We realize that many of our website visitors aren’t contractors, they are the clients of a contractor. They are generally either looking for help with their Cost Plus project that’s gone wrong, or they’re trying to figure out if the price they were quoted (or charged) is reasonable.How Much Should A Contractor Charge?

They frequently confuse Markup with Profit, and we want to set the record straight. Markup isn’t profit.

Markup is a general term that applies to the overhead and profit that any business needs to realize if the business wants to stay in business. It is the amount a business charges above their direct cost.

If your contractor has a 1.50 markup (which is reasonable for a remodeling contractor), that means that if the estimated cost for a job is $10,000, they’ll multiply the $10,000 x 1.50 and arrive at a $15,000 sales price.

Now many people who know little about business and even less about the costs of running a business will say, “Oh, look at that crook. He is making $5,000 profit on my job.” Nope, not true.

Your contractor gets $5,000 to pay their overhead expenses (which includes salary) and make a reasonable profit. I just heard those same people say, “But wait, contractors don’t have any overhead!”

Guess again. They have overhead. Advertising, sales commission, job supervision (which isn’t usually a job cost), office expenses (even if they work out of their home), insurance, accounting and legal fees, licenses, taxes, employee expenses, and their own salary are just a few of their overhead expenses. The typical remodeling contractor will have overhead expenses ranging from 25% to 54% of their revenue – that means every $15,000 job could have overhead expenses of $3,750 to $8,100.

Somewhere along the line, people started believing that a 10% overhead and 10% profit is the industry standard for construction jobs. Or that a 20% markup is all a contractor needs. Armed with that knowledge, owners try to get their contractor to reduce the price of the job they want done.

If you think it through, it’s not a smart move. Would you ask your surgeon to reduce his price before doing open heart surgery? Would you ask your auto repair shop to reduce their price before rebuilding the engine on your car? Do you really want them to go cheap? For most homeowners, your home is your largest single investment. Why do you want to use a cut rate contractor to improve or repair your major investment?

Every business must make a profit or it will go away. It must price the work or services to include the cost of its goods or services as well as cover its overhead expenses and make a reasonable profit. It needs a reasonable profit to build and maintain the business, keeping it viable during the down times. Profit is what insures a business’s longevity – if it doesn’t make a profit, it might not be in business in six months. If it can’t cover overhead expenses and make a reasonable profit, it might not even be in business long enough to finish your project.

The National Association of Home Builders published a report a few years ago that stated that their “best” remodeling contractors averaged something under 4% net profit. I can tell you that in my experience, too many contractors make no profit at all. That’s why so many construction-related businesses fail.

So, if you’re focused on finding the cheapest contractor to do your job, you have a very good chance of selecting a contractor who will go out of business while trying to build your job.

There’s an old saying, “A fool and their money are soon parted.” Any owner who selects a contractor based on their price has no one but themselves to blame when things go sideways. Markup isn’t profit, it is the money needed to make sure the contractor can complete your job, pay his bills and if he’s doing things right, make a profit on the job as well. Just like your doctor, your mechanic, your grocer and every other business.

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Kim Barnett
Kim Barnett
March 29, 2021 10:12 am

I needed this kind of information thanks for posting I’ve struggled for years between percentages and profit and never thought about Multiplier would like to have more examples possibly for different areas of the country thank you so much

Dan Adams
Dan Adams
March 28, 2021 12:20 pm

I’ve done my fair share remodeling in the past and always understand there’s a mark up for the GC and all related services. I’m working a new project in a different area of the country and saw the pricing that seemed to reflect quite a substantial markup which again I am used to, but this GC is also tacking on another 10% fee for his services as a GC. I’ve never seen that before. I can assure you that the individual projects are absolutely marked up at least 30% and I am supplying the materials for most. Am I missing… Read more »

Dan Adams
Dan Adams
March 28, 2021 12:22 pm
Reply to  Dan Adams

And just for context, he clearly bridge at the line item for his service fee above and beyond the market for each line item.

paula Davis
paula Davis
March 23, 2021 12:52 pm

Hi, I have a question on pulling a permit for a rather large company and having to coordinate with all the other subs included for pulling permits how much should a license contractor charge?

John Campbell
John Campbell
March 23, 2021 10:46 am

Hey Mike, got a lot of great points in this post. People always think that by going cheaper they are saving money, but in our world it makes no sense. With me being a fence contractor, I see people all the time wonder why the cheaper guy couldn’t get the job done. I always tell my customers that having me charge more means I can get the job done right.

Keep up the great work!

jason mertz
jason mertz
March 20, 2021 6:30 am

I’m curious, why should a GC who is charging a % of a project earn more money if I decide to buy a $15k slab vs. $5k budgeted. Why earn more on the $70 tile I choose vs. $8 budgeted. It takes the GC no more or less time “overseeing” the subs work in either situation.

Nicole
Nicole
March 12, 2021 2:18 pm

I get that contractors need to earn a living. But so do I, and I’m not going to just pay blindly through the nose. I am fine with a markup on the WORK- that completely makes sense to me. That is the service I hired them to perform. But I have a contractor who is charging a markup on products that I go out and purchase in addition to a markup on the work and charging to install. I purchased the materials on my own time, with my own money, with no help from him and he wants to charge… Read more »

Justin
Justin
March 13, 2021 7:27 am
Reply to  Nicole

Speaking as a contractor, I would imagine the contractor has a set percentage above cost that is needed in order to first break even and then make a few bucks. For example, let’s say I estimate 2 different projects and the total cost of each project is $20,000. My rate is usually 15-20% above total cost. Now in this scenario of those two jobs, let’s say material cost is $5,000 for each job. On one job the customer went and bought the materials and the other one I did. So by your logic, my rate should be $15,000 x 15%… Read more »

Scott Taylor
Scott Taylor
April 18, 2021 5:52 am
Reply to  Nicole

He has to install the product.

Kelly
Kelly
February 9, 2021 5:50 pm

I hired a contractor for a room remodel (a one man show, no office/shop, employees, etc) who agreed to sub the demo, re-frame (including lumber), hanging of windows and door, new roof and finish work (door and window trim) but I would need to find and schedule subcontractors for flooring, painting fireplace and surround. He told me to quickly order and schedule the delivery of the trusses and to order and pick up windows and doors. I already had all the permitting done through the county and all the elevation inspections were organized by me. My husband and I cleaned… Read more »

Robert Fawcett
Robert Fawcett
February 15, 2021 3:53 pm
Reply to  Kelly

He is not justified, unless it clearly states that in your agreement. In essence you are the prime contractor and he was just a sub, and the finishing contractor was a sub-sub.
Did he supply builders risk insurance for the work being completed by the other subs? If not that is your smoking dagger.

Brad Banks
Brad Banks
January 29, 2021 2:46 pm

My contractor who I had to stop from finishing the job and take him to court because 1/3 of the way through the project we found out he built it 3 feet too low!… Via the court records we found out he was making a “profit“ or a “markup” of 361%.

Curious if the authors of this article feel thats necessary for this guy to “stay in business“?

Scott
Scott
February 23, 2021 1:40 pm
Reply to  Michael Stone

What are ‘job costs’ as you mean? Materials and expenditures for the job?
Btw, I’m a licensed landscape contractor.
Thank you.

mari lamers
mari lamers
January 27, 2021 4:31 pm

I am starting the process of a kitchen remodel and am soooooo confused about all this mark up and overhead stuff. I have priced out all the individual pieces (cabinets, countertops, flooring, even electrical and plumbing). I know that I am paying for the contractor to organize and execute the project. I am paying for their knowledge and craftmanship…… My question is……will there be transparency in all the budgeting? Will I expect to see what they paid for the cabinets and what I am being charged? I know that contractors charge a certain percentage up but is that off of… Read more »

J Ward
J Ward
January 29, 2021 9:45 am
Reply to  mari lamers

I ask this seriously: Do you analyze and ask the same of your doctor or dentist, any attorney at your employ, the mechanic or car salesman? I remodel. I live rural now, but I begin in and around Nashville metro. That said, 90% of my business has been word of mouth and 10% has been from my random pinning of biz cards on physical boards for such things. You can do it your way, but goodness friend, assuming you analyze all as such, when do you have time for yourself. And why not just do the projects yourself as it… Read more »

jason mertz
jason mertz
March 20, 2021 5:27 am
Reply to  J Ward

Doctors and dentists and most lawyers perform their own labor the GC hires labor and only manages

Kevin Sabol
Kevin Sabol
March 23, 2021 5:01 pm
Reply to  mari lamers

Mari – I feel for you ( been through similar ordeal- and it wasn’t because contractor charged too little!). Yes you should ask for price breakdown. Price. You won’t get cost…. but they should be able to tell you how much of the price is material and how much is labor. Beyond that just know that yes – GCs have HUGE markups. If you aren’t comfortable with that and don’t have deep pockets – I’d say keep shopping around . And I disagree with stone – unless he was the contractor who walked off he doesn’t know sh*t about it-… Read more »

John
John
January 27, 2021 4:55 am

I want the bid to show a breakout of materials and labor by sub-contractor. I want to see the sale receipt for materials and sub-contractor. I can get all material at 10% under cost and contractor should be able to match that. Also, if I want to provide engineering plans, paint interior, install flooring, install baseboards, provide new windows and provide door the contractor should not whine and not try to gouge anyone for doing this. The home owner wants to say money just like the contractor wants to make money.

