What Profit Margin Should Contractors Charge? (2026 Guide)
How much profit margin should contractors add to jobs? This guide covers industry benchmarks, markup vs margin, and how to price for real profit.
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What Profit Margin Should Contractors Charge?
This is the question that separates profitable contractors from ones who stay broke despite being busy. Here's the real answer.
Markup vs. Margin — Know the Difference
| Markup | Margin | |
|---|---|---|
| **Definition** | % added to cost | % of selling price |
| **25% means...** | Sell $100 cost job for $125 | Keep $25 of every $100 |
| **Formula** | Cost × (1 + markup%) | (Price - Cost) ÷ Price |
Most contractors talk about markup but should be thinking margin.
Industry Benchmarks by Trade
| Trade | Typical Net Margin | Top Performers |
|---|---|---|
| HVAC | 10-15% | 20-25% |
| Plumbing | 10-18% | 22-30% |
| Electrical | 12-20% | 25-35% |
| Roofing | 8-15% | 20-25% |
| General Contractor | 5-12% | 15-20% |
What "Overhead" Actually Costs You
Before you make a dollar of profit, your prices must cover:
- Insurance: 3-8% of revenue
- Vehicles and equipment: 3-7%
- Admin staff and software: 2-5%
- Marketing: 3-8%
- Your own salary as owner: 10-15%
Total overhead: 21-43% of revenue. This is why working for cheap is a trap.
The Simple Formula
Minimum price = Direct costs ÷ (1 - overhead % - profit %)
Example: $500 in materials/labor, 35% overhead, 20% profit target:
$500 ÷ (1 - 0.35 - 0.20) = $500 ÷ 0.45 = $1,111 minimum price
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