Most of a remodeling job's profit is won or lost before you pull a permit. It's decided at the bid — in whether the price you handed the customer actually covers what the work costs you, your overhead, and a real profit on top. Do that math right and a busy year leaves you money. Do it the way a lot of contractors do, and you can run flat out for twelve months and keep almost nothing.
The average remodeler nets about 6.3% — razor-thin, and unforgiving of pricing mistakes. Here's how to price a job so those margins hold, in four numbers and three steps.
Every price is built on four numbers
Strip away the spreadsheet and every job price comes down to four things:
- Direct cost — materials, labor, and subs for this specific job.
- Overhead — the cost of being in business at all: your truck, office, insurance, admin, your own time, software.
- Margin — the share of the price you keep, which has to cover overhead and leave a profit.
- Contingency — a buffer for the surprises every remodel uncovers.
Get all four in the price and you make money. Miss one — usually overhead, or the true cost of labor — and you've underpriced without knowing it.
Step 1 — Get your real direct cost
This is where most estimates are already wrong, and it's almost always the labor line.
Materials and subs are the easy part
Price the materials from real quotes, not memory, and get firm numbers from your subs. Add them up. Nothing tricky here — just don't round down to win the job.
Labor has to be burdened
The wage on the paycheck is not what an hour of labor costs you. On top of the base wage you pay payroll taxes, workers' comp, liability insurance, and any benefits — typically another 30–50%. A carpenter at $30/hour really costs you closer to $39–45/hour once you burden it. Skip that and every labor-heavy job is underpriced from the first line.
Add a contingency
Remodels find surprises: rot behind the tile, wiring that isn't to code, a floor that isn't level. A contingency of 8–10% of cost covers the ones you can't see at bid time. Don't zero it out to sharpen the price — that's borrowing from your own profit.
Step 2 — Recover your overhead
Overhead is real money, and no single job carries it on its own — so every job has to carry a share. For small remodelers, overhead commonly runs 15–25% of revenue. If your bids don't build it in, being busy just means you're losing money faster.
The clean way to handle it: fold overhead recovery into your target margin (Step 3), then check that your total overhead for the year is actually covered by the margin across all your jobs. That's the job of a business dashboard — but it starts with pricing each job to carry its share.
Step 3 — Price on margin, not markup
This is the step that trips up even experienced builders. A markup is a percentage added to cost. A margin is the share of the price you keep. They are not the same number — a 30% markup is only a 23% margin — so if you mark up your cost by your target percentage thinking it's your margin, you underprice every job. (We break the math down fully in markup vs margin.)
Price on margin instead. Pick the gross margin you need, and work backward to the price:
For a 30% margin on a $26,000 cost: $26,000 ÷ 0.70 = $37,143.
Remodeler gross margins average about 30% (29.9% in NAHB's most recent data), which after overhead leaves the ~6% net that's typical for the trade. Set your margin to cover your actual overhead plus the profit you want — then let the formula set the price.
A full worked example: a midrange bathroom
Here's all three steps end to end on a real-sized job.
| Item | Cost |
|---|---|
| Materials (tile, vanity, fixtures, drywall, paint) | $8,000 |
| Labor — 120 hrs × $45 base, burdened 35% | $7,290 |
| Subs (plumbing, electrical, tile) | $7,500 |
| Equipment & permits | $1,400 |
| Direct cost | $24,190 |
| + Contingency (8%) | $1,935 |
| Cost basis | $26,125 |
Now price it on a 30% margin: $26,125 ÷ 0.70 = $37,322. That price covers the full cost, recovers overhead, and leaves a real net profit. Mark the same cost up by 30% instead and you'd charge only $33,963 — about $3,400 less, most of it straight off your bottom line, for the exact same work.
Do this in one sheet, every time
The BidSolid Job Estimating & Bid Calculator runs all three steps for you — it burdens your labor, recovers your overhead, prices on the margin you set, and shows the correct price next to the "marked-up by mistake" price so the gap is impossible to miss. One spreadsheet, no subscription.
See the estimator — $149The four ways contractors underprice
- Using the wage instead of the burdened cost of labor. The single most common leak.
- Marking up cost instead of pricing on margin. Feels the same; costs you points on every job.
- Forgetting overhead. A "profitable" job that never carried its share of the office and the truck isn't as profitable as it looked.
- Cutting the price to win. Racing to the bottom on price is racing to the bottom on profit. Compete on trust and clarity, not on being the cheapest.
Frequently asked
How do you price a remodeling job?
Total your real direct cost (materials, burdened labor, subs, plus a contingency), decide the gross margin you need to cover overhead and leave a profit, then price with Price = Cost ÷ (1 − Margin). Price on margin, never a flat markup.
What margin should a remodeling contractor charge?
Remodeler gross margins average about 30%. After overhead that nets around 6%. Set your target to cover your actual overhead plus your desired profit.
Should I use markup or margin?
Margin. A 30% markup is only a 23% margin, so pricing on margin is the only way to be sure the profit you intend is the profit you keep.
How much do I add for overhead?
Small remodelers commonly run overhead at 15–25% of revenue, with net profit on top — which is why a 30% gross margin usually nets closer to 6–10%.
Sources: remodeler net margin 6.3%, gross 29.9% (FY2024) — NAHB Remodelers' Cost of Doing Business Study, 2026 edition. Labor burden 30–50% of base wage — CFMA / industry. Contingency 8–10% — industry rule of thumb. Dollar examples are illustrative and not a guarantee of results.