J Ward
J Ward
January 29, 2021 10:03 am
Reply to  Michael Stone

I wish to carry the torch regarding the truth you write.

I mean no harm when I write that the widow of a lifelong DIYer can often times be a customer-type I will meet with, resulting in a series of events : discuss costs, field an inquisition, explain cost, inquisition continues, explain undefined time frame, inquisiton wants to cotinue, I smile,interrupt, leave card, ,drive home, punch myself in the face.

John
John
January 29, 2021 3:30 pm
Reply to  Michael Stone

Then he doesn’t belong in the business.

Donald
Donald
January 27, 2021 12:49 pm
Reply to  John

John, As a GC, I can get most material at a minimum of 10% discount over walk-ins, I also get rebates, and marketing dollars for using specific products. If you agree to a “cost plus” contract you have every right to see the receipts and sub invoices, however if your agreement is turn key, you have agreed to an amount for completion and any discounts earned by the contractor should not be of your concern. Also, we love it when you supply engineering plans, it makes our job easier. However, when you want to paint, install the flooring, baseboards, provide… Read more »

John
John
January 29, 2021 3:54 pm
Reply to  Donald

This was the contract I’ve had with two contractors, one in Washington State and the other in North Carolina. Contractor will provide a detailed breakdown of materials and labor. Contractor will pass any cash discounts for materials ordered for project back to customer. Any rebates or refunds generated from returns or surplus materials will go to customer. Small tools purchased by the contractor to do work on this project s\will be turned over to the customer. Contractor will not charge overhead and profit on sales or use tax. Contractor will not charge sales tax on labor. Any fee charged by… Read more »

John
John
January 30, 2021 6:28 am
Reply to  Michael Stone

I’ve not taken over anyone’s business because I don’t hire the sub-contractors, plan the days for subs to work or setup the inspections. Why does a contractor have to hire a journeyman or apprentenance and charge the customer 50% markup. A GOOD contractor will have two to five contracts going on simultaneously. If a contractor will not provide references, that also raises a red flag. It just like buying a car, you don’t pay the sticker price. 

Scott
Scott
February 23, 2021 1:51 pm
Reply to  John

A licensed contractor who has workers comp-insurance, will charge somewhere in the ballpark of 1.6 times what he pays his employees and subcontractors who are under his workers comp responsibility. (to re-state, that is 60% over what he pays his employees and subs under his workers comp responsiblity).

Last edited 1 month ago by Scott
David Tegan
David Tegan
February 15, 2021 9:21 pm
Reply to  John

This is obviously not a contract…. where is the scope of work? Contract documents? Payment schedule etc… your list of 12 items is nothing more than a wish list and mostly weighted in your favor. A true contract is equitable…the use of the word “padded” is a nice touch .I wonder if that is recognized as a legal term…also funny that any changed work will “NOT” include overhead expenses? How could adding work that resulted in extra time not also include overhead expense?? Time is money, overhead is divided over time spent on projects…extra time takes a bigger percentage of… Read more »

David A Silva
David A Silva
April 2, 2021 9:31 am
Reply to  David Tegan

Hello David, I would like to get a copy of
Mason’s list. I too think I settle for less and am working for the wrong people.

Scott
Scott
February 23, 2021 2:01 pm
Reply to  John

We all know this, especially for smaller type projects: Lots of contracts are simply charged on what the agreed price is, – which is what it’s worth the client, and, for the contractor to do. That’s it. More complex / variable contracts are of course open to materials and labor ongoing pricing and payments, with an agreed budgeting per portion of the project, and total project. If not charging the ‘overhead’ pricing in the way you describe, then that would mean the contractor would have a higher ‘labor pricing’. If materials costs aren’t marked up, then a high labor cost… Read more »

Troy Nelson
Troy Nelson
January 27, 2021 2:33 pm
Reply to  John

That’s a delusional way in a disrespectful way to handle any Tradesman whatever you call yourself homeowner client customer you don’t disrespect people that work with their hands or any people for that matter. This is not a bid War where you’re trying to ring the contractor out for every last bit of breath he has left guess what you’ll never get a creative beautiful job like that

J Ward
J Ward
January 29, 2021 9:52 am
Reply to  John

Why not go the only two steps left friend–the only two steps that matter: get a tool belt, and do work?

I always ask my customers with such demands for a MLA style works cited page for reference.

Reason: if they don’t trust me then why should I trust them.

Edit: Grammar and spelling–because style is classy and cool.

Last edited 2 months ago by J Ward
John
John
January 29, 2021 3:59 pm
Reply to  J Ward

I’ll do what I’m skilled to do but need help with the rest.

Chris
Chris
February 1, 2021 8:30 pm
Reply to  John

That would make you a contractor wouldnt it?

Danny
Danny
February 27, 2021 11:54 am
Reply to  John

Hey John, I have been doing construction for 48 years. in business for 25 years my self. About 15 years ago I started to break down the jobs just like you requested. I soon found out that I was loosing money on every job. What happened was the cheap home owner would price everything against my prices. and anything I could make a few dollars on was under bid by some body that would take my price and under bid it. Anything that I priced to low was the job that I got. Now if I had have got the… Read more »

David D.
David D.
January 23, 2021 6:42 am

50% markup is BS. 20 to 25% is reasonable depending on how much overhead and cash outlay they have to extend – subs contractors and materials. Paying as you go for work performed allows for the contractor to reduce their cash-flow issues and should reduce the overall markup.

Donald
Donald
January 27, 2021 12:31 pm
Reply to  David D.

50% is on the low end. Most GC’s mark up the cost 66%, or about a 40 % margin. If you pay for quality subs, materials, have all of your licensing, and insurances, honor your warranties, have an accounting staff, sales staff, project management team, equipment, office, and advertising, and do an awesome job… you might walk away with 2-2.5%net.

Scott
Scott
February 23, 2021 2:05 pm
Reply to  David D.

A licensed contractor who has workers comp-insurance, will charge somewhere in the ballpark of 1.6 times what he pays his employees and subcontractors who are under his workers comp responsibility. (to re-state, that is 60% over what he pays his employees and subs under his workers comp responsiblity).
Materials, and some other direct project purchases, are typically marked up 20% to 25%, but there are exceptions, lower and higher.
There are the administrative and book keeping costs and related to maintain a good business.

Last edited 1 month ago by Scott
Michael Maxwell
Michael Maxwell
January 20, 2021 12:15 am

I’m having a leaking solarium replaced. Paid him $3,800 to rip out solarium and haul it away. Having a deck installed using trex deck and roof put on covering deck. It will have walls made of T111 board and soffit ceiling. The cost of material is $13,000 and labor to build is $7,000. Total finished price$23,800. Deck is 21×12. Does that sound about right?

J Ward
J Ward
January 29, 2021 10:12 am

I just priced a 10 x 12 deck. Trex for ONLY railing as customer wanted white. It was one rectangle, 2ft 6 inch height, no covering, stand off with 4 post, one set 4 foot steps, treated lumber for all OTHER than Trex railing. My cost, no markup $2800. I would say his price is fair.

Have you inquired about industry prices as they relate to Covid? In Kentucky, it’s 30% across the board, which has crazy skewed outliers like: osb up 200%, treated up 125%, etc

Angie
Angie
January 14, 2021 4:23 pm

I just got quotes for my 3 bathroom. The smallest first bathroom: tiling shower, floor and replacing vanity countertop. That is: $$3600 Second bathroom: tiling and installing new tub, replacing vanity countertop, and floor. That is: $4500 Master bath: floor, vanity countertop, tiling shower, and placing a stand alone tub. $6,900 I have to purchase all the finishes, countertops, floor tiles, shower heads, faucets, shower glass doors. I pay for the dumpster too. He is only getting whatever material use to waterproof shower and tub. Is this an honest cost? I see it as the cost is only covering labor,… Read more »

Daniel Williams
Daniel Williams
January 18, 2021 10:10 pm
Reply to  Angie

Hello Angie, as a General Contractor myself (without knowing the actual sizes of your rooms) I would say this is a fair price. To be honest, it sounds a bit cheap or at least cheaper than what I charge. With the information at hand I would say go for it. But. Please ALWAYS, be careful with who use. Make sure to get several recommendations, ask to see some of their work, don’t be afraid to ask these questions. Above all else, as this article states of course. Your home is one (if not THE) of your biggest investments and you… Read more »

J Ward
J Ward
January 29, 2021 10:18 am
Reply to  Angie

The industry pricing of materials being hit so damn hard is the reason many of us are having customers get their materials.

