How to Price a Contractor Job: The 4-Number Formula

How do you price a contractor job?

You price a job from four numbers: loaded labour, materials, an overhead share and a target margin. The first three add up to break-even. The margin turns break-even into a price by division, not by adding a percentage.

I'm not a contractor. I build pricing math, and every number on this page shows its working so you can check it against your own job. Every input below is an assumption you replace with yours.

Most quoting advice stops at "add up your costs and put a markup on". The two places money leaks are hidden inside that sentence: which cost (the wage or the loaded rate) and which percentage (markup or margin). The rest of this guide closes both leaks.

Try it: the free contractor pricing calculator

Put your own hours, wage, materials and yearly overhead into the calculator below and it returns break-even and the price to quote. It runs in your browser; nothing is sent anywhere.

The starting values are this worked example. Every figure in the table is computed from the inputs above it:

Read it top to bottom. The worker earns $25 an hour but costs $32.50 once a 30% burden is added, so 8 hours of labour is $260.00. Materials are $180. Overhead of $14,520 a year spread over 1,760 sellable hours (220 days x 8 hours) is $8.25 an hour, so this job carries $66.00. Break-even is $506.00. At a 35% margin the quote is $778.46, leaving $272.46 of profit. The same calculator is on its own page at the free job pricing calculator.

How do I calculate the cost of a job, step by step?

Estimate the hours, load the wage, add materials, then add overhead per hour. Do it in that order and write each line down, because a quote you can't retrace is a quote you can't fix.

1. Hours

Estimate crew-hours on site plus the time the job forces on you: loading, driving, clean-up, a return visit for a punch list. If two people work 8 hours, that is 16 crew-hours.

2. Loaded labour rate

Multiply the wage by one plus your burden. Employer Social Security and Medicare alone are 6.2% and 1.45% of wages according to the IRS Topic 751 page, 7.65% together, before unemployment tax, workers comp, insurance and paid time off. The 30% in the example is an assumption; the labor burden calculator guide builds that percentage line by line.

3. Materials

Use what you pay, not list price, and include delivery, fasteners, consumables and the waste you expect. If you mark materials up, that is a pricing decision you make later, not a cost.

4. Overhead per hour

Total a year of costs that aren't labour or materials, then divide by the hours you can actually sell. The overhead and profit guide shows why this beats a flat 10% on small jobs.

5. Break-even, then price

Add the three cost lines. That total is your floor. Divide it by one minus your target margin to get the quote.

What is a normal markup for a contractor, and why does cost-plus-20% lose money?

There is no single normal markup; the percentage matters far less than what you apply it to. Cost-plus-20% on the bare wage and materials can land below break-even, and even on the right cost a 20% markup keeps only 16.67% as margin.

Take the example job and price it the shortcut way. Wage-only labour is 8 x $25 = $200. Add $180 of materials: $380. Add 20%: $456. True break-even is $506.00, so that quote loses $50 before a single dollar of profit. The shortcut left out the burden (the gap between $200 and $260.00) and the whole $66.00 overhead share.

The last two rows both "use 35%". The difference is $95.36 on this one job. At three jobs a week for 52 weeks that is $14,876.40 a year for identical work. If you think in markup, convert first: the markup vs margin guide has the full conversion chart.

How to price construction jobs with a crew

A crew job uses the same formula; crew-hours replace hours and overhead is spread over everyone in the field. Two people for two 8-hour days is 32 crew-hours, and each one carries labour and overhead.

Here two workers at $28 an hour load to $36.40. The business carries $30,000 of yearly overhead across two field workers and 220 billable days, so each crew-hour carries $8.52. With $1,200 of materials, break-even is $2,637.53 and the quote at a 30% margin is $3,767.90. Price it at break-even plus 30% instead and you bill $3,428.79, keeping 23.08%: $339.11 less on one job.

Subcontractors and equipment rental go in as their own cost lines next to materials: they are direct costs of this job, so they belong in break-even before margin is applied.

How do I calculate my contractor rate? ($100 an hour vs a salary)

An hourly billing rate is not a salary. $100 an hour x 2,080 hours is $208,000, but nobody bills 2,080 hours, and the rate has to pay for overhead and your own burden before anything is income.

Use the example's own assumptions: 220 billable days x 8 hours is 1,760 sellable hours. At $100 an hour that is $176,000 of labour revenue if every one of those hours is sold. Take out the $14,520 of yearly overhead and $161,480 is left, before self-employment tax, income tax, unbilled days and slow weeks. Then compare it with the rate you actually need: in the example, labour plus overhead costs $32.50 + $8.25 an hour before any profit.

For a solo operator the handyman pricing calculator guide works the rate out from a yearly pay target, overhead and realistic billable hours.

Excel formulas to price a job

Six cells are enough to price a job in Excel or Google Sheets. Put inputs in column B and the formulas below give loaded rate, overhead per hour, break-even and the quote.

Keep the cell for margin as a percentage (35%) so the formula reads =B9/(1-B8). If B8 holds 35 instead of 35%, divide it by 100 or the price goes negative.

What to put in your job pricing sheet

A pricing sheet needs the inputs that decide the number, not just line items and a total. If a column is missing, that cost is being guessed or ignored.

• Crew-hours, split into on-site and travel/setup if you track both.
• Wage and burden % as separate cells, so a raise or a new insurance quote updates every future price.
• Materials, subs and equipment at your cost.
• Yearly overhead, people in the field and billable days, so overhead per hour recalculates when any of them change.
• Break-even shown on its own line, above the price.
• Target margin and the price, with the markup equivalent next to it so nobody on the team confuses the two.

The contractor estimate template guide covers the full column layout for client-facing estimates.

Calculator, spreadsheet, app or custom build: which fits?

Use a free calculator for one-off checks, a spreadsheet when you want every job saved and editable, and estimating software when you need scheduling, invoicing and a team on the same system. They solve different problems.

None of these fixes a wrong input. Whatever you use, check that it loads the wage, spreads overhead by hours and prices on margin.

Step-by-step: How to Price a Contractor Job: The 4-Number Formula

1. Estimate crew-hours. Count on-site hours for every worker plus loading, travel, clean-up and any return visit the job needs.
2. Load the wage. Multiply each wage by one plus your burden percentage (payroll taxes, workers comp, insurance, paid time off) and by the crew-hours.
3. Add materials, subs and equipment. Enter what you actually pay, including delivery, consumables and expected waste.
4. Add the overhead share. Divide yearly overhead by sellable hours (people in the field x billable days x 8) and multiply by the job's crew-hours.
5. Find break-even. Add labour, materials and overhead. This is the lowest price that doesn't lose money.
6. Divide by one minus margin. Price = break-even / (1 - target margin). At 35% margin, divide by 0.65.

Related guides