How to Price a Construction Job: A Pricing Guide for Contractors

Pricing is the hardest part of running a construction business. Quote too high and you lose the job. Quote too low and you work for free, or worse, lose money.

The good news: pricing isn't guesswork. There's a formula. This guide walks you through it step by step, with a real worked example.

Why most contractors underprice

Most contractors price by gut feel: "This feels like a $5,000 job." That's how you end up broke.

Common pricing mistakes:

• Forgetting overheads (insurance, fuel, tools, admin time)
• Underestimating how long jobs take
• Not adding a margin for problems and rework
• Matching cheap competitors instead of pricing properly
• Not factoring in time spent quoting jobs you don't win

If you're constantly busy but not making money, your pricing is wrong. Let's fix it.

The construction pricing formula

Every construction job costs four things:

Job Price = Materials + Labour + Overheads + Profit

Skip any of these and you're losing money. Let's break each one down.

1. Materials

This is the easiest one. List every material the job needs and add up the cost from your suppliers.

A few tips:

• Always add a waste factor. Tiles, paint, timber, and most materials need 5-15% extra for cuts, breakages, and mistakes. For tiles specifically, use 10%.
• Include consumables. Screws, nails, sandpaper, masking tape, drop sheets. These add up.
• Add a markup. Most contractors mark up materials 15-25%. This covers the time spent ordering, collecting, returning faulty stock, and the risk of price changes.
• Get fresh quotes. Prices change. Don't use last year's figures.

Example for a small bathroom renovation:

2. Labour

This is where most contractors get it wrong. Labour isn't just "what I'd like to earn per hour." It's a calculated rate based on what you need to earn to run a sustainable business.

Calculate your hourly rate

Start with what you want to earn per year (after tax). Add your business costs. Divide by billable hours.

Example:

• Desired income: $60,000/year
• Business costs (insurance, vehicle, tools, accountant, etc.): $20,000/year
• Total needed: $80,000/year

Now, how many hours do you actually work on paid jobs? It's not 40 hours a week, because you also spend time:

• Quoting jobs you don't win
• Buying materials
• Travelling between sites
• Doing admin and invoicing
• Sick days and holidays

Realistically, most full-time contractors get 25-30 billable hours per week. So:

• 28 billable hours/week × 48 weeks/year = 1,344 billable hours
• $80,000 ÷ 1,344 = $60/hour

That's your minimum hourly rate. Charging less means you're losing money.

Estimate the hours

Now estimate how long the job will take. Be honest, and always add 20% for unexpected issues (rotten timber, hidden pipes, weather delays).

Example (continuing the bathroom):

• Strip-out: 1 day (8 hours)

• Plumbing rough-in: 1 day (8 hours)

• Tiling: 2 days (16 hours)

• Fitting and finishing: 1.5 days (12 hours)

• Subtotal: 44 hours

• Plus 20% buffer: 53 hours

• Labour cost: 53 hours × $60/hour = $3,180

3. Overheads

Overheads are costs that aren't tied to a specific job: rent on a yard, vehicle finance, phone bills, software subscriptions, insurance.

Some contractors include overheads in their hourly rate (as we did above). Others add a separate overhead percentage to each job (typically 10-20%).

The simple way: if your hourly rate already accounts for business costs (as in the example above), you don't need to add overheads again. Just make sure you've included everything in that calculation.

4. Profit

Profit is what's left after costs. It's what makes your business worth running.

A healthy construction business should aim for 10-20% net profit on top of materials, labour, and overheads.

Example:

• Materials: $3,840
• Labour: $3,180
• Subtotal: $7,020
• Profit (15%): $1,053
• Job total: $8,073

Round it up to $8,100 for a cleaner quote.

The full worked example

Let's put it all together for the bathroom renovation:

That's a price that pays you fairly, covers your costs, and leaves a profit. If a competitor quotes $5,500, they're either much faster than you, much cheaper on materials, or losing money. Don't race them to the bottom.

How to present the price

You have two main options:

1. Single line item (lump sum)

Bathroom renovation as per discussion: $8,100

Simple and clean. The client sees one number. Use this when:

• You're confident in your numbers
• The client doesn't want to see the breakdown
• You're worried about being undercut on individual items

2. Itemised breakdown

Materials: $3,840 Labour (53 hours): $3,180 Project management and profit: $1,080 Total: $8,100

The client sees where the money goes. Use this when:

• The client is comparing multiple quotes
• You want to justify your price
• You're worried they'll think you're overcharging

Both are valid. Pick based on the client and the situation.

Pricing for different job types

Different jobs need different pricing approaches:

Should you offer payment plans?

For jobs over $5,000, almost always yes. A common structure:

• 30% deposit before work starts (covers initial materials)
• 30% at midpoint (when rough work is complete)
• 40% on completion (final balance after sign-off)

This protects your cash flow and reduces your risk if the client backs out.

For smaller jobs, a 50% deposit and 50% on completion is standard.

Pricing mistakes to avoid

Quoting verbally. Always send a written quote. Verbal quotes lead to "but you said it would be $5,000."

Quoting too quickly. Take time to scope the job properly. A rushed quote almost always undercharges.

Forgetting site visits. Quoting based on photos or descriptions is a recipe for disaster. Always visit the site first.

Not factoring in access. Carrying materials up four flights of stairs adds hours. Tight parking adds frustration. Account for it.

Matching cheap competitors. If the other guy is half your price, he's either inexperienced, cutting corners, or going bust. Don't try to win on price.

For more on common quoting mistakes, read 5 small business mistakes when sending quotes.

Make professional quotes faster

Calculating pricing is one thing. Turning those numbers into a professional-looking quote is another. Most contractors waste hours formatting Excel or Word documents that still look amateur.

EasyNest lets you build line-item quotes in minutes, with your branding, your terms, and instant PDF generation. You can also see exactly which quotes have been accepted and which need follow-up. Free to start, no credit card required.

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