Its 30% across the board–the rise in material price. It was overnight basically.

That makes a bid prior to build a $200000 home now realized ar $260000.

That’s nearly the equivalent of my yearly gross income.

This needs to be considered and may help to answer.

Currently, you get what you pay for cannot really be assessed, also.

Maybe hold off til May or June? To see If materials get a rebalance?

Last edited 2 months ago by J Ward
Barry E. Holland
Barry E. Holland
January 9, 2021 12:35 am

Nice Article…Very interesting to read this article. I have learned some new information. Thanks for sharing.

Sandy
Sandy
January 7, 2021 9:40 pm

I have a 1/2 bathroom (approx size 3×9) which I’m adding a stand up shower too. The contractor is quoting me $10,000.00 to complete the job but I have to provide material and finishes. Is that average and normal? I thought $10,000.00 would include materials and finishes in that price.

Eric
Eric
January 14, 2021 6:33 am
Reply to  Sandy

Sandy, I am a contractor. I agree with Michael, I would get another contractor. We never require homeowners to provide their own materials. With the exception of towel bars. The only time we see contractors asking the homeowner to provide materials is usually some half-ass handyman.

Daniel Williams
Daniel Williams
January 18, 2021 10:20 pm
Reply to  Sandy

Hello Sandy! I have to agree with the two Gentlemen above as a Contractor myself. I always send my clients a detailed and itemized estimate stating what I will be doing and in certain projects I will detail how I am to be doing it. My estimates contain pictures of the affected areas with notes of what I found as well as notes my clients described. At the very bottom my contract is there for you to read through and I ask my clients to go through the contract thoroughly before signing. I put a lot of work and time… Read more »

BobTheBuilder
BobTheBuilder
December 25, 2020 8:44 pm

I am baffled at how homeowners who have no experience in anything construction related feel that they can dictate the price of a service THEY want. You would NEVER barter with a surgeon or head chef at a restaurant for a cheaper price. Yes, contractors can make GOOD money when they know how to operate there business and price accordingly. But let’s be honest, you want a service done and you want it done right. It’s going to cost you money and if you feel it’s “too expensive” maybe the work you require to be done is too expensive for… Read more »

StunnedOnlooker
StunnedOnlooker
December 30, 2020 12:43 pm
Reply to  BobTheBuilder

Okay Glenn . well , im paying this guy $600 a day but i cant get anybody to work on my pool in this small town im in. How about that. cit needed to be done.

fence contractor
fence contractor
March 18, 2021 1:54 pm

You could definitely learn to do the work yourself so y don’t have to pay anyone. Thats how you could save money in your small town and maybe start new profitable business considering theres only 1 pool guy in your area forcing everyone to pay his price. Just my 2 cents

Doris Bloxom
Doris Bloxom
December 1, 2020 9:46 am

Our contractor told us up front his markup is 20%. When we asked him if he charged 20% on the items listed in owner’s budget, which would include items we pick out and pay for, all he said was, “I have never been asked that question before”. That doesn’t seem quite right to us if he does. And if he does, then if we come in under budget, would that mean he would credit us the difference plus 20%?

Samantha
Samantha
December 8, 2020 9:15 am
Reply to  Doris Bloxom

On the contractors end, we work with a client who does this. So long as the contractor approves what you personally purchase (validate that it wont incur additional work, supplies, deviations to the plan, etc.) then we would typically credit the difference in cost only. The 20% markup is similar to a coupon and should only be applied to what was actually purchased and paid for. You would still see those savings in the end, but could be minimal or end up costing you more money if it requires additional work to utilize. This should be detailed in your contract… Read more »

Doug Byers
Doug Byers
December 27, 2020 1:42 am
Reply to  Doris Bloxom

you have to keep in mind the contractors 20% markup includes the labor he would have to use and the tools he would have to use to install those items you picked out and paid for. those things you picked out and paid for become part of the overall work that that contractor has to complete. I think it’s rather short-sighted when people can’t or dont look at the totality of a contractors work effort. They choose instead to look at it as a series of individual events or items of material that become targets of opportunity to put the… Read more »

Eric
Eric
January 14, 2021 6:41 am
Reply to  Doris Bloxom

Doris, That seams perfectly normal too me. The mark up is on the job cost. That does not mean only the contractors costs. For example – I do a lot of basement finishes. I find my cost and then add my markup. I have had a homeowner tell me that they will pay for the flooring themselves because that will remove $7,000 from my estimate, then my markup will go way down to. He would simply pay the bill. I would still be in charge of ordering, scheduling delivery, supervising install, etc, etc. Well obviously it doesn’t work that way.… Read more »

Terry Lee Blakey, Jr
Terry Lee Blakey, Jr
November 21, 2020 11:09 am

As a framing contractor in California the central valley and bay area. I currently hover at 30-33% burden, 10-12% overhead, 9.25% profit and 5-10% material markup. Each cost I listed were lessons I learned the hard way, and still wonder if I am getting each correct for each bid I turn in.

Dave
Dave
November 6, 2020 11:45 am

Thank you for posting this, Michael. I’m assuming that $90 for a 10-foot pressure treated 2×12 is an exorbitant markup when I can buy one for about $26 at my local lumberyard. I’m just now looking at an invoice for my mom that came in at $17,000 when the original estimate for the job was $11,000, and I’m trying to figure it out for her. Looks like they marked up most of the materials at least 60%, and some as much as 320%.

Amanda
Amanda
November 4, 2020 3:39 pm

Hi Michael, I have a 850 sqft basement I am trying to get finished. Exterior walls are framed and insulated. Need to add a bedroom (egress window already in place) and an 8 x 5 full bathroom. Current quotes (without vanities, fixtures, and flooring) are $26,000 and $29,500. I am in the middle of Illinois and wanted to ask your thoughts on this pricing and if it was accurate in your opinion. Thank you in advance!

VFB Renovations
VFB Renovations
November 8, 2020 11:09 pm
Reply to  Amanda

It’s a little cheap.

Glenn Banks
Glenn Banks
November 20, 2020 5:10 am
Reply to  Amanda

Typical basement remodel with mid level finishes, no bathroom, is $40 a sq ft. So we’d be around $34k no bathroom. Bathroom would add at least another $8k. So high $30’s to low $40’s.

Eric
Eric
January 14, 2021 6:49 am
Reply to  Amanda

I agree with the other two posts down here. I am a contractor that does a lot of basement finishes. From 800 square feet and up. That is very cheap. That is the kind of cheap that would make me question what quality of work I am getting. I’m from South Dakota, so not far off.
Basic finish without bathroom – $35,000
Basic with bathroom – $40,000
Minor upgrades – $45,000
Major upgrades – $65,000
Major upgrades would be a fireplace and dry bar. Maybe a wet bar would fit in that budget.

okera
okera
November 3, 2020 1:48 am

A contractor charging a grower for kiwifruits orchards
Please advise the breakdown

Joe
Joe
October 26, 2020 11:52 am

What is the estimated cost of a job include? Does it include the cost of materials + labor to complete the job or other things?

Joe
Joe
November 2, 2020 12:12 pm
Reply to  Joe

Thanks for your help. Last question, does the estimated job cost include the contractor’s markup?

Joe
Joe
November 2, 2020 12:45 pm
Reply to  Joe

I am trying to estimate a reasonable price quotation by a contractor to remodel parts of my small 10′ x 10′ kitchen. I have checked big box stores for the cost of materials for the job such as paint, cabinents, flooring, baseboards, ceiling light, kitchen vent, etc. The total retail cost of materials for the job is about $6,000. So what is a fair price for the contractor to quote me for removing the old cabinents & sink, then prepare the kitchen for installation of the new flooring/baseboards, base & wall cabinents, sink plumbing, wall painting, etc? Is there a… Read more »

Joe
Joe
November 2, 2020 1:19 pm
Reply to  Michael Stone

Thanks Michael. I realize that every company is different and not to expect a standard price. I live in Harrisburg, PA. Can you give me an estimated price range of what I may expect to pay for this approximate 8-10 day renovation job on my kitchen using $6,000 in materials?

Victoria
Victoria
December 10, 2020 6:47 pm
Reply to  Joe

what you should be doing is trying to find a contractor that you can trust. Then TRUST them.

