sum projects, you can definitely make a good profit in the long term, even if the margin is low for individual projects.

Here, the general contractor needs to make anticipation of all the overhead costs and the profit margin to fix a price. Along with that, the contractor must also ensure that the client won’t make any changes or change the order throughout the lifecycle of their project.

Too many requests for altering the decided services and construction project elements will be a cost burden for contractors. So, every condition in this method will be specified in the contract.

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No, it is not possible for the general contractors to change the price for the entire job after quoting it to customers. The only condition where it can be changed is when the client changes the scope of work for the ongoing project.

The general contractors charge profit margins of 10% to 20% on a typical note. But if you believe that you are offering quality services to your clients with additional perks, you can eventually demand better profit margins.
But make sure that the margin you choose above the total cost of the project should be justified to the customer. If they find it over the line, they might switch to other contractors or your competitors, unless you have already built a strong brand reputation.

The markups of general contractors cover both profits and overheads. A general contractor should be aware of the overhead percentage and use it for determining their markups.
Most contractors leverage 50% markup to maintain a 30% gross profit margin, and 20% of it will be utilized for the overheads.

For pricing a job quote, there are a few simple steps for you to acquire, which include:

  • Note all the activities that your job needs.
  • Decide on the per-hour payout that you want for each task.
  • Eliminate the material and other additional costs.
  • Compare your price with the standard market rates for similar services.
  • Do your research and cost predictions before setting up the price.
  • Negotiate or defend your rates with clients during inquiries.


FieldCamp is one of the best service business scheduling software which is proficient in managing your entire business operations in clicks. The software streamlines around 90% of the daily business operations. 

You can use this software to schedule your jobs and assign staff members to them with just one click. 

You can specify job details, client location, tasks, activities, and other details of the job over the software for your team to refer to anytime and anywhere. 

Not just that, but upon completion of the job, this tool will help you create an invoice with just one click. You can also track whether the invoices are due or cleared from the client’s end. 

This is just a glimpse of what our FieldCamp software offers for your general contractor business. to experience more of it yourself. 

Give your construction or contractor business a digital revolution by utilizing FieldCamp for more than just streamlining your business.

Author Bio

Gaurang Bhatt

Gaurang Bhatt is a techie in himself with an ability to solve problems technically and present solutions in the form of a product. He is one of the pioneers to curate FieldCamp with his 15+ years of knowledge and expertise in providing solutions to home service industries. Gaurang aims to overcome challenges faced by service business owners through software solutions and blogs.