There is no single correct markup, and any contractor who quotes you one is either selling something or oversimplifying. Markup is a decision about your business, not a rule of the trade. What follows is how to make that decision deliberately instead of by habit.
Markup and margin are not the same number
This is the mistake that costs the most money, and it is easy to make because the two feel interchangeable.
- Markup is what you add on top of cost.
- Margin is what is left as a percentage of the sale price.
If a job costs 10,000 and you apply a 20 percent markup, you sell it for 12,000. Your margin is not 20 percent. It is 2,000 divided by 12,000, which is 16.7 percent.
The gap widens as the numbers grow. A contractor who thinks in markup while planning in margin will under-earn on every job and not understand why.
Start with overhead and profit as separate things
Overhead and profit get lumped together as "O and P," which makes them easy to underprice.
Overhead is the cost of existing whether or not this job happens: office, insurance, vehicles, software, admin salaries, and the estimating time you just spent. It has to be recovered across your jobs, so it belongs in every bid.
Profit is what the business keeps. It funds equipment replacement, slow periods, mistakes, and growth. A job with overhead covered and no profit is a job you did for free.
Work out an annual overhead figure, divide it by realistic annual volume, and you have a per-job number to recover before profit even starts.
Ranges, with a warning attached
Across small and mid-sized contractors, combined overhead and profit commonly lands somewhere between 10 and 20 percent of cost, with specialty and higher-risk work running higher. Some markets are tighter; some scopes carry far more.
Treat those as a sanity check, not a target. Your overhead is a fact about your company. Somebody else's percentage tells you nothing about whether yours is covered.
What should move your number
- Risk. Tight access, unknown site conditions, aggressive schedule, or unfamiliar scope all justify more.
- Competition. A crowded bid field compresses margin. That is a reason to be selective, not a reason to bid below cost.
- Scope clarity. A well-documented job with few questions is cheaper to carry than a vague one.
- Cash flow. If the payment schedule leaves you financing the work, that cost belongs in the bid.
- Size. Larger jobs often carry lower percentages but larger absolute dollars.
Do not price the job you want
A common failure is marking up the number you need to win rather than the number the work costs. If the bid only works at a markup that does not cover your overhead, the job is not a good fit. Losing it is the better outcome.
Write the number down and keep it consistent
Decide your target margin per job type, apply it the same way every time, and track what you actually earned. Consistency is what turns pricing from a guess into a process.
BidPacket builds the scope breakdown, materials checklist, and proposal draft from your documents so that more of your time goes into pricing decisions and less into assembling the bid. The markup itself is still yours to set.