Doug Byers
Doug Byers
December 27, 2020 1:59 am
Reply to  Joe

Joe, if you truly believe that the true cost of the materials provided by a contractor is simply the cost you pay at the register you clearly have no concept of the term cost as it applies to construction. cost of manpower to go get the material cost of the payroll taxes on that manpower cost of the workman’s compensation insurance cost of any health insurance that might be provided cost of fuel, insurance and maintenance on the vehicle used to pick up the material cost of any job site storage or tarps etc to protect material from the elements… Read more »

Alvin
Alvin
December 27, 2020 9:16 pm
Reply to  Joe

If you are looking at quality material, expect to pay at least 40% of your total cost in the labor portion of the build. Lesser quality material may be more. The best thing you can do is get a quote from 3 contractors with references. Compare there quotes and go with the one that you are comfortable with. Pay attention to there time to reply to request for quotes, initial job overview, and proposal submitted. This may be an indication to how they will treat your project moving forward. If the calculations start running too tight on your budget I… Read more »

Eric
Eric
January 14, 2021 6:53 am
Reply to  Joe

Joe, that is a common mistake that a lot of homeowners make. If you are checking prices of materials you had better make sure that you are checking the right place. Most contactors always buy materials from lumber yards which are almost always more expensive then box stores.

fence contractor
fence contractor
March 18, 2021 2:13 pm
Reply to  Eric

Not true. As a fence contractor I would never buy my materials from a big box store such as Home Depot. Big box stores will always be more expensive than lumber yards. lumber yards get their lumber at a discounted price because they eliminate the middle man and can sell it cheaper for that reason. Basically wholesaling their lumber. Home Depot sells a 8′ cedar 2×4 for $16.34 or $2.04/lft and at a lumber yard that same 8′ cedar 2×4 is $11.60 or $1.45/lft. Now ya now the truth . Cheers

Daniel Williams
Daniel Williams
January 18, 2021 10:33 pm
Reply to  Joe

Do not take this and run with it. The best thing you can do is just keep this in the back of your head for useless entertainment….that’s not so entertaining. You can pretty much expect to pay more than double of what you spend for materials. Obviously this does not pertain to every job and potentially not ANY job. Materials cost 6,000, Labor will cost 12,000. Bringing your grand total to 18,000. Not including custom work, markup, expenses, tax, etc. etc.

Jabber
Jabber
October 16, 2020 9:21 pm

I have recently been scanned in 2 projects, the first time it’s happened to me ibn thre 30+ years that I’ve been in this trade. Im a general contractor, the first job was a sub contractor i hired to work with me in the site, managed to convince the homeowner to cut me out of the deal and give it ti him instead. Spoke to a lawyer, he advised me not ti gi after him but to file a lien in thre property, not knowing it came with an 8 grand bill. Second project, i was working with the homeowners… Read more »

A Robinson
A Robinson
October 15, 2020 11:16 am

We were having excessive sweating of our ductwork after a new HVAC system was installed last summer. I just had a HVAC/contractor add two supply vents, enlarge one return, replaced the duct going into the unit, and insulate the duct supply going out of the unit. He charged $5300 ($1800 for five hours of labor for two people and $3500 for supplies). When my usual contractor came to look at the work, he said that there was a maximum of $800 in materials. He talked to a friend who is an HVAC tech and he said it looked like a… Read more »

A Robinson
A Robinson
October 15, 2020 3:21 pm
Reply to  Michael Stone

1. I did agree to the price before the work started, but I never signed a contract. I went with him, because he was the brother of a good friend that I trusted. I spoke with my contractor and he thought it sounded high, but we thought the one of the ducts was actually going to be replaced that runs along the ceiling. He said that there was going to be a need for patchwork, but then there wasn’t any. I was under the assumption there was going to be a lot more materials needed. 2. My regular contractor specializes… Read more »

A Robinson
A Robinson
October 15, 2020 3:24 pm
Reply to  A Robinson

I’m not disputing that he didn’t do a good job. It looks like it’s well done. I just feel like I’ve been taken advantage of. Thanks for your help!

A Robinson
A Robinson
October 19, 2020 6:51 am
Reply to  Michael Stone

Thanks. I asked for an itemized invoice before the job started and he agreed to it. I still haven’t received it. I have that in a text conversation.

Doug Byers
Doug Byers
December 27, 2020 2:02 am
Reply to  Michael Stone

great answer Michael.

Victoria
Victoria
December 10, 2020 6:50 pm
Reply to  A Robinson

you should pay him what he charged you. He gave you a price, a scope, and you agreed to it and he did the work.

Dale
Dale
October 7, 2020 10:50 am

This past July, I signed into a contract with a contractor to build a front porch on our house. The contract (not an estimate but a signed contract) laid out all of the work that was to be done and a final cost of $20,000 with payment to be made in three installments (1st @ $7,000 prior to work / 2nd at $6,000 after completion of framing / 3rd at $7,000 upon completion of job). The project is not in the final stages (approximately 3 days of work left till complete) and the contractor has now demanded an increase in… Read more »

Dale
Dale
October 7, 2020 11:58 am
Reply to  Michael Stone

I totally understand what you are saying and that but I am trying to wrap my head around the number of $5,000 he is coming up with. He has stated that costs are up by 25%. If that is the case and he had a budget of $8,500 for materials, then the 25% would apply to that and be a cost difference of $2,125. When he says $5,000 is due to him because of the 25% increase, then to me that is a 25% increase on the entire project cost of $20,000 (so I am paying more for not only… Read more »

Sean
Sean
November 23, 2020 5:06 pm
Reply to  Michael Stone

I have a long standing remodel business in central florida. During covid season, we have seen the cost of a simple 2x4x96 piece of lumber ( not pressure treated ) go from $3.20-$8.10 in just 2 weeks. We have had to go back to some of our customers with lumber heavy projects for the same reason. the price is justified.

Jim Snow
Jim Snow
October 9, 2020 6:59 pm
Reply to  Dale

Since covid the material has doubled in price. I seen 2x4s go from 7 to 14 dollars in a matter of months. So yeah it is only fair to pay the expected rate for the labor and the material even if it got marked up. It wouldn’t be fair to expect him to pay for the material and not make anything.

Russ
Russ
October 28, 2020 6:43 am
Reply to  Jim Snow

I am a contractor and it’s not fair to expect Dale to pay for increases on something that didn’t occur. The contractor should not capitalize on a 50% material increase by making the customer pay for the material increase plus give the contractor an additional 50% markup on overhead or labor. Labor and OH should be based on the contractors costs for them and if that didn’t change, he should not be charging a 50% increase. If he did his math right the first time, he should be making the same profit by just covering the material increase. Anything over… Read more »

Last edited 5 months ago by Russ
Bill
Bill
September 8, 2020 1:29 pm

I know there’s a lot of stuff that goes in to it.. say a kitchen reno, material/labor included is about 20k. He charged 30k and makes 50% ‘profit’ .ok, fair enough.

Contractor does that same job, same material, but charges 50k.. thats 150% ‘profit’

Is that fair? Job already started, with some money handed out, how do you get yourself out of it without losing money?

Dean Baker
Dean Baker
August 10, 2020 1:37 pm

I am a contractor that is trying to leap the next hurdle of growth. Frustrating to say the least. In need of assistance to understand the things needed to accomplish this. Looking for an advisor to answer specific questions.

Devon Stone
Admin
Devon Stone
August 10, 2020 2:28 pm
Reply to  Dean Baker

Dean – That’s what we’re here for. Check out our coaching services or look into our online classes. Feel free to call if you’d like, Michael’s in the office most mornings until noon (Pacific time).

General contractor
General contractor
July 15, 2020 12:39 pm

I am a GC and I hire or subs to do some of the work on a remodel job. Let’s use electrician as an example I hire an electrician to come in and rewire a house he gives me his estimate to do the work at what percentage do I mark it up before presenting it to the client?

Jesse Flowers
Jesse Flowers
August 19, 2020 9:07 am

I would say 15-25% depending on the price. I mean don’t get ridiculous. Some of your decision should be based on the rates of the electrician.

Scott
Scott
February 23, 2021 2:12 pm

Who’s responsible for workers comp and do you have to report their paid work on a W9 or W2?

Matt LeMieux
Matt LeMieux
July 7, 2020 3:45 pm

I’m attempting to determine what the percentage of a project’s cost is actually outside of the labor and rough materials. For example, if GC is only responsible for labor and rough materials for a project, what percentage decrease could I expect to see in a project’s cost vs. a traditional project cost. Factors including, marketing, client coordination, permits and design consulting, finish materials delivered to the job site, all being covered by me would save the GC what percentage of the job cost? If a GC provides a quote for a $25k bathroom remodel what percentage of that would be… Read more »

Matt LeMieux
Matt LeMieux
July 9, 2020 10:42 am
Reply to  Michael Stone

Hi Michael,

My question is what would the cost of a project be if the GC did everything vs. the cost of the same project if I bought and delivered all the finishing materials, pulled the permits, managed the design to ensure it was fully thought out and confirmed ahead of time. Leaving just the labor portion plus including rough materials for the GC.

I read your article but I guess I’m wondering what it would cost a sub to complete an entire job vs. hiring them as the GC. Would it be a reduction of ~24-50%?

Thank you

jim Morrison
jim Morrison
August 26, 2020 3:37 pm
Reply to  Michael Stone

Micheal,
What I see a lot clients asking for on large projects is for the GC to operate under a management contract, where the owner/ builder is responsible for the permits and liability and they pull their own inurance coverage. They feel they are in more control of the costs and are willing to take the risk

On Deck Electric
On Deck Electric
June 29, 2020 6:50 pm

I think 4% net profit is not sustainable. The risks as a contractor are too large to make 4%.

