How to Price a Job: Labor, Materials & Markup
Price a job by adding your labor, materials and overhead to get your cost, then adding profit on top. To hit a target profit margin, divide cost by one minus the margin. A job that costs you $1,000 with a 20 percent margin should be priced at $1,250.
| Markup on cost | Price | Profit | Margin on price |
|---|---|---|---|
| 10% | $1,100 | $100 | 9.1% |
| 20% | $1,200 | $200 | 16.7% |
| 25% | $1,250 | $250 | 20% |
| 50% | $1,500 | $500 | 33.3% |
Step 1: Estimate labor
Estimate the hours for each task and multiply by your labor rate. Use a loaded rate, which covers payroll taxes, insurance and benefits, not just the hourly wage. Add a buffer for callbacks and delays on unfamiliar work.
Step 2: Add materials
List every material with quantity and current price, including waste. Add delivery and disposal. Prices change, so check supplier quotes close to the estimate date and put a validity period on the estimate.
Step 3: Add overhead
Overhead is what it costs to run the business that is not tied to one job: insurance, vehicles, tools, software, licenses and office costs. Spread it across jobs, for example as a percentage of direct cost, so every job carries its share.
Step 4: Add profit, and know markup from margin
Markup is profit as a percentage of your cost. Margin is profit as a percentage of the price. They are not the same: a 25 percent markup is a 20 percent margin. If you want a 20 percent margin, divide your cost by 0.8, not multiply it by 1.2.
- Price from markup: cost x (1 + markup)
- Price from margin: cost / (1 - margin)
- Margin from markup: markup / (1 + markup)
Step 5: Put it on the estimate
Show labor and materials as separate lines so the client can follow the price. Decide whether markup is shown as its own line or built into each item, and be consistent. Then send the estimate for approval and convert it into an invoice when the work is done.
Common questions
How do contractors price a job?
They add estimated labor, materials and overhead to find the cost of the job, then add profit. Labor is hours times a loaded rate, and materials include waste, delivery and disposal.
What is the difference between markup and margin?
Markup is profit divided by cost. Margin is profit divided by price. A 25 percent markup produces a 20 percent margin, so the two numbers are never equal unless both are zero.
How do I price a job by the hour or flat rate?
Hourly pricing is safest when the scope is unclear. Flat-rate pricing suits well-defined, repeatable work, and rewards you for being efficient. Either way, itemize the estimate so the client sees what they are paying for.
Should I add a contingency to an estimate?
For work with unknowns, such as remodels in older buildings, many contractors include a contingency allowance and say so on the estimate. Be clear about what triggers a change order.
Can AI help me price a job?
AI can draft the scope and line items from a job description, but you set the prices. MyInvoice lets you review and edit every line before the estimate goes out.
Turn your pricing into a professional estimate
Itemize labor and materials, send it for approval and convert it into an invoice.
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