How to Price a Job: A Complete Method for Contractors
A repeatable five-step method for pricing any job: burdened labor, real material costs, overhead recovery, margin-correct pricing, and a sanity check before you hit send.
Most underpriced jobs aren't lost on price — they're lost in the estimate. A missed cost here, an optimistic hour count there, and a job that "sold well" quietly becomes a donation. This is the method in five steps. It takes longer than guessing, and it pays for itself on the first job where the guess would have been wrong.
Step 1: Cost labor at its true rate
Start with hours — scoped honestly, not optimistically, and include travel, pickup runs and cleanup. Then multiply by the right rate. If the work is done by employees, that's the fully burdened rate: wage plus payroll taxes, workers' comp and benefits, divided by billable hours. A $25/hour wage typically means $33–36/hour of true cost once burden is included. If you do the work yourself, use what an hour of your time must earn — not $0.
Find your true hourly cost with the labor burden calculator →
Step 2: Cost materials as they'll actually be
- Use current supplier pricing, not last year's quote.
- Add waste: 10% for most materials, more for tile and diagonal layouts, and a full extra box or bundle where returns aren't practical.
- Include delivery fees and small stuff that adds up — fasteners, blades, sealant.
- If prices are volatile, note the quote's expiry on the estimate.
Step 3: Add every other direct cost
Subcontractors (at what they'll actually invoice, plus your handling), permits and fees, disposal, equipment rental, and job-specific travel. Anything the job causes you to spend belongs here. If a cost happens whether or not you take the job, it's overhead — that's the next step.
Step 4: Recover overhead — deliberately
Overhead is insurance, vehicles, tools, software, accounting: everything that runs whether or not any job exists. Two common ways to recover it per job: add it as a percentage of direct cost, or fold it into your target margin. What kills small businesses isn't choosing the wrong method — it's recovering overhead only when there's "profit left over," which is never.
Total your monthly overhead and see it per billable hour →
Step 5: Price to a margin, then sanity-check
Divide total cost by (1 − target margin). On $2,300 of cost at a 35% target margin: $2,300 ÷ 0.65 = $3,538. Then sanity-check against reality: what does work like this sell for in your market? If your number is far above market, either your costs or your scope assumptions need a second look — don't just shave margin to win the job. If it's far below, raise the price or find out why your costs are so low.
| Line | Amount |
|---|---|
| Labor: 32 hrs × $34 burdened | $1,088 |
| Materials incl. waste & delivery | $780 |
| Subs (plumbing fixture set) | $350 |
| Disposal & permits | $105 |
| Direct cost | $2,323 |
| Overhead allowance 15% | $348 |
| Total cost | $2,671 |
| Price at 35% margin ($2,671 ÷ 0.65) | $4,109 |
Price a full job with the job pricing calculator →
Frequently asked questions
How do I price a job as a contractor?
Add every direct cost (burdened labor hours × rate, materials, subs, travel, other), add an overhead allowance, then divide by (1 − target gross margin). For example: $2,000 of direct cost, 15% overhead ($300), and a 35% target margin gives $2,300 ÷ 0.65 = $3,538.
Should I price hourly or by the job?
Price by the job when scope is clear — it rewards you for working fast and clients prefer certainty. Use hourly or time-and-materials pricing when scope is genuinely unknown, and cap it with a not-to-exceed figure.
What margin should I build into a job price?
Start from your numbers: overhead as a percentage of revenue, plus your target net profit. If overhead runs 15% of revenue and you want 10% net, you need roughly a 25%+ gross margin — and more to absorb scope slips and rework.
Tools for this
- Job Pricing Calculator
- Labor Burden Calculator
- Contractor Overhead Calculator
- Flat Rate Pricing Calculator
Ready to run the numbers?
Open the Job Pricing Calculator and apply this guide with your own figures.
Open the Job Pricing Calculator →