How to price trade jobs so you actually profit

Markup vs. margin — they are not the same number

Markup adds a percentage on top of cost. Margin is profit as a share of the price the customer actually pays. Confusing the two is the single most common way trade businesses underprice themselves, because a markup percentage always produces a smaller margin percentage than the same number implies.

To hit a target margin instead of a markup, divide cost by (1 − target margin) rather than multiplying cost by the percentage: $400 ÷ (1 − 0.50) = $800. That $200 gap between the two methods, on a single $400 job, is exactly the kind of shortfall that adds up to a shop that's busy all year and still short on cash every March. The job price & markup calculator shows both prices side by side on your own numbers so you never have to do this math by hand.

Billable hours ≠ paid hours

A 40-hour paid week is rarely a 40-hour billable week. Drive time between jobs, estimates, material runs, callbacks, and paperwork all consume real hours that never show up on an invoice — realistically closer to 30 billable hours out of 40 paid ones for most field crews. Pricing your rate as if every paid hour is billable quietly underprices every single job.

Say you need $120,000 a year to cover your own target pay plus the business's overhead, and you work 50 weeks a year. At 40 billable hours a week (2,000 hours/year), that's $60/hr. At a more honest 30 billable hours a week (1,500 hours/year), the same $120,000 requires $80/hr — a 33% higher rate, just from using the real denominator instead of the paid-hours one. Use the hourly rate & overhead calculator to run this on your actual crew size and billable-hour reality instead of a guess.

Folding overhead into your price

Overhead is everything the business pays whether or not a job happens that month: rent or a storage unit, insurance, software and subscriptions, vehicle payments and fuel, phone, marketing, and any admin staff who don't bill hours directly. If your hourly rate already folds overhead in (salary + overhead, divided by realistic billable hours — the same formula the hourly rate calculator uses), then a job price built from that rate already carries its share of overhead. Adding overhead a second time when you price the job double-counts it and prices you out of jobs you'd otherwise win; what a specific job still needs added on top is whatever is genuinely unique to it — a permit, equipment rental, disposal fees — plus your target margin.

Break-even rate vs. target rate

Your break-even rate is what you need to charge to cover salary and overhead with zero profit left over — the floor, not a goal. Continuing the example above, an $80/hr break-even rate with a 15% target margin on revenue means dividing by (1 − 0.15): $80 ÷ 0.85 ≈ $94/hr. That $14/hr gap between break-even and target is the entire profit of the business — quote consistently below it and the shop can stay “busy” indefinitely while never actually getting ahead.

Common ways trade businesses underprice jobs

• Pricing off gut feel or a competitor’s number
  instead of your own cost structure — someone else’s underpriced job becomes your underpriced job too.
• Leaving overhead out entirely
  and pricing only labor plus materials, so every job "profit" is really just unpaid overhead recovery.
• Using 40 paid hours as the billable-hour denominator
  when the real number is closer to 30 — see above.
• No documented minimum job charge
  so a small job with the same drive time and setup as a big one gets priced like an afterthought.
• Absorbing scope creep and change orders
  without repricing — the margin planned at the quote quietly bleeds out over the course of the job.
• Never revisiting the rate
  as insurance, fuel, and material costs rise — a rate set two years ago is a rate that’s losing money today even if nothing else changed.

Put it together with the two calculators

Start with the hourly rate & overhead calculator to find your break-even and recommended billable rate from your real salary target, overhead, crew size, and billable hours. Then take that rate into the job price & markup calculator to price an individual job from labor and materials, with trade-specific defaults and the markup vs. margin comparison built in. Both are free, run entirely in your browser, and store nothing.

Where the numbers come from once you're not doing it by hand

Pricing well depends on trusting the inputs — a rate is only as good as the overhead and cash numbers behind it.

Frequently asked

Is a 50% markup the same as a 50% margin?

No — and mixing them up is the single most common pricing mistake in the trades. A 50% markup on $400 of cost prices the job at $600, but that $200 of profit is only 33% of the $600 you actually collect — a 33% margin, not 50%. If your target is a true 50% margin at that same $400 cost, the price has to be $800 (cost ÷ (1 − target margin)), not $600. Markup is profit measured against cost; margin is profit measured against the price the customer pays. Use the job price calculator to see both numbers on the same quote instead of assuming they match.

How much should a contractor mark up materials?

It depends on the trade and how the material is sourced, but most shops run somewhere between 15% and 50% over their actual cost (not the sticker price at the counter — your real, paid cost after any trade discount). Lower-cost, high-volume materials (fasteners, basic fittings) often carry a higher percentage markup because the dollar amount is small; big-ticket items (a furnace, a pool pump) usually carry a lower percentage because the dollar amount is already large. The job price calculator pre-fills a starting-point markup by trade — treat it as a floor to test against your real numbers, not a rule.

What's a reasonable profit margin for a trade business to target?

Most healthy independent trade shops target somewhere in the 10%–20% net margin range, after the owner has already been paid a real market wage for the work (labor) or management time (if not swinging a hammer) — margin on top of a real wage, not instead of one. A shop that shows "20% profit" but only got there by paying the owner $0 a week is not actually profitable; it is underpriced with the shortfall hidden in unpaid owner labor.

How can I tell if I'm underpricing my jobs?

A few honest signals: you win essentially every bid you submit (a contractor who never loses a job on price is pricing below the market, not just being competitive); the business stays busy but the bank balance doesn't move; you can't afford to hire even though the schedule is full; and a single slow month, a truck repair, or one bad debt turns into a real cash crunch instead of an absorbable dip. None of these show up by staring at revenue — they show up when you compare your rate to your actual break-even rate.

If my hourly rate already includes overhead, do I need to add overhead again when I price a job?

No — that's double-counting, and it prices you out of jobs you'd otherwise win. If your billable rate was built the way the hourly rate calculator builds it (salary + overhead ÷ realistic billable hours), overhead is already baked into every hour you bill, so a job price built from that rate already carries its share of rent, insurance, and the rest. What you still add on a per-job basis is anything that's genuinely specific to that job and not part of your everyday overhead — a permit fee, equipment rental, disposal costs — plus your target margin on top.