Product workflow guide · Updated November 9, 2026
Contractor estimate math: margin and markup are different
Markup divides profit by cost; gross margin divides profit by the selling price. To target a gross margin, divide total job cost by one minus the margin. A $1,000 cost at 25% gross margin needs a $1,333.33 price before tax, not $1,250.
Start with a complete cost estimate
Include direct labor, materials, subcontractors and other job-specific costs. Decide how overhead is recovered and avoid counting it twice. A calculator cannot make an incomplete cost estimate accurate.
Work through a simple example
Cost of $1,000 plus 25% markup equals a $1,250 price and $250 profit. Gross margin is $250 divided by $1,250, or 20%. To make the gross margin 25%, use $1,000 divided by 0.75: $1,333.33.
Keep tax and change orders separate
Show whether tax is included and agree on what happens when scope changes. This guide explains arithmetic, not local tax treatment. Verify the tax and accounting rules that apply to your business.
Compare estimated and actual costs
After the job, compare the estimate with actual materials and labor. Record what changed and update your templates using that history rather than copying a competitor's price.