How to price a project: cost, overhead and the margin that is actually left

Price is not a guess or copying what the competitor charges. Price is direct cost plus overhead plus the margin you decide to earn. Getting this math wrong is what separates the company that grows from the one that bills a lot and has nothing left at the end of the month.

Markup and margin are not the same thing

This is the mistake that costs the most money. Markup is what you add on top of the cost. Margin is what is left inside the final price. They are not the same:

Markup	Percentage added on top of the cost. A cost of $100 with 20% markup becomes a price of $120.
Margin	Percentage of profit inside the price. In that same case, the $20 over $120 gives a 16.7% margin, not 20%.

In other words, 20% markup is not 20% margin. Those who confuse the two work thinking they earn more than they do. We went deeper into this in the article 50% markup is not 50% profit.

The anatomy of price

Direct cost	Labor, material, subcontractors and equipment for that specific project.
Overhead	The cost of keeping the company standing: office, insurance, vehicle, administration and license.
Margin	The profit that is left after everything is paid. It is what finances the next phase of the business.

Overhead: the cost of existing

Overhead is what the company spends even when no project is running. Today it consumes 10% to 15% of revenue for a well-run contractor. If you do not put overhead inside the price, it comes out of your profit. We explain it in full here.

How much to mark up in 2026

There is no magic number, but there are market reference ranges today:

Item	Reference range
General contractor markup	20% to 30% over cost. 15% no longer covers the cost of operating.
Labor	Mark up 25% or more, to cover payroll charges, taxes and supervision.
Material	From 7.5% to 10% for common items, reaching 20% to 35% for special items.
Target net margin	8% to 12% on residential projects, 10% to 18% on remodels.

The step almost everyone skips

Calculating the real cost of labor. The helper at $30 an hour does not cost $30. With payroll taxes, workers comp and unproductive time, he gets close to $50. Those who bid on the raw hourly rate lose money on every project. We broke this math down here.

The right price is not the highest or the lowest. It is the one that covers all the costs and still leaves the margin you decided to earn. That decision is yours, not the market's.