How to Price a Job: From Costs to a Defensible Number

Step 1 — Burden your labor

Labor is priced at what employees cost, not what they're paid. Payroll taxes, workers' comp, insurance, benefits, and non-productive paid hours put the true cost 25–60% above the wage. Compute a burdened rate per classification with the Labor Burden Calculator (details in the labor burden guide). A $28 wage becoming $43.78 burdened is not padding — it is the actual cost of an hour.

Step 2 — Total the direct costs

Everything this specific job consumes: labor hours × burdened rate (the Crew Cost Calculator converts crew-days into dollars), materials at real current prices plus waste, subcontractors' quotes, rentals, permits, dump fees. Estimate hours honestly — including setup, cleanup, and the punch list, which are real hours the customer's job consumes.

Step 3 — Name your overhead share

Overhead — office, trucks, insurance, advertising, your management time — is paid by jobs or it isn't paid. Compute your overhead percentage from last year's books: total overhead ÷ total revenue (the Overhead Recovery Calculator does this). If it's 12%, every job must hand over 12% of its price. Skip this step and your company can win every bid and still end the year broke.

Step 4 — Choose the margin on purpose

Profit is not what's left over; it's a line you set. It has to fund slow seasons, mistakes, worn-out equipment, and the reason you took the risk of owning a company. Pick a floor you won't bid below and a target you build toward.

Step 5 — Divide, don't multiply

Price = Direct costs ÷ (1 − overhead% − margin%)

Because overhead and margin are percentages of the price, the price comes from division. Multiplying cost by "1 + the percentages" undershoots — the full explanation is in Markup vs. Margin, and the Break-Even Job Price Calculator runs this step, returning both the break-even floor and the target price.

Worked example, start to finish

• Labor: two-man crew, 140 hours total. Burdened rates $43.78 and $29.69 → (70 × $43.78) + (70 × $29.69) = $3,065 + $2,078 = $5,143
• Materials: $3,600 including 8% waste. Subs: $1,150 (electrician). Other: $310 (dump, permit)
• Direct costs: $5,143 + $3,600 + $1,150 + $310 = $10,203
• Overhead: 12% of price. Target margin: 10% of price.
• Price = $10,203 ÷ (1 − 0.12 − 0.10) = $10,203 ÷ 0.78 = $13,081
• Floor (break-even) = $10,203 ÷ 0.88 = $11,594 — below this, the job loses money.

Now stress-test it: put $13,081 and the same inputs through the Bid Check Calculator and confirm the projected margin is the 10% you designed. After the job closes, run actuals through the Job Profit Margin Calculator — the difference between projected and actual is your estimating error, itemized for next time.

Where job pricing goes wrong

• Raw wages in step 1 — the original sin; every later step inherits the error.
• Hopeful hours in step 2 — price the job you'll actually build, punch list included.
• Borrowed overhead percentages in step 3 — your competitor's 8% may be your 16%.
• Negotiating below the floor — discounts come out of margin first, then out of your pocket. Know the break-even number before the conversation starts, and see the Underbidding Trap guide for what happens when quoting below it becomes a habit.
• Never reconciling — pricing improves only when projected margins are compared against actuals, job after job.