Contractor & construction
Contractor Markup Calculator
Works contractor markup, where overhead recovery has to be inside it.
Result
Overhead is entered as a share of revenue, which is how most contractors track it. If you only know overhead as an annual dollar figure, divide it by annual revenue to get the percentage.
Get a Free Business AuditHow the calculation works
The markup applied to job cost, with the resulting price and margin shown. The markup has to cover overhead as well as profit, which means a contractor who adds a profit percentage and nothing else is funding overhead from profit and will find there is none.
What moves the number
- Overhead as a share of revenue.
- Target profit above overhead recovery.
- Job cost completeness.
- Whether different job types carry different markups.
Where this one goes wrong
Overhead and profit are separate things inside a markup, and a contractor who thinks of the uplift as profit has not recovered the cost of being in business, which is why the first question is what the overhead rate actually is. Calculate it before setting a markup. Different job types may also warrant different markups, since a job tying up the crew for weeks carries more overhead than a quick one at the same material cost.
Before you quote
- Calculate the overhead rate before setting a markup.
- Treat overhead recovery and profit as separate components.
- Consider different markups for different job types.
Questions
About this calculator
What does markup have to cover?
Overhead and profit, in that order. A contractor who adds a profit percentage and nothing else is funding overhead from profit and will find there is none, which is the most common reason a busy business makes no money.
How do I know what markup I need?
Start from the overhead rate as a share of revenue, add the profit you need, and convert the combined margin into a markup. Working from a figure someone else uses is how a markup that suits a different cost structure gets adopted.
Should all jobs carry the same markup?
Not necessarily, since a job tying up the crew for weeks consumes more overhead than a quick one at the same material cost. Differentiating by how much capacity a job occupies is more accurate than a single uplift.
The formula
price = cost ÷ (1 − overhead% − profit%)
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How to use this calculator
- Materials ($). Enter your own figure; the page starts at $1,800.
- Labour (burdened) ($). Enter your own figure; the page starts at $1,400.
- Subcontractors ($). Enter your own figure; the page starts at $600.
- Overhead as a share of revenue (%). Enter your own figure; the page starts at 18%.
- Profit you want to keep (%). Enter your own figure; the page starts at 12%.
The result updates as you type, so you can try a figure, see what it does to price to quote, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Materials | $1,800 |
| Labour (burdened) | $1,400 |
| Subcontractors | $600 |
| Overhead as a share of revenue | 18% |
| Profit you want to keep | 12% |
What comes out
| Result | Value |
|---|---|
| Price to quote main result | $5,428.57 |
| Markup on cost | 42.86% |
| Resulting gross margin | 30.00% |
| Profit in dollars | $651.43 |
Job cost of $3,800 needs a 42.86% markup to quote $5,428.57, covering 18% overhead and leaving $651.43 of profit.
How sensitive the answer is
Holding everything else steady and changing only materials, this is what happens to price to quote. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Materials ($) | Price to quote |
|---|---|
| $900 | $4,142.86 |
| $1,350 | $4,785.71 |
| $1,800 example above | $5,428.57 |
| $2,700 | $6,714.29 |
| $3,600 | $8,000.00 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Materials ($)
- A money amount, starting at $1,800.
- Labour (burdened) ($)
- A money amount, starting at $1,400.
- Subcontractors ($)
- A money amount, starting at $600.
- Overhead as a share of revenue (%)
- A percentage, between 0 and 90, starting at 18%.
- Profit you want to keep (%)
- A percentage, between 0 and 90, starting at 12%.
What the results tell you
| Result | What it is |
|---|---|
| Price to quote | The headline result. A money figure. |
| Markup on cost | A percentage. |
| Resulting gross margin | A percentage. |
| Profit in dollars | A money figure. |
Overhead is where these go wrong
Pricing and margin figures are only as good as the cost you put in. If your cost covers parts and wages but not the van, the insurance, the phone and the unbilled hours, the markup is paying for those before it becomes profit, and the margin you think you are making is not the one you are making.
Keep going
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