How to Price a Contractor Bid
Pricing a contractor bid accurately is the difference between winning profitable work and leaving money on the table — or worse, underbidding and losing money on every job. A solid bid accounts for every real cost your business carries, not just materials and labor.
The core structure of any contractor bid follows a consistent formula, regardless of trade. You start with your direct costs — materials, labor, equipment, permits, and subcontractors. Then you layer on overhead to cover your ongoing business expenses like insurance, vehicles, office costs, and licensing. Next comes a contingency buffer for the unknowns that every experienced contractor has been burned by: hidden damage behind walls, material price swings mid-project, or scope creep from the client. Finally, you apply your profit — either as a markup on cost or as a target gross margin on the final sale price.
Direct Costs = Materials (+ waste) + Sales Tax + Labor (+ burden) + Equipment + Permits + Subs
Subtotal = Direct Costs + Overhead % + Contingency %
Bid Price = Subtotal + Profit (markup or gross margin)
The HexBolt calculator handles this entire formula automatically. Enter your numbers, adjust your percentages, and get an instant bid price with a full itemized breakdown you can export to PDF or share as a link.
What Most Contractors Get Wrong
The most common pricing mistake isn't bad math — it's forgetting to include real costs. Many contractors price jobs using only materials and a rough labor estimate, then wonder why they're working 60-hour weeks and barely breaking even. Labor burden alone — payroll taxes, workers' comp, insurance, PTO — typically adds 25–40% on top of base wages. If you're paying a worker $45/hour but not accounting for burden, your true labor cost is closer to $58–$63/hour. That gap eats your profit on every single job.
Overhead is the other silent killer. Your truck payment, insurance premiums, tool replacement, phone bill, accounting fees — these don't stop when you're between jobs. If your annual overhead is $80,000 and you do $400,000 in revenue, that's a 20% overhead rate that needs to be baked into every bid, not absorbed from your profit after the fact.
Markup vs. Gross Margin: Know the Difference
This is one of the most misunderstood concepts in contractor pricing, and getting it wrong can cost you thousands per job. Markup and gross margin both describe profit, but they calculate it differently — and produce different bid prices from the same inputs.
Markup
Bid = Cost × (1 + markup %)
Markup adds a percentage on top of your total costs. If your costs are $10,000 and you apply a 20% markup, your bid is $12,000. Most contractors use markup because it's intuitive — you know your costs, you add your percentage, done.
Gross Margin
Bid = Cost ÷ (1 − margin %)
Gross margin targets a percentage of the final sale price as profit. If your costs are $10,000 and you target a 20% gross margin, your bid is $12,500 — not $12,000. The difference compounds on larger jobs. Gross margin is standard in commercial construction and for contractors tracking profitability against revenue.
Here's the critical takeaway: a 20% markup only gives you a 16.7% gross margin. If you think you're making 20% on every job because your markup is 20%, you're actually keeping less than 17 cents of every dollar. On a $500,000 commercial project, that misunderstanding costs you over $16,000 in expected profit that doesn't exist.
HexBolt lets you toggle between both methods and shows you the true gross margin regardless of which mode you use, so you always know exactly what you're keeping.
Understanding Labor Burden
Labor burden is the true cost of employing a worker beyond their base hourly wage. It includes every mandatory and voluntary cost your business pays for each employee. Most contractors underestimate this by 15–20%, which directly erodes profit margins.
Mandatory Costs
FICA / payroll tax: ~7.65% of wages. Federal unemployment (FUTA): ~0.6%. State unemployment (SUTA): 2–4% depending on state and claims history. Workers' compensation: 4–15% depending on trade — roofers and electricians pay more than finish carpenters.
Voluntary / Competitive Costs
Health insurance: 8–12% of wages for employer contribution. Retirement match: 3–6% if you offer a 401(k). Paid time off: 3–5% for vacation, sick days, holidays. Training and safety: 1–2% for OSHA compliance, certifications, and continuing education.
For most trades, a 25–40% labor burden rate is realistic. HexBolt separates burden from the base hourly rate so you can see the true cost split in your breakdown. This matters because when you're deciding whether to hire employees or use subcontractors, the burden rate is the variable that changes the math — subs carry their own burden, employees don't.
Frequently Asked Questions
Is HexBolt really free?
Yes. No account, no trial, no credit card, no upsell. The calculator runs entirely in your browser — nothing is sent to any server. Export to PDF and share links as much as you want.
How is contingency calculated?
HexBolt applies contingency to your Direct Cost + Overhead combined. This is a conservative compounding approach — it means your contingency buffer also covers potential overruns in overhead, not just direct costs. Some calculators apply contingency to direct cost only, which produces a slightly lower number. We chose the conservative method because it better protects your margin when surprises hit.
What overhead percentage should I use?
Most residential contractors fall between 15–25%. To find your real number: add up your annual business expenses that aren't tied to a specific job (insurance, vehicle, office, tools, licenses, phone, accounting, marketing). Divide that by your annual revenue. That's your overhead rate. If you don't know yours yet, 20% is a reasonable starting default for most trades.
What's a healthy gross margin for contractors?
Industry benchmarks vary by trade, but generally: below 8% is dangerously thin and leaves no room for error. Between 8–15% is survivable but tight. Between 15–25% is healthy for most residential and light commercial work. Above 25% is strong and typical for specialty trades or commercial GCs. HexBolt shows a color-coded margin health indicator so you can see at a glance whether your bid is in a sustainable range.
Can I save my bid?
HexBolt has no backend in this version, so there's no server-side save. But you have two options: export to PDF for a permanent record, or copy the shareable link which encodes all your inputs as URL parameters. Bookmark that link to reload your exact bid later. Saved profiles are coming soon.
Does this work on mobile?
Yes. HexBolt is fully responsive and tested on iOS Safari and Android Chrome. Input fields are sized to prevent auto-zoom on iOS. You can build a bid on a job site from your phone and export the PDF right there.
Why is my markup percentage different from my gross margin?
Because they measure profit differently. Markup is profit as a percentage of cost. Gross margin is profit as a percentage of the sale price. A 25% markup gives you a 20% gross margin. A 50% markup gives you a 33.3% gross margin. They only match at 0%. HexBolt shows both so you always know the real number.