Contractor Markup Calculator
Build an accurate client quote by marking up materials, subcontractors, and applying overhead. See your gross profit and margin instantly — and finally understand the difference between markup and margin.
Client Quote
Includes markup, overhead, and profit
| Concept | Formula | Your Numbers |
|---|---|---|
| Material Cost | — | — |
| Marked-up Price | — | — |
| Gross Profit on Mat. | Price − Cost | — |
| Markup % | Profit ÷ Cost | — |
| Margin % | Profit ÷ Price | — |
All figures are estimates. Labour pricing, sub rates, and overhead should reflect your actual cost structure. Consult an accountant for tax implications.
Assumptions & Methodology
- Markup % (% of cost): Client material price = your cost × (1 + markup/100). E.g. $1,000 at 25% markup → $1,250 billed. Markup % is always higher than the equivalent margin %.
- Margin % (% of price): Client material price = your cost ÷ (1 − margin/100). E.g. $1,000 at 25% margin → $1,333 billed. Ensures profit is exactly 25% of the price you charge.
- Labour cost is passed through at cost — it's assumed your labour rate already includes your margin. If you want to mark up labour, enter it as a material cost instead.
- Sub markup is applied independently using percentage markup (not margin). Typical range 10–15% to cover coordination, warranty risk, and admin time.
- Overhead is calculated as a percentage of your total direct costs (materials at cost + labour + subs at cost). This allocates your fixed running costs proportionally to each job.
- Client Quote = marked-up materials + labour (at cost) + marked-up subs + overhead amount.
- Gross Profit = Client Quote − total direct costs (at cost) − overhead.
- Gross Margin % = Gross Profit ÷ Client Quote. Target: 20–35% for most trade contractors.
Frequently Asked Questions
What's the difference between markup and margin?
Markup is profit as a percentage of your cost. Margin is profit as a percentage of the selling price. A 25% markup on $100 gives a $125 price — but that's only a 20% margin ($25 profit ÷ $125 price). If you want to target a 25% margin, you need a 33.3% markup. Many contractors confuse these, under-price jobs, and wonder why they're not making money.
How much should I mark up materials as a contractor?
Most Canadian contractors apply 15–25% markup on materials as a standard practice. This covers: the time to source, order, and pick up materials; carrying costs (you pay the invoice before the client pays you); and the risk of price changes or material waste. For specialty or hard-to-source materials, 30–40% is reasonable. Markup on subcontractors is typically lower (10–15%) since you're just coordinating, not handling the materials yourself.
Should I include markup in my quote or keep it hidden?
You don't need to itemize your markup separately. Most contractors provide a single line-item for "materials and supplies" at the marked-up total, not a cost-plus breakdown. Clients are buying a result, not auditing your supplier invoices. The exception is cost-plus contracts (common in commercial work), where you disclose costs and markup % upfront as part of the contract terms.
What overhead percentage should I use?
For most sole proprietors and small trade businesses, 10–15% overhead allocation is typical. This represents fixed costs — vehicle, insurance, tools, phone, office — spread across all jobs. If you're a larger operation with employees, office space, and equipment, 20–30% may be more accurate. Calculate your total annual overhead costs, divide by your estimated annual direct costs (what you spend on materials and labour), and that gives your overhead rate.
What gross margin should I be targeting?
Most successful trade contractors target 20–35% gross margin on their total quote. Below 15% is a warning sign — one problem job can wipe out the profit from several good ones. The Job Profit Margin calculator on this site lets you evaluate individual jobs in detail. For material-heavy jobs (like flooring installation), margins tend to be lower; for skilled-labour-heavy jobs (like custom carpentry), you can often achieve 35–45%.
How to Mark Up Materials and Build a Profitable Contractor Quote
Pricing is the single biggest lever a contractor has on profitability — yet most tradespeople set their prices by gut feel or by copying what competitors charge. A systematic markup process ensures every job covers your real costs and generates consistent profit, regardless of market conditions.
Why Markup ≠ Margin (and Why It Matters)
This is the most common and costly mistake in contractor pricing. Many contractors say "I mark up 25%" thinking they're making 25 cents on every dollar — but they're not. A 25% markup means: cost $100, price $125, profit $25. That profit ($25) divided by the price ($125) is only 20% margin. If you want a 25% margin, you actually need a 33.3% markup. Running the wrong number means every job is slightly less profitable than you think — and that adds up to thousands of dollars per year.
The Standard Markup on Materials
Material markup serves multiple purposes: it compensates you for the time to source, order, and transport materials; it covers carrying costs (you pay invoices before getting paid); it hedges against price increases between quote and purchase; and it accounts for normal waste and overages. For commodity materials readily available at any big-box store, 15–20% is competitive and defensible. For specialty or hard-to-source items, 25–40% is standard.
Subcontractor Markup
When you hire a sub, you take on risk: you're responsible to the client even if the sub does poor work. You also spend real time coordinating, scheduling, and following up. A 10–15% markup on sub invoices is standard practice — it's not price gouging, it's the cost of project management. On larger commercial jobs, general contractors commonly apply 15–20% to subs, particularly for work with significant liability exposure.
Overhead Allocation
Every job should contribute to your overhead — the fixed costs of running your business that aren't directly tied to any single job. Calculate your annual overhead (vehicle, insurance, tools, phone, advertising), divide by your annual direct costs, and you get your overhead rate. Applying this rate to each job ensures your overhead is covered proportionally. If a job doesn't carry overhead, you're effectively subsidizing it with profit from other jobs.
Building Quotes That Win and Make Money
The goal is to quote competitively while maintaining healthy margins. Start with your true cost (materials at supplier price, honest labour hours, real sub quotes). Apply your standard markups. Check the resulting margin — if it's below your target, look for cost savings before lowering the price. Clients rarely reject quotes because of a $50–$200 difference; they reject quotes they don't trust. A well-presented quote with a fair price will almost always beat a lower quote from someone who seems unreliable.