Ultimate Energy Controls Inc
Ultimate Energy Controls Inc
June 17, 2020 11:15 am

I couldn’t agree more! From the outside looking in the general public has no understanding of what it costs to run a business and what rates are required to make it sustainable.

Moses
Moses
May 29, 2020 10:20 am

But in the Bills of Quantities, there is a Preliminaries Section where overheads such a as insurance, transport, telephone, hoarding, testing etc are covered. Therefore the rates in the builder’s works should only include material cost, labor, plant and equipment and profit.

Kara Williams
Kara Williams
May 16, 2020 4:57 am

I’m working with a builder and he is charging me 11% OH and P. On the estimate spreadsheet it also shows I’m also paying 65k for the foreman(9 month project) as well as for his cellphone and all the “office” expenses. Is this correct?

Peter Coffman
Peter Coffman
April 28, 2020 9:20 pm

I loved the way you explained the overhead charges that a contractor has to pay to his workers and miscellaneous charges…

Lee-Ann Bibb
Lee-Ann Bibb
April 19, 2020 4:25 am

If I have already bought and paid for 100 percent of my materials at the cost of $100,000.00 how much should a contractor on average charge to do the build?

Keith Abrams
Keith Abrams
April 14, 2020 10:05 am

What if the contractor is charging a 10% mark up And an additional 30% profit To my let overall cost. plus all materials as well are included inTo my quote. Is this common?

MLM Improvements LLC
MLM Improvements LLC
April 7, 2020 7:33 pm

Thanks for your valuable resources keep sharing the information like this…

alex smoulders
alex smoulders
March 3, 2020 6:31 am

Hey Micheal, thanks for sharing here how much should a contractor charge for home renovation, Really informative and in spot on.

Jan
Jan
February 6, 2020 12:26 am

We are building a new house and we really trust our contractor. Prior to breaking ground we agreed to pay him an hourly wage plus 10% of time and materials. Recently in passing he mentioned it is 10%of time and expenses. There is a huge difference between time and expenses. It feels like a gouge to pay him 10% for things that are not material. What is the protocol?

Devon Stone
Admin
Devon Stone
February 6, 2020 3:08 pm
Reply to  Jan

Jan, it’s semantics. Time and material, and time and expenses, is the same thing. It’s normally called time and material, but the “material” is considered all expenses. Are you concerned that he’s gouging you? He’s not. New home construction usually requires at least a 1.26 markup, and he’s quoting you less than 1.10. You’ll be lucky if he doesn’t go out of business during the job because he can’t pay his own bills. Reread the article. We talk about remodeling, but new home builders are no different – they need to cover their overhead expenses and make a reasonable profit… Read more »

Jan
Jan
February 7, 2020 1:01 pm
Reply to  Devon Stone

Thank you for the reassurance. I come from a family of loggers and ranchers so I understand about overhead. We the home owner are paying for all expenses plus hourly wages plus what he calls his “profit” .. The only overhead he has is his own personal and company expenses like all businesses have. Paying for expenses because the contractor does not have the equipment is ok, but paying a profit charge on top of it it absurd and an insult to injury. He has been a builder for decades and is doing just fine.

Jan
Jan
February 7, 2020 1:15 pm
Reply to  Devon Stone

PS Perhaps to the receiving end of the deal, expense and material are the same thing but to the home owner they are different.

Amanda
Amanda
February 11, 2020 9:55 pm
Reply to  Jan

Subcontractors would be considered under expenses, not materials. For example, should he supply the subcontractor for block masonry, plumbing, electrical, etc. then these would be considered expenses since typically the materials would be provided by that subcontractor. Your contractor is required to supply his expertise & knowledge, management for permits & inspection fees (also expenses), subcontractors (their time + material), materials + delivery fees, etc. Paying additional for time and expenses is exactly how it should be since these payments come out of your contractors pocket and are expected to reimbursed by you. Not to mention, 10% above the cost… Read more »

Benjamin Haberman
Benjamin Haberman
December 20, 2019 6:58 pm

Hello Michael- I have a landscaping business with a very high mark up currently (2.25). The overhead is intense in the landscaping business. There is a lot of equipment needed to build the work and the work needs to be built in a short amount of time (9 months). It’s a very hard business to figure out. My question for you is sometimes we have situations where we have the opportunity to subcontract the work(we dont sub a lot in this business). But when we apply the mark up to the sub contractor, the price looks HIGH. I understand the… Read more »

BB
BB
June 20, 2019 5:40 am

What is the industry standard % for a general contractor to build a custom home?

Devon Stone
Admin
Devon Stone
June 20, 2019 8:32 am
Reply to  BB

BB – There isn’t one. Every contractor needs to calculate his markup based on his business. https://www.markupandprofit

Matt Wolf
Matt Wolf
March 23, 2019 9:41 am

Fixed overhead should be level set against a typical work effort (ex. 40 hours a week).
Once you exceed that effort (work overtime), you have 100% covered your fixed cost, and your profit increases.
Effort can be measured in man hours, volume or gross revenue. The article does not mention this, and too closely ties fixed and variable markup costs. Imagine trying to be complete against someone that knows this when you don’t!

restreet
restreet
September 13, 2018 5:37 am

This discussion is about Cost of the Work contract where the Owner pays the actual costs and the Contractor adds a Fee which is either an agreed upon % of cost or a fixed Fee. The Fee is essentially the Contractor’s OH&P. In such a contract only the subs mark up materials but all the Owner sees is the cost of the winning sub bidder. Cost control for subs is provided by competitive bidding.

Biteityouscum
Biteityouscum
August 24, 2018 4:01 pm

It is really simple if you want good work today you have to find your unit cost as a contractor. Some new contractors start a little low and people reap the benefits. Eventually a contractor that has pride in his work and business will learn that they need to charge to stay in business. Architects, prime contractors and designers are all guilty of not considering california prevailing wages for a detailed project or complying with labor code 2810. I know this because every project I bid, I bid it according to these laws and a lower number is almost 99%… Read more »

Natalie
Natalie
August 22, 2018 1:27 pm

If my contractor gets 35% off sinks/toilets/medicine cabinets – how much should he be charging me? Should my price be retail even if he gets 35% off?

Michael Jacobson
Michael Jacobson
November 8, 2018 2:41 pm
Reply to  Natalie

At least retail. If you would rather give the money to a retailer than your contractor, you can purchase the materials on your own. I personally don’t know why you would rather pay more to some big retailer instead of the person you hired to do the work.

Ron Davies
Ron Davies
February 4, 2019 6:21 am
Reply to  Natalie

Retail or more. What about handling, delivery, research, etc.? Is your expectation that the contractor should receive nothing for this?

Heisenberg
Heisenberg
February 16, 2019 9:03 pm
Reply to  Natalie

He should be charging you retail, +tax, +10% at bare minimum.

Joshua Robertson
Joshua Robertson
February 25, 2019 2:31 pm
Reply to  Natalie

Yes when he adds sales tax the time spent figuring and getting the product you can expect to see around a 30% mark up on supplies and expenses

notmycupoftea
notmycupoftea
June 18, 2019 7:13 pm

You’re ridiculous. Shame on you.

bambalam
bambalam
June 18, 2019 9:38 pm
Reply to  notmycupoftea

LMBO it’s business plain and simple. Ridiculous is the mark up suppliers make that 3000$ refrigerator only cost Lowe’s 430$. And shame on you expecting some one to work and provide a service and deal with your issues and not get paid to do it.

notmycupoftea
notmycupoftea
June 19, 2019 8:33 am
Reply to  bambalam

haha. No, you seem to have everything backwards. You see a supplier marks up the costs because they are a…. supplier. They have to deal with risk of holding items, inventory, moment. You just buy the toilet seat, so difficult!

bambalam
bambalam
June 19, 2019 9:08 am
Reply to  notmycupoftea

As does the contractor who is responsible for the bill and getting it to job. Since you seem to know so much maybe you should try it out. I mean obviously I know nothing about the business ?.

notmycupoftea
notmycupoftea
June 19, 2019 9:24 am
Reply to  bambalam

Oh. you don’t think I’m a contractor because I don’t rip people off? Interesting. Delivery is easy, I just pass on the $50 deliver fee and let the supplier deliver it. (or sometimes free if it’s $3k-25k from the supplier. They save money, I’m not ripping them off.

KTF
KTF
July 17, 2019 4:34 pm
Reply to  notmycupoftea

You are the customer that watches over my shoulder, gets in the way, doesnt do what is required. For example, I’m a finish carpenter…when going into a house to rip out old trim and install new..I charge for me to move the furniture..some customers say theyll do it…you are the one who doesnt move it…or when you do…you move it 3 inches from the wall so you “can still have space to sit on your $8k couch…then complain that my compressor is too loud and my nail gun is interrupting your show. Or…the best one…the wall has a bow in… Read more »

notmycupoftea
notmycupoftea
July 17, 2019 7:13 pm
Reply to  KTF

You’re just applying bad experiences with customers and generalizing them onto me. That’s not an argument. And we’re not talking about moving furnature, take that up with them, I didn’t sign the contract.

