How to Price Your Jobs Without Losing Money or Customers
Every contractor has been there. You submit a bid that feels fair, only to watch the client’s face drop when they see the number. Or worse—you win the job but realize halfway through that you’re barely breaking even. Getting pricing right is one of the biggest challenges in contracting, but it’s also the difference between a struggling business and a profitable one.
The good news? There’s a strategic approach to pricing that protects your bottom line while still landing jobs. Let’s break down exactly how to price your work so you can sleep well at night—and pay your bills.
The Real Cost of Underpricing
Before we dive into pricing strategies, let’s talk about why getting this wrong is so dangerous. When you underprice jobs:
- You’re working for free (or close to it) once you factor in all costs
- You attract the wrong clients who only care about the lowest price
- You can’t reinvest in better tools, training, or growing your business
- You create unsustainable expