General Contractor Markup Percentage and How to Set It

There is no single right general contractor markup percentage. Most online guides say 15% to 30%, but NAHB’s data on what remodelers actually spend works out to about a 43% markup on job cost for the average remodeler in its survey. Your number comes from your own overhead and profit goal. It takes three numbers from last year’s books and a phone calculator.

This guide is for general contractors and remodeling contractors who set their own prices. It walks through the math, one full example, and how to explain your markup to a homeowner who asks.

What is the average general contractor markup percentage?

Online guides usually report 15% to 30% on total job cost, and some put remodelers higher. Those ranges are a starting point, not an answer. The markup you should charge is the one that pays your overhead and your profit goal on the jobs you actually run. Here is what three popular guides say.

• Method, a QuickBooks CRM company, says most general contractors use 15% to 20%.
• Buildern, a construction software company, says in its FAQ that many builders use 10% to 30%.
• Foreman, another software company, puts residential GCs at 20% to 33% and remodelers at 25% to 50%.

Now compare that to real books. The average remodeler in NAHB’s 2026 Remodelers’ Cost of Doing Business Study brought in $2.7 million in 2024. About 70.1% of that went to cost of sales: labor, materials and subs. That left a 29.9% gross margin. Operating expenses, which include the owner’s pay, took 23.6%. Net profit was 6.3%.

Run that backward and you get the markup. Divide 29.9 by 70.1 and you get 42.7%. Call it 43% on job cost. Altus Financial, a coaching firm for trade businesses, does the same math and lands on the same number.

The spread inside that average is wide. In a Pro Remodeler column on the same study, Elliott Pike of the NAHB Remodelers Council reports the top 25% of firms netted 18.4%. The bottom 25% lost 10.3%. Same survey, very different results.

Why a “typical” number is a check, not a target

Here is where I land. Stop copying a range. A 20% markup is a 16.7% margin, and the average remodeler in NAHB’s survey spends 23.6% of revenue on overhead alone. So the 15% to 20% in many guides would not keep that shop open. Altus says those online ranges are “mostly written for homeowners checking a bid.”

The caveat cuts both ways. NAHB’s average firm does $2.7 million a year, which is bigger than most one- to ten-person shops. A one-truck outfit run from a home office carries less overhead than a firm with five people in an office. Your number may land below 43% or above it. The only way to know is to run it.

A poster in a ContractorTalk thread on marking up subcontract work said it best: “Before plucking some number out of the air, take the time to know your own numbers first.”

Margin versus markup, and why 20% is not 20%

Markup is a percent of your cost. Margin is a percent of your price. Add 20% to a $100 cost and you charge $120, but the $20 you kept is only 16.7% of the price. Mix the two up and every job comes in short of what you planned, and the gap grows as the percent rises.

Put simply, markup is what you add on top of cost. Margin is the share of the selling price left after job costs. Here is how they line up on a $100 cost.

Markup on cost	Price on $100 of cost	Margin you keep
10%	$110	9.1%
20%	$120	16.7%
25%	$125	20.0%
30%	$130	23.1%
35%	$135	25.9%
40%	$140	28.6%
43%	$143	30.1%
50%	$150	33.3%
100%	$200	50.0%

Going the other way matters more, because most owners think in the margin they want to keep. To keep 20% of the price, you need a 25% markup. To keep 25%, you need 33.3%. To keep 30%, you need 42.9%. The formula is margin divided by (1 minus margin).

Construction coach George Hedley laid this out years ago in Construction Business Owner. On a $1,000 cost with a 30% markup, he wrote, “you are not making 30 percent. You are only making 23 percent on your sales.” Foreman, Altus and Buildxact print the same conversions.

Two quick ones people search for: a 20% markup on $100 is $120. A 5% markup on $100 is $105.

How to use the general contractor markup formula on your own books

Markup equals overhead plus profit goal, divided by job costs. All three come from last year’s profit and loss statement. If you have a bookkeeper, ask for them. Add your overhead and the profit you want, divide by what you spent on jobs, and that is your markup percentage. It takes a phone calculator, nothing more.

Job costs are what you spent to build the work: field labor, materials, subs, permits, dumpsters, and trucks while they are on a job. Overhead is everything it takes to stay open for the year, with or without work on the board.

What counts as overhead

Foreman and Hedley list close to the same things. If you pay for it whether or not a job is running, it goes here:

• Office rent or your home office
• Insurance
• Vehicles when they are not on a job
• Software, phones and internet
• Bookkeeping, accounting, legal and admin help
• Time spent estimating and selling
• Marketing, advertising and lead spend
• Your own salary or draw
• Crew time you pay but cannot bill, like a slow winter

Lead spend is the one owners skip. I sold phone leads to contractors for years, and that money is overhead like any other line. If it is not in your markup, every job pays for your leads out of profit. If you are weighing what different lead services cost, count that number here. One 2008 ContractorTalk poster put it plainly: if your advertising runs 6% or 10% and you mark subs up 10%, you are paying to market your subs.

Labor burden

Your labor cost is not the hourly wage. Foreman reports that burden (payroll taxes, workers’ comp, benefits and the like) typically adds 25% to 45% on top of base pay. Use your real burdened rate in job costs, and see our guide to accounting software that tracks job costs if your books cannot show cost per job. Then update it once a year, because comp rates and wages move.

Profit goal

Net profit for GCs runs in the single digits. NAHB’s average remodeler netted 6.3%. Relay, a small-business bank, cites CFMA’s 2025 benchmark at 6.7% before taxes. Foreman says healthy residential contractors aim for 8% to 10%. Set your goal in dollars, not hope. The profit goal is not whatever is left over. It is a cost of staying in business, and it goes into the markup up front.

A worked example on a $40,000 job

A remodeler with $500,000 in job costs, $125,000 in overhead and a $50,000 profit goal needs a 35% markup. At that rate, a $40,000 job sells for $54,000. This is a made-up shop used to show the math, not survey data. Swap in your own numbers and the steps stay the same. If you build estimates in software, check the estimating software compared by price before you set the markup rules in it.

Start with last year’s books. Job costs were $500,000. Overhead was $125,000, covering owner pay, a truck, insurance, an office, software and marketing. The owner wants $50,000 in profit.

The markup is ($125,000 + $50,000) ÷ $500,000 = 35%.

Now the job. Materials are $14,000, burdened labor is $16,000 and subs are $10,000. That is $40,000 in direct cost. The price is $40,000 × 1.35 = $54,000.

The $14,000 you added splits two ways. $10,000 carries this job’s share of overhead (25% of cost). $4,000 is profit (10% of cost). That is a 25.9% gross margin and a 7.4% net margin. Across a full year, $500,000 in job costs at 35% is $675,000 in sales, with the $50,000 profit goal met.

Here is what a flat 20% copied from a guide would do. The price drops to $48,000. You keep $8,000, but this job’s share of overhead is $10,000. So the job loses $2,000. Across the year, $500,000 at 20% is $600,000 in sales and $100,000 in gross profit, against $125,000 in overhead. That is a $25,000 loss.

Then there is the “I want 20% profit, so I add 20%” trap. Keeping 20% of the price takes a 25% markup, not 20%. And even at 25%, this shop just breaks even. The $10,000 gross on a $50,000 price covers overhead and leaves nothing. That is because overhead here is 25% of job cost. Foreman makes the same point: if your overhead rate and your markup are both 20%, you earn zero profit.

Change orders follow the same rule. A $3,000 upgrade the owner asks for, at 35%, bills at $4,050.

The same job with a different rate for each cost type

Some owners would rather set rates by cost type. Say subs get 20% ($2,000), materials 30% ($4,200) and labor 50% ($8,000). That adds $14,200, a 35.5% blended markup and a $54,200 price. Set rates however you like. The blended number is what has to hit your 35%.

