Free tool · Price a job properly
What should you bid on this job?
Add up the job’s direct costs, put a realistic contingency on them, recover your share of overhead, and only then add profit. Bid the other way round — costs plus a round number — and the profit is whatever happens to be left.
The order matters
Every one of these steps sits on top of the one before it. Skip a layer and the error compounds all the way to the price.
Direct costs
Everything with a job number on it. Labor goes in burdened — wage plus taxes, comp and benefits — not at the bare wage.
Contingency
A percentage for what you have not found yet. Remodels carry more than new construction. Zero contingency is a bet, not a bid.
Overhead
Your yearly overhead has to be recovered somewhere. Spreading it across expected revenue gives you the percentage to add to each job.
Profit
Profit is applied last and as a margin, by dividing rather than multiplying. This is the step that quietly costs contractors the most.
Why divide instead of multiply
If a job costs $49,600 and you want a 12% margin, multiplying by 1.12 gives $55,552 — and a margin of 10.7%, not 12%. Dividing by 0.88 gives $56,369, which actually is 12%.
The gap looks small on one job. Across a year of work it is the difference between a profitable company and a busy one.
Price = cost ÷ (1 − margin). Markup = margin ÷ (1 − margin).
Setting your overhead percentage
Take last year’s total overhead and divide it by the revenue you expect to sell this year. If you carry $85,000 of overhead and expect to do $700,000 of work, that is roughly 12%.
Two cautions. Do not double-count: if overhead is already inside your hourly labor rate, set the overhead field here to zero. And if your revenue forecast is optimistic, your overhead percentage is too low and every bid this year is slightly underpriced.
Questions
Should labor go in at the wage or the burdened cost?
Burdened. Wage plus payroll taxes, workers’ comp and benefits, divided across billable rather than paid hours. Using the bare wage understates a job by twenty to forty percent before anything else goes wrong.
How much contingency should I carry?
New construction with a clear scope can run two to three percent. Remodels, anything opening up an existing wall, and jobs with a difficult client justify five to ten. Carrying none means the first surprise comes out of your profit.
Is overhead and profit the same as the ten and ten I see on insurance work?
Ten and ten is a convention on insurance restoration work, not a calculation of your business. If your actual overhead is fourteen percent, a ten percent allowance loses money on every claim you take.
The price came out above what the job is worth locally.
Then the job is either not worth doing at your cost structure, or your cost structure needs work. Both are decisions worth making deliberately instead of discovering after the job closes.
Not sure your inputs are right?
A Books Checkup is a fixed-fee review by an accountant who works only with contractors. You get the real numbers to put in these boxes, and a list of what your books are currently hiding.
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Open the calculator →A planning tool, not tax, legal or accounting advice. Rates and classifications vary by employer and change over time — confirm yours against your own records before relying on them.