How should a contractor price a quote?
Price your quote based on your true costs plus a profit margin you can defend. Most contractors either underprice because they guess at labor time, or overprice and lose jobs. We'll walk through the math and the decision points that actually matter.
Start with your actual labor cost per hour
This is the number contractors skip. Find out what you actually pay your crew, including payroll taxes, workers comp, and vehicle costs. If you pay a plumber $28 an hour and their tax burden is 35%, your real labor cost is roughly $38 per hour. Don't guess. Pull last quarter's numbers. Now estimate how long the job takes. A bathroom remodel isn't 40 hours—break it down by task. Demolition, rough plumbing, drywall, tile, finish. If you're off, you're off consistently. Track your time for two weeks on three jobs. You'll see the pattern. Use that actual data for future quotes, not what you think it should take.
Add material costs plus a markup
Material cost is straightforward—what you actually pay your supplier. Then mark it up. Most contractors use 20-35% markup on materials. A plumbing job with $800 in materials marked up 25% becomes $1,000. This covers waste, breakage, price fluctuations, and admin time sourcing parts. Get actual quotes from your suppliers for each job. Don't remember what copper cost last month. Prices move. If you're doing the quote on-site, take a photo of the space and get written quotes from your suppliers before you submit the estimate. It takes fifteen minutes and kills surprises.
Decide your profit margin upfront
Profit margin is what's left after all costs. Most healthy contracting businesses run 10-20% net profit. A roofing job with $5,000 in labor costs and $3,000 in materials should be priced around $9,500 to $10,500, depending on your market and risk. That gives you $1,500 to $2,500 in profit. Some contractors price percentage markup instead (50-100% markup on costs). Either method works—just pick one and stick with it. Your margin covers insurance, unexpected issues, weather delays, and keeping the lights on. If you're consistently winning every job, your margin is too high. If you're losing jobs you expected to close, it's too low.
Present the price clearly and justify it
Homeowners don't understand labor. They see the total and flinch. Your quote should itemize labor (estimated hours and rate), materials (with supplier quotes attached), and any overhead or permits. "4 days labor at $125/hour = $4,000. Materials (itemized) = $2,100. Permit = $200. Total = $6,300." This shows you're not making it up. Customers close more often when they see why the price is what it is. If a competitor quotes $4,500 for the same work, you know whether you're overpriced, underpriced, or they're cutting corners. Track your close rate by quote price range. If you close 60% of jobs under $5,000 but only 30% over $10,000, your pricing in that range needs adjustment—or your sales process does.
Bottom line
Calculate labor using actual hourly cost, add marked-up materials, apply your profit margin, and itemize the quote so customers see the math. Then track which prices close and adjust based on real data, not what feels right.