Markup on labor, materials and subs

You can use one blended markup or a different rate for each cost type. Either works if the total pays your overhead and profit. The published ranges by cost type disagree a lot, running from 7% to 50% depending on the source. Use them to sanity-check your split, not to set it.

What is the average markup on labor?

Buildern puts labor at 25% and up. The reason labor carries a healthy markup is that so much rides on it: burden, downtime between jobs, supervision, callbacks and warranty visits. A Houzz commenter answering a homeowner made the same point about a GC’s own crew. There is “still overhead of him figuring materials, picking them up or setting up delivery, tool maintenance, vehicle wear and tear, etc.”

What is normal markup on materials?

Method says 7% to 20%. Foreman says 15% to 35%, with stock items like lumber and drywall at 15% to 25% and special orders like cabinets and tile at 25% to 35%. Buildern says 30% to 50%. Whatever you pick, materials markup pays for ordering, pickup, returns, waste and standing behind the product.

General contractor markup on subcontractors

Foreman reports most GCs add 10% to 20% to a sub’s price. On a newer ContractorTalk thread, KarpenterKid, who says he spent 30 years running jobs, used 15% to 20%, depending on the coordinating and warranty risk. Back in 2008, ruskent learned the low end the hard way: “I made the mistake of only marking up subs 10%. That did not work out good for me.”

Sub markup pays for scheduling, warranty and float. You pay the sub in a week or two, and the client may pay you weeks later. Relay gives a simple example: 20% on a $200,000 sub bid is $40,000 gross, and overhead still takes its share. MetroRich, a general contractor on the same thread, put it this way: “The biggest mistake is marking up too low because the sub is doing the labor. The GC is still owning the outcome.”

Mistakes that cost GCs money

The usual ones are confusing markup with margin, forgetting overhead, marking up only one cost type and giving away change orders. Most come from pricing by feel or by a number someone else uses. Each one is easy to fix once you have run your own markup from last year’s books.

Marking up only labor or only materials is a common one. A poster in the 2008 ContractorTalk thread said he once marked up only hours and saw wide swings in profit from job to job. Buying and selecting materials was costing him time he could not bill.

Forgetting overhead hurts, but so does counting it twice. Buildxact warns that if you already added overhead to the job as a line, then mark up the whole thing for overhead again, you recover it twice and price yourself out.

A stale markup is another trap. NAHB reports the average remodeler’s gross margin sank to 24.9% in 2021 and climbed to 29.9% by 2024. Five points in three years. A markup set in 2021 may not fit your shop today.

Pricing low out of fear of losing the bid hurts too. Small jobs need a higher percent, not a lower one. As Foreman notes, fixed overhead is the same whether the job is $500 or $50,000.

Last, not writing change orders with markup on them. Extra work with no written change order is work you paid to do.

How to explain your markup to a homeowner

You do not have to show the percentage, but you must be able to say what it pays for. Keep one clear line ready: it covers scheduling the work, insurance, standing behind the job after you leave and running the business that makes all of that possible.

KarpenterKid on ContractorTalk said it well: “Folks forget the markup isn’t just profit; it covers the scheduling, standing behind their work to the customer, and the liability if something goes sideways.”

Contractors differ on showing it as its own line. Method suggests not listing markup on the invoice but being ready to explain your price if asked. On cost-plus work, Buildxact says the contract has to define the fee, so the homeowner sees it either way.

Expect one question in particular: why is there markup on your own crew? A homeowner asked exactly that on Houzz. The answer from the thread holds up. Your own work carries overhead too, just like a sub’s work does.

Run your number today

Open last year’s profit and loss statement today. Write down three numbers: job costs, overhead and the profit you want. Add overhead and profit, then divide by job costs. That is your markup. If it comes out higher than what you quote now, use it on the next estimate.

Then write that markup on every change order and every sub bill. If you also sell service agreements, the same margin math applies when pricing an HVAC maintenance plan. Re-run the math each January when the books close, and update your labor burden at the same time.