Most contractors price jobs the same way they learned to drive — by watching someone else do it, then improvising. The result is a number that feels right, usually too low, and often not sustainable.
This guide gives you a real formula. One that covers your actual costs, pays you properly, and still leaves profit on the table. By the end, you'll price any job in under five minutes with confidence.
When you price by instinct, you're guessing at four things simultaneously: how long it will take, what materials will cost, what overhead applies, and what margin you need. Getting all four right by feel is nearly impossible — and the errors compound.
The average independent contractor undercharges by $15–$40 per hour compared to what their actual costs require. Over 200 working days that's $24,000–$64,000 in lost revenue annually. Not from lack of effort. From lack of a formula.
Before you can price a job, you need one foundational number: the absolute minimum you can charge per hour and still cover your costs, pay yourself a livable wage, and set aside enough for taxes. This is your Minimum Viable Rate (MVR).
MVR Formula: (Annual Overhead + Desired Owner Pay + Tax Buffer) ÷ Billable Hours Per Year
Example: Annual overhead $36,000 + desired pay $60,000 + 28% tax buffer $16,800 = $112,800 total need. Divided by 1,152 billable hours = $97.92/hr MVR.
If you're charging $75/hr, you're losing money every single hour you work.
Part 1 — Labor Cost: Estimated hours × Your MVR.
Part 2 — Material Cost: The actual invoice cost of all materials. Get current supplier quotes — never round down.
Part 3 — Material Markup (20–30%): You sourced the materials, drove to get them, and carry risk if something is wrong. A 25% markup is standard and justified in every market.
Part 4 — Profit Margin (15–25%): Applied to your subtotal. This is separate from labor — it's the margin that lets your business invest, absorb slow periods, and grow.
Add all four parts together. Round up to a clean number. That's your quote.
When a client says "that seems high," most contractors panic and drop the price. Don't.
"Let me walk you through exactly what that covers." Transparency builds trust more than discounts do.
"I can adjust the scope to fit your budget — what would you like to remove?" Never cut your margin. Cut the deliverable. Put the decision back in their hands.
"Our pricing reflects doing it right the first time." Clients who have been burned by cheap contractors respond to this immediately.
Not accounting for non-billable time: Driving, quoting, and admin all eat hours. Your billable efficiency rate (55–65% for solo operators) already accounts for this in your MVR — make sure you calculated it correctly.
Using old material prices: Supplier costs change constantly. Always get current quotes before finalizing a bid.
Forgetting change orders: Any work outside the original quote is a change order with its own price — documented before you do it, not after the client objects.
Under-pricing to win bids: Competing on price is a race to the bottom. Compete on reliability, quality, and response time instead.
Ready to price jobs automatically? The Trades Money Kit Job Pricing Calculator handles all four parts — enter your hours and material cost, your full quoted price appears instantly.
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