But I think I see what’s going on here. Sounds like you’ve had a lot of bad customers and this is is why you justify taxing them 20% on trim you pick up from Home Depot? Shame.

ezekiel1111
ezekiel1111
July 2, 2019 10:48 pm
Reply to  notmycupoftea

If we buy the seat, than we own it. If you want our seat you will need to buy it… which makes us… your supplier. If its my toilet I can sell it for whatever you’ll pay. In fact, what if I drive to the store with my gas, use my time and money (loan=risk) to attain the fixture, use my vehicle to deliver it to your house (stores charge about $75 per delivery).. say I did all of this but I don’t get a discount on toilets? I would still be charging you a mark up to cover all… Read more »

notmycupoftea
notmycupoftea
July 9, 2019 3:25 pm
Reply to  ezekiel1111

“What happens if there are unforeseen circumstances and the job was way more complicated than it originally seemed… will you volunteer to pay the difference? or say, “tough, its your job to come up with a price”. Here’s one for you. Worker’s comp for a carpenter in MN is 23% of payroll. “

You’re convoluting the issue. A job being more complicated than you originally thought should have nothing to do with upcharging an item!

Eitherway, I hope you’re letting these poor bastards know that you’re charging them extra for an item!

Richard
Richard
December 11, 2019 5:53 pm
Reply to  ezekiel1111

Here here, you are very articulate.
Very well stated. I couldn’t agree more. It’s a tuff business. It’s a difficult thing to convey to a potential client /customer/pessimist, without insulting them.

Nathan M Cole
Nathan M Cole
February 24, 2020 9:43 pm
Reply to  ezekiel1111

This is so well put.

Ryan Terry
Ryan Terry
May 22, 2020 7:38 pm
Reply to  ezekiel1111

Anyone who is planning on hiring a contractor for their business/home remodeling should read this. Maybe their wouldn’t be so much sub par work being done by unqualified people for a cut rate price that makes us all look bad. Excellent explanation.

Copley Services
Copley Services
August 20, 2019 5:33 am
Reply to  bambalam

Agreed!!! If it were that easy you wouldn’t be looking for a contractor to get your fixtures. And for you who choose this, don’t complain when you call us to come fix it properly and have to charge more to undo your DIY quality work. Someone who spends there life establishing their self and business had spent countless hours running their business behind the scenes. That 35% goes twords the countless unpaid hours of work to get them that 35%. Nickel and dime the real trades men and have fun dealing with Home Depot and IKEA contractors.

Nicholas
Nicholas
July 17, 2018 9:42 pm

Should markup be charged for materials? Say that a contractor is purchasing windows and doors, should this have a markup?

Jeff Bower
Jeff Bower
July 18, 2018 2:44 pm
Reply to  Nicholas

Yes. If the contractor touched the material than yes there is likely a markup. This is why some people try to get their own material and just pay for labor. But, think about it, you’re asking the guy to order material for you or go to the store with his truck and take the time to shop and pick things up, that’s what you’re paying for. Auto dealerships make a killing off of this practice. I add 18 to 20% on all material and all labor for a subcontracted crew.

notmycupoftea
notmycupoftea
June 18, 2019 7:16 pm
Reply to  Jeff Bower

Hahaha most deliveries are less that $100, and sorry, but most contractors have no taste. Leave it to the home owners to buy the product and the contractors work!

bambalam
bambalam
June 19, 2019 9:10 am
Reply to  notmycupoftea

Deliveries are 200$ for 50 mile radius dumbass Lowe’s home Depot Ace that’s the going rate as it’s considered freight.

Jason Kindle
Jason Kindle
July 14, 2019 9:15 am
Reply to  bambalam

Most deliveries are between $20 and $70 depending on the deal you have with the supplier. And then $1 exttra per mile, and is sometimes free if you hit their price. So if you’re paying $200 for a 50 mile range that is very unusual.

Second. All you would have to do is just transfer that delivery cost on to the supply cost, but you would rather charge more than the actual cost of shipping. So if a costomer spends $5K on supplies you tax on 20% of that? That’s $1000!!! You’re crazy! SHAME ON YOU!

Bond Summers
Bond Summers
November 20, 2019 6:19 am
Reply to  Jason Kindle

In major municipalities of California, deliveries are typically $85 to $100. Some less, some more.

Jason Kindle
Jason Kindle
November 21, 2019 8:39 am
Reply to  Bond Summers

not from the big box stores. And again, if a homeowner is redoing their kitchen or bath and spending 5K-20K charging 20% $10k ($2000!) on the supplies for a 100$ deliver is criminal! Not to mention the contractor already should get %10 off with contractor discounts so that actually 30%!

Jon Forsberg
Jon Forsberg
December 14, 2019 1:51 pm
Reply to  Jason Kindle

Please tell me how a contractor gets 10% off from the big box stores? I am a contractor who is not ex military or a senor citizen and I pay the same as my customers. There is no contractors discount that I am aware of.

Jason Kindle
Jason Kindle
December 15, 2019 10:50 am
Reply to  Jon Forsberg

If you are contractor who purchases bulk items at Home Depot, Menards, Lowes, etc. they will discount up to 20%. You usually have to spend above $1500 for a 10% and above $5000 to get 20% off. Also there are the occasional promotional offers they send out for 10% off on any purchases. Just go to their pro desk and let them know.

So, yeah, for any contractor slapping a 30% upcharge on the sticker price. Shame on them.

Jason Kindle
Jason Kindle
December 15, 2019 11:03 am
Reply to  Jon Forsberg

And it doesn’t’ actually have to be bulk items, it can be anything.

Name
Name
July 13, 2019 5:13 pm
Reply to  notmycupoftea

I’m curious, notmycupoftea. Is there a specific reason you’re such a jerk, or are you referencing some actual situation? Because the way you are attacking the industry as a whole leads me to believe your opinions aren’t worth anything because you’re too biased.

Ron Davies
Ron Davies
February 4, 2019 6:22 am
Reply to  Nicholas

Yep. 15-20% markup should be applied. Markup is NOT profit. See https://www.markupandprofit.com/blog/how-much-should-contractor-charge

audnak
audnak
February 11, 2019 5:38 pm
Reply to  Ron Davies

What if I researched and purchased the materials on my own and had them delivered on site (I paid out of pocket for delivery)? My contractor did not have anything to do with the purchasing process or had to front any money upfront on materials, but he is still charging me 20% as O+P and says that’s industry standard. Please advise, thanks.

Ron Davies
Ron Davies
February 11, 2019 7:04 pm
Reply to  audnak

If the materials are supplied by you, and delivered to the site, then charging you an additional 20% is NOT any kind of industry standard, it is gouging. I would get another contractor. If he is gouging now, he will continue to be underhanded, and it will get worse. Also, he may try to hide that 20% somewhere else.

audnak
audnak
February 12, 2019 1:19 pm
Reply to  Ron Davies

Thanks. What if material was supplied by me, but picked up by the contractor? I purchased tiles and hardwood floors on my own, but had my contractors pick them up. Thanks again for your input.

Devon Stone
Admin
Devon Stone
February 12, 2019 5:35 pm
Reply to  audnak

Audnak – It sounds like you’re doing all you can to get this job done as cheaply as possible. Trust me, a 20% markup on materials that you provided isn’t gouging. When you supply materials, you take responsibility for those materials. Your contractor should not guarantee the install. If there is any problem with those materials, your contractor will charge you twice for the labor – once to install the bad materials, then tear them out and install the new materials. If, in 90 days, something goes wrong with those hardwood floors because you didn’t recognize the difference between low-cost… Read more »

Joshua Robertson
Joshua Robertson
February 25, 2019 3:10 pm
Reply to  audnak

Then expect to pay between 500 to 1000 $ aday in labor and other expenses depending upon where you are in the world with no warranty for material defects or problems due to material I.e. if the contractor can’t make money on materials and they aren’t his property or product then he or she or they have no contractual obligations to not be paid for his work or rework or scope of work changes and change orders usually start between 250$ and 500$ just to change plus material and labor. “Take no responsibility for anothers debt cause you may have… Read more »

Joshua Robertson
Joshua Robertson
February 25, 2019 2:57 pm
Reply to  Ron Davies

Actually a 30% markup is pretty standard across most business and platforms. When you’re labor cost is 8 to 40% for workers compensation insurance and your general liability is at 5 % plus the average labor in prevailing wage act comes to around 800 a week plus other expenses your contractors make some where between 3.2% and 12% profit above a pay check weekly so if your project cost around 100k then @ 7 % he will make 7000 and that will take him between 3 to 6 months to complete and he will struggle to stay in business at… Read more »

Matt Kuehn
Matt Kuehn
March 25, 2019 11:59 am
Reply to  Ron Davies

It is not gouging its people trying to short the contractor. He still needs the markup money to pay overhead.

