How to Price Construction Jobs Without Losing Money

You hear a competitor charged €15,000 for a similar job, so you charge €14,500 to win. Problem: you do not know their cost structure, overhead, or if they are even profitable. Many competitors are slowly going bankrupt - copying them means joining them.

You calculate materials and labor, add 10%, and call it a price. But what about insurance, vehicle costs, tools, office rent, accounting fees, unpaid sick days, and time spent on quotes that do not convert? These invisible costs eat 15-25% of revenue.

Charging €40/hour sounds good until you realize your fully loaded cost per hour (including overhead, benefits, unbilled time) is €38. You are working hard to earn €2/hour profit.

Nice customer? You give a discount. Difficult job? You add a little extra. Slow month? You take anything. This random approach means profit depends on luck, not strategy.

If you do not know what past jobs actually cost, you cannot price future jobs accurately. You are guessing based on feelings, not data.

Add up all costs that are not directly tied to jobs: office rent, insurance, vehicles, fuel, tools, software, accounting, marketing, phone bills, training, certifications. For most 5-15 person companies, this is €80,000-200,000 annually.

Not working hours - billable hours. A full-time employee works 2,080 hours/year. Subtract holidays (200 hrs), sick days (80 hrs), training (40 hrs), travel/non-billable time (300 hrs). Realistic billable hours: 1,400-1,600 per employee.

Divide annual overhead by total billable hours across your team. Example: €150,000 overhead divided by 8,000 billable hours (5 employees) = €18.75 overhead per billable hour.

Employee hourly wage plus employer costs (taxes, insurance, benefits). A worker earning €20/hour typically costs €26-30/hour fully loaded.

Add overhead per hour (€18.75) plus fully loaded labor cost (€28) = €46.75. This is your break-even. Charge less than this and you lose money, regardless of how busy you are.

If your cost is €1,000 and you add 20% markup, you charge €1,200. Markup is calculated on cost.

That same €1,200 job with €1,000 cost gives you 16.7% margin (€200 profit divided by €1,200 price). Margin is calculated on selling price.

Thinking 20% markup = 20% profit margin. It does not. 20% markup = 16.7% margin. 30% markup = 23% margin. 50% markup = 33% margin.

Margin = Markup / (1 + Markup). Example: 25% markup = 0.25 / 1.25 = 20% margin.

Markup = Margin / (1 - Margin). If you want 25% profit margin, you need 33% markup (0.25 / 0.75 = 0.33).

Estimated hours times fully loaded hourly rate. Be realistic - jobs almost always take longer than expected. Add 10-15% buffer for unexpected issues.

Actual cost of materials needed. Include waste factor (typically 5-10% extra). Include delivery costs if applicable.

Any work you will outsource. Get quotes, do not guess.

Rentals, special tools, or depreciation on owned equipment used for this job.

Sum of the above four items. This is your cost floor.

Add your overhead percentage (calculated from break-even analysis). Typically 15-25% of direct costs.

Add your desired profit on top. Healthy construction companies aim for 10-20% net profit margin.

Direct costs + Overhead recovery + Profit = Your minimum price. Then consider market factors.

You spend time ordering, receiving, storing, transporting, and managing materials. You take risk if materials are damaged or stolen. You deserve compensation for this.

10% for commodity items (lumber, basic supplies). 15-20% for specialty items you need to source. 20-25% for items requiring significant handling or storage.

Some contractors prefer passing materials at cost plus a fixed handling fee per job. Example: materials at cost + €200 handling fee. This is more transparent for customers who ask questions.

If you get 15% trade discount but quote list price, that 15% is additional profit. Never reveal your actual costs - quote based on standard pricing.

Reduce price but add a management fee (5-10% of material value). You still handle, install, and take responsibility for customer-supplied materials.

If accepting means losing money, decline politely. Working at a loss is worse than not working. Your overhead keeps running either way.

Constant complaints before work starts. Unrealistic timelines. Already fired multiple contractors. Obsessive focus on price over quality. Trust your instincts - problem customers cost more than they pay.

Customer keeps adding to the scope during quoting. Cannot clearly define what they want. Changes requirements with every conversation. These jobs will overrun and result in disputes.

Reluctance to pay deposits. History of slow payment. Business in financial trouble. Unreasonably long payment terms. Getting paid matters more than winning the job.

If taking this marginal job means you cannot take a better job next week, declining is the right choice. Your capacity is limited - fill it with profitable work.

For every job, compare estimated hours to actual hours worked. Most contractors underestimate by 10-20%. Use this ratio to adjust future estimates.

Compare quoted materials to actual spend. Include waste, returns, and additional purchases. Build realistic waste factors for each material type.

Total revenue minus all direct costs minus allocated overhead. Many jobs that feel profitable are actually losses when you allocate overhead properly.

Some jobs are consistently profitable, others consistently lose money. Focus your marketing and sales on the profitable categories.

Every quarter, analyze your completed jobs. What patterns do you see? Where are you consistently underpricing? Where do you have pricing power?

If a customer asks for a lower price, first understand why. Are they comparing to a different scope? Do they have a genuine budget constraint? Often the issue is not actually price.

If budget is truly limited, offer to remove or simplify parts of the job. This protects your margin rate while meeting customer constraints.

When challenged on price, explain what is included: warranty, quality materials, insurance, experienced crew, cleanup. Cheap competitors often skip these.

Offer small discount for larger deposit or faster payment. You get cash flow benefit; customer gets price reduction. Both win.

Before any negotiation, decide the minimum price you will accept. If pushed below that line, walk away professionally. Desperation shows and invites further pressure.

See exactly how long similar jobs took in the past. No more guessing - base estimates on real data from your own projects.

Track every material used on every job. Build accurate material budgets based on actual historical usage.

See actual profit margin for each completed job. Identify which job types and which customers are most profitable.

Generate cost reports for any job instantly. No more digging through spreadsheets and paper records.

Automatically compare quoted hours and materials to actual. See exactly where your estimates are accurate and where they need adjustment.