How to Price a Remodeling Job for Profit

The pricing formula (start here)

Everything below builds one number. The formula is:

Price = (Direct costs + Overhead) ÷ (1 − target margin)

Two things make or break it: the costs going in must be complete and burdened, and the margin must be applied by dividing — not by multiplying cost by a markup. Get those right and the price you quote is the profit you keep. Here are the four steps.

1. Nail your direct costs (with burdened labor)

Direct costs are everything that goes into this job:

• Labor — crew hours × their burdened cost.
• Materials — with current pricing and a realistic waste factor.
• Subcontractors — quoted, in writing.
• Equipment — rentals, fuel, machine time.

The single most common pricing error starts right here: using the wage, not the burdened cost, for labor. A $35/hour carpenter actually costs your business roughly $45–$55/hour once you add payroll taxes, workers’ comp, liability, and benefits. Price off $35 and you’ve baked a loss into the job before margin. Run your real number through the labor burden calculator and use that in your estimate.

2. Add your real overhead (not a guessed percentage)

Direct costs don’t pay for your office, truck, software, insurance, or the hours you spend estimating. That’s overhead, and it has to be carried by every job. The mistake is plugging in a borrowed “10%” instead of your actual rate.

Measure it once:

Overhead rate = Annual company overhead ÷ Annual revenue

If that’s 20%, then 20% is what each job must carry — not the 10% you heard somewhere. The overhead percentage calculator gets you the number fast. (For the full picture of overhead and profit together, see overhead and profit in construction.)

3. Apply margin, not markup (the trap that quietly underprices you)

This is the step that costs contractors the most, and it’s pure arithmetic. Markup is added to cost; margin is a percentage of the final price. They are not the same number.

Say your total cost (direct + overhead) is $30,000 and you want to keep 30%:

• Wrong (markup): $30,000 × 1.30 = $39,000. Your $9,000 is only 23% of the $39,000 price.
• Right (margin): $30,000 ÷ (1 − 0.30) = $30,000 ÷ 0.70 = $42,857. Now $12,857 is a true 30% of the price.

That’s nearly $4,000 on one job — gone, silently, if you multiply instead of divide. This is exactly the case-study mistake above. The markup vs margin calculator lets you see the gap on your own numbers, and the profit calculator confirms the final margin before you send the quote.

4. Sanity-check, then price the change orders too

Before the quote goes out:

• Benchmark it. Compare your gross margin to trade norms (kitchens and baths often 30–45%, roofing/siding lower). Wildly under means a cost is missing; see what a good profit margin looks like.
• Add contingency for the unknowns you can predict will exist on a remodel (especially older homes).
• Price change orders the same way. Every change is a mini-job: burdened cost + overhead + the same margin, approved in writing before the work. Unpriced change orders are one of the biggest margin leaks in remodeling.

Putting it together

A remodel priced right is just those four steps in order: complete, burdened direct costs → your real overhead → margin applied by dividing, not multiplying → a benchmark sanity-check and disciplined change-order pricing. Build the estimate cleanly to begin with (how to write a construction estimate), and the price you quote becomes the profit you actually keep — instead of the profit you assumed you’d made.