So they either keep the markup or increase the labor rate to cover it.

ezekiel1111
ezekiel1111
July 2, 2019 10:59 pm
Reply to  audnak

He is only charging 20% on what he supplied. If you supplied it, it would not be on his bill and therefore not charged for… Unless you have the unimaginable scenario that he showed up, saw materials and demanded his 20% mark up…

Marshal Doss
Marshal Doss
January 2, 2020 2:18 am
Reply to  audnak

I would turn the job down. If i bid it with my mark up, and then you come to me saying you bought the materials. You just cut my bid and expect me to do the same job with usually more time for less money. Most customers buy less or inadequate materials than what is needed. Also if you buy the material you just voided your warranty with me.

Abel
Abel
July 6, 2018 3:56 pm

Other than problems with profit pricing work, what are other frustrations that contractors are facing in the industry?

hobiesmom
hobiesmom
May 4, 2018 11:15 am

So, is it normal and acceptable for a contractor to only charge markup on the estimated labor and materials in arriving at his price for a project, OR markup PLUS 20% O&P?

Jeff Bower
Jeff Bower
May 5, 2018 9:29 pm
Reply to  hobiesmom

They should add about 10% to each of those and that will give you the total cost, Remember that if you get a bid for 10k and the project required more material, the contractor pays for it. That’s the chance we take with bidding the job. Of course there are special circumstances, but some jobs pay better than others. Labor works the same way. One mistake can cost the contractor half a day for a crew of guys and who pays for it? The contractor is the top of the food chain AND the bottom of it at the same… Read more »

Devon Stone
Admin
Devon Stone
May 22, 2018 8:50 am
Reply to  hobiesmom

Markup should include all overhead and profit. As far as the “20% O&P” goes, there is no industry standard of 20% or 10%. We talk about that here: https://www.markupandprofit

hobiesmom
hobiesmom
May 22, 2018 9:41 am
Reply to  Devon Stone

Thank you. Our issue has resolved itself since I first posted this. We discovered that he was trying to charge an exorbitant markup (WAY more than 1.5%, more like 3%) AND 20% O&P on top of that. I don’t have a problem with anyone making a living, but fleecing someone is not a good way to do business.

snaffew
snaffew
September 22, 2018 10:17 am
Reply to  hobiesmom

If you have a contract for $10,000.00 and the contractor marks up materials 10 percent…how is this fleecing a customer? Say the materials are $4k and the contractor makes $400 off of the markup…that’s his money he doled out for the materials, his time to assess what materials to get, his time to pick out the materials, his gas and his vehicle to pick up the materials, etc. 1.5 percent on $4k is $60. Do you really expect someone to pick out, pick up, pay for and deliver all those materials for $60 and think that’s exorbitant? Perhaps you should… Read more »

mdme me
mdme me
February 1, 2019 4:23 pm
Reply to  hobiesmom

The 1.5 is not 1.5% it is 150%. 10,000 x 150% (or 1.5) = 15,000

Heisenberg
Heisenberg
February 16, 2019 9:10 pm
Reply to  hobiesmom

Perfect example of why I don’t get into these discussions with customers. The price is the price, how he arrived at that price is none of your business.

Bob Youngs
Bob Youngs
March 6, 2019 12:00 pm
Reply to  Heisenberg

A Heisenberg: Amen, and amen! The price calculations don’t matter to the client, as long as they feel they are getting what is acceptable and a good exchange for the value. If you get fleeced by the ‘contractor’ you are likely get fleeced by others in your life. That means you should act more prudently, and seek advice if you feel someone is legitimately charging far more than they should. In some cases it is possible the business person just sees too many potential problems, or it’s just a really bad ‘fit’ for their business and maybe they’re too bashful… Read more »

Jane Doe
Jane Doe
July 5, 2018 9:02 am
Reply to  Devon Stone

We had a contractor (not licensed – lost it) charge us $5,000 up front, materials and labor by the hour for himself and his helper, plus 15% P&O. There was a contract signed for a remodel, but we’ve reached the estimated price, and the work is only 65% complete. Does this sound right?

Dustin Cunningham
Dustin Cunningham
March 6, 2019 8:08 am
Reply to  Jane Doe

If this person has no license he is a handyman….not a contractor. You went cheap and you got what you paid for. Unfortunately this will be an expensive “I told you so” learning experience for you. In the state of California and unlicensed handyman can do no more than $499 worth of work for any one client during any one calendar year. Your desire to cheap out on your project has undercut all legitimate contractors….not to mention the harm done to the reputation of legitimate contractors every time you tell all your friend how you got screwed by a “contractor”.… Read more »

Bob Youngs
Bob Youngs
March 6, 2019 11:52 am

I couldn’t agree more there Dustin. I’ve called the California State Licensing Board to ask specifically on this one myself. Turns out the wording in the License Law & Reference Book is really specific, that if the non-licensed person does work (including all materials and overhead, etc) the person requires a license in California. In addition, they were clear to tell me that means if a project involves more than one person doing work on the project, it means the total of all work (with all materials, etc for the project entirely) cannot hit the $500 mark or they all… Read more »

Jeff Bower
Jeff Bower
April 22, 2018 7:01 am

This is a great article! I started a company only 3 months ago subcontracting Amish teams to build pole barns here in the Midwest and this author is spot on. The biggest thing most homeowners take for granted is they can pick up the phone and get multiple people to give them a job quote, yet for each phone call they make, behind the scenes you have just asked each company to invest from 1 hour up to multiple hours in your project. I have dozens of bids I’ve worked on that never come through. All of that took my… Read more »

Devon Stone
Admin
Devon Stone
May 22, 2018 8:52 am
Reply to  Jeff Bower

Jeff – You need enough to cover your overhead expenses and make a reasonable profit, and 15-20% won’t do it. You’ll discover that in a few more months; or you can read Markup & Profit, A Contractor’s Guide Revisited and learn how to calculate your markup so you won’t go broke. (https://shop-markupandprofi

Dustin Cunningham
Dustin Cunningham
July 6, 2018 9:50 pm
Reply to  Devon Stone

Saved my business! Best book ever….

Abel
Abel
July 6, 2018 3:57 pm
Reply to  Jeff Bower

Other than problems with profit pricing work. What are other frustrations that contractors are facing in the industry?

Ron Davies
Ron Davies
February 4, 2019 6:25 am
Reply to  Jeff Bower

Our market is short of contractors. We are considering charging $150 for the quote to pay for the resources consumed in quoting.

Tired_of_theBS
Tired_of_theBS
May 27, 2019 2:28 pm
Reply to  Jeff Bower

Except they are charging for the hours spent via labor charges, of which is higher than the costs of the labor. Contractors will try and tell you it’s due to the expenses beyond base pay. (Stuff that anyone who has an employee knows). However they will typically charge more than their cost even with the added costs of an employee. For example a $30 an hr employee doesnt cost the busi ess $50. It just doesnt. They will then use a markup on top of that, say 20%. Ok fine. The problem is they will then try to add “overhead”… Read more »

bambalam
bambalam
June 18, 2019 9:50 pm
Reply to  Tired_of_theBS

That all depends on the trade classification as workers comp is as much as 70% depending on the classification and let’s not forget the general liability which is 5 to 10% cost of safety equipment ect. That’s also not including providing health care insurance options for your employees or retirement.

Bond Summers
Bond Summers
October 23, 2019 8:59 pm
Reply to  Tired_of_theBS

Markup in many retail ‘markets’ is commonly 100% of the wholesale price, i.e. double the wholesale price,… which is slyly termed 50% markup, – i.e. the marked up difference is 50% of the retail price.

Iga Rudzinska
Iga Rudzinska
September 8, 2019 4:56 am
Reply to  Jeff Bower

I am trying to get an estimate over the phone, just to understand if I can afford the contractor, but they seem to prefer to spend their time to travel to my place instead of giving me an idea of the possible cost. I am not getting it.

Bond Summers
Bond Summers
October 23, 2019 8:54 pm
Reply to  Iga Rudzinska

Send them photos of your intended project along with the main details, over email to get a fair enough estimate.

GCGALORE
GCGALORE
November 15, 2019 10:40 am
Reply to  Iga Rudzinska

as simple as you think getting a quote may be over the phone, what ends up happening is that the contractor comes to take a look (after telling you a job is $50,000) and then in person sees the project at hand and tells you that its actually going to be $75,000. you will think you were lied to and shouldn’t trust the contractor. But, in reality what happened was that you aren’t a contractor and doesn’t know what is involved with the whole project and left out 10-20 major factors in the job that are not accounted for. If… Read more »

Betancourt Desmond Lillian
Betancourt Desmond Lillian
April 3, 2018 12:29 pm

How much is the price ranch for a chainlink fence 210 feet.My contract is charging us 7,500. Which we think he ripping us off.

Peter Hadley
Peter Hadley
April 19, 2018 4:12 pm

Thats really not bad. Paid $3200 for 88′ of vinyl 6′ tall fencing.

