How quote math works
Most small contractors underprice for the same reason: they price the wage, not the job. A $35-an-hour wage is not a $35-an-hour cost once payroll taxes, workers comp, time off, truck, fuel, insurance, and phone are counted. That loaded number is your burdened rate — start there, or every quote is short before you begin.
The order of the math
- Labor: hours × burdened rate.
- Materials: materials cost × (1 + waste %). Ten percent waste is a safe default for cuts, splits, and bad boards.
- Job cost: labor + materials + subcontractors + permits, fees, rentals, and disposal.
- Overhead: a percentage of job cost for the business costs every job has to carry. Fifteen percent is a starting point, not a rule — work out your own yearly overhead divided by billable hours.
- Price: total cost × (1 + markup %). Markup is not margin: a 25% markup on cost is a 20% margin on price, because margin is profit ÷ price.
Why the exclusions matter more than the price
Price arguments are usually scope arguments in disguise. A client who thought permits were included, or that hidden rot was part of the price, is not arguing about your rate — they are arguing about what "the job" meant. Writing exclusions and a change-order rule into the quote before work starts is what turns that argument into a signed change order instead of a lost day.
Frequently asked questions
What markup should a small contractor use?
There is no universal number. Start from your real overhead and the margin you need to stay in business, then work backwards: a 20% margin needs a 25% markup; a 30% margin needs about a 43% markup. If your quotes keep landing work but the bank account never grows, your markup — or your burdened rate — is too low.
Is this a contract?
No. This page gives you a quote summary to send a client. A signed contract, deposit rules, and local licensing and lien rules are separate — check your state's requirements before you take a deposit.
How do I handle a partial-scope job for a general contractor?
Use the same math, but be extra careful with exclusions: write down exactly what you are — and are not — taking on, who handles the work before and after yours, and what triggers a change order. Partial scopes are where the most margin leaks out.