Ron Davies
Ron Davies
February 4, 2019 6:26 am

Wholesale rate on a hole with a post cemented into it is $100. You have 21 posts at $100 each COST. That’s $2100 for the posts alone. You got a good deal.

ghtyui33
ghtyui33
February 17, 2018 1:14 pm

I can’t help but read through these comments and get the sense that some contractors think that what they do is special or different than any other vocation. Auto mechanics charge an hourly rate and a markup on parts. Plumbers do the same. Electricians – the same. So for a GC to layer additional profit on top of all these others smacks of selfishness. Sure – GC’s have “overhead”, but so does every other business in the world. If you need to charge 150% to cover your overhead, you need to run a better business. As a customer, markups will… Read more »

Dustin Cunningham
Dustin Cunningham
February 23, 2018 2:51 pm
Reply to  ghtyui33

Where in this article did Michael state that a contractor needs to charge 150% markup? 1.5 is the multiplier…..that’s a 50% markup (100% of the job costs + 50%). And remember….that 50% includes all overhead, salary and profit. Believe me, by the end of any job, at 50%, you are still counting pennies and doing everything you can to keep costs on budget. By the way…GC’s do pay markups on everything else! The tile supplier isn’t selling tile at a loss…..the electrical sub is charging overhead and profit as well. As a GC I’m the last person on a job,… Read more »

Abel
Abel
July 6, 2018 3:58 pm

Other than problems with profit and pricing your work, what are other frustrations that contractors are facing in the industry?

Dustin Cunningham
Dustin Cunningham
July 6, 2018 9:48 pm
Reply to  Abel

Hi Abel, thank you for the question. I believe every contractor has similar and different frustrations. For me my frustrations have to do with the sometimes insane planning department and B&S codes that every project must adhere to. Mind you, I’m not talking about codes that relate to engineering, earthquake and fire safety. I deal with a lot of setback issues, neighborhood architectural reviews and other items that can make a contractor want to pull his/her hair out. There is a current problem that I think all contractors face that is a real pain in the posterior. Lately I have… Read more »

vickiepowell
vickiepowell
March 29, 2018 1:18 pm
Reply to  ghtyui33

The major cost items are fluid and intangible and you cannot quantify them online or anywhere else. I don’t know of ANY contractor making a lot of money off making off actual items/materials. They usually charge a flat mark up to help cover the administrative costs of accounting – reconciling and paying the bills, handling, gas, insurance, etc. The REAL way you are gouging contractors and injuring the industry is because the money has to come out of wages. Therefore you get illegal crews working under the table with no benefits and actual citizens out of work. Only someone who… Read more »

Dave
Dave
January 13, 2019 8:50 am
Reply to  ghtyui33

This is a valid point, on the other hand the contractor has to do his best to offer a price that is fair to himself as well. When bidding on a job there are so many things to consider. The fluctuation in material prices have to be considered. Unforseen issues have to be considered. You want to be fair out chances are you won’t get the job, but you also have to make sure you don’t lose money on the job and on those unforseen expenditures that almost always come up. It’s hard to be fair and competitive. If you… Read more »

Bond Summers
Bond Summers
October 23, 2019 9:04 pm
Reply to  ghtyui33

Markups take care of the accounting on items purchased/installed for the project. Plumbers and Electricians work on the same level, not differently as you indicate. But, case by case depending on the particular project circumstances.

John Doe
John Doe
February 17, 2018 10:07 am

Generally speaking, as a contractor for over 40 years, the construction contracting business is in huge trouble. It is more common than uncommon to speak to contractors in disputes with home owners and/or $ troubles.DIY TV has a lot to do with it IMO. Home owners eat that stuff up as if it were gospel and don’t realize so much is staged for TV and paid for by the programmer.Construction contractors have a particular set of skills that can only be developed with time, effort, training. Any one can swing a hammer or a paint brush but there is a… Read more »

vickiepowell
vickiepowell
March 29, 2018 1:20 pm
Reply to  John Doe

And a Contractor working in any particular area for any amount of time gets to know which Architects are hard to deal with, which types of Owners are going to constantly give him a headache. And in some cases, I have heard our estimators say “we just know too much about these types of projects” – in other words, they have done them over and over and KNOW what problems will arise and add contingencies for it. Also include regulatory fees – licenses and permits and training – which everyone seems to want their Contractor to have but NO ONE… Read more »

Abel
Abel
July 6, 2018 3:59 pm
Reply to  John Doe

Other than problems with making a profit and pricing your work, what are other frustrations that contractors are facing in the industry?

Dave Johns
Dave Johns
August 20, 2018 12:53 am
Reply to  Abel

Abel you ask the same question throughout this thread and have been answered every time, i am beginning to see your a slow learner and by now if you have not understood the replies then you need to relocate to a short bus facility where they can explain everything slower than the average Abel needs to under stand simple economics.

Kirk Hilles
Kirk Hilles
February 16, 2018 8:10 am

We have a house from 1972 and a small 5×7 bathroom we’ve wanted remodeled. I got all of the demo done, redid all of the wiring and purchased all of the tile and major components and then got “sticker shock” at a $6,500 quote to get it finished (plus a attic ladder install) which is likely 90% labor. I had troubles reconciling that especially when I’ve gotten a quote from a local guy to do both floor and tile for $1,700. BUT, I think I finally “get it”. People focus on the “markup” for hourly rates, markup for materials, etc,… Read more »

Jeremy
Jeremy
February 21, 2018 6:02 am
Reply to  Kirk Hilles

Kirk, you are on the right track. But you left no money to pay for business expenses. The only overhead you covered in this scenario is a fair salary for the contractor. Sure the materials got purchased, the labor was paid for and the contractor made his salary. I hope that contractor is insured, has a computer to type on, has a car or truck to drive to the jobsite, a website to get job leads, pictures of his fine work, etc, etc. You missed a bunch of his overhead costs. If he wants to grow his business, he might… Read more »

Matthew David
Matthew David
February 22, 2018 3:01 am
Reply to  Kirk Hilles

I’m not sure what people get paid to do there work but I’d have to say if you make just a paycheck for owning you’re company you will not last long. What does material have to do with labor? So if you had tile work done with tile you bought for .88 a sf you think the cantractor should charge less in labor? If you bought beautiful expensive tile he should keep his work lower than material? I don’t do that type of work I do customized concrete stamping color and hand faced stone work and I charge probably 6… Read more »

matt stoesz
matt stoesz
March 23, 2018 9:13 pm
Reply to  Matthew David

Ya, that formula works for me :
“I would never do my work less then what material and man labor cost times 2”
It seems to work out pretty good. I do high end metal roofing, zinc/copper curve roofs.
If its too expensive for you, someone else will do it for cheaper and I wont come back to fix it!
Cheers

Joshua Robertson
Joshua Robertson
February 25, 2019 3:56 pm
Reply to  Kirk Hilles

Yes you are pretty well on the contractor is making his money on his money like an investment or gambling seeing as all things man made are subject to fail and everyone else has to get their part as well the State the City the county the land fill the insurance company. The employees and the contractor. In reality a 5×7 bathroom can cost anywhere between 3500 to 9000 depending on materials, design, location, and local laws

ezekiel1111
ezekiel1111
July 2, 2019 11:26 pm
Reply to  Kirk Hilles

The average bathroom remodel with tile install, is $25k all in. Often homeowners will supply most finishings and contractor will only supply construction material and install other material. In this case the contractor’s portion would be around $15k. Sounds like there was no demo ($1200), you did electrical (correctly with dedicated 20 amp circuit?)($2500) Did you supply tile backer? is there accent of base tiles? is there a customer shower with floor pan? Drywall? HVAC (fart fan) Paint? Door? Trim? Windows? This is way more than two weeks worth of work but the way, and the big ticket item in… Read more »

Matt
Matt
January 26, 2018 6:31 am

I worked for a contractor who has no Employees and does not perform any work himself, he also has no Shop/office he is paying rent for, no tools etc. He basically just hires subtrades and checks on the job every other day.still he charges the client 70% mark up for subtrades.Basically my quote was just under 9000$ (Including labour and material) and charged the client 15000$ for my service! If he does that for every other subtrade like plumber, electrician, millworker, drywaller, framer, flooring guys etc.Simply means job cost would be 63000$ and his charge is 105000$.So thats 42000$ for… Read more »

vickiepowell
vickiepowell
March 29, 2018 1:26 pm
Reply to  Matt

Whatever he wants to charge is acceptable if the client hires him. It is a lot of hassle managing a project with schedules, materials, deliveries, subs, insurance, etc. If you don’t like his price, hire the other guy. You don’t get to dictate to people what they are willing to work for EXCEPT just don’t hire him. If he has contacts that allows him to bid work under other contractors who are self-performing then that’s his value.

notmycupoftea
notmycupoftea
July 17, 2019 7:22 pm
Reply to  vickiepowell

Which is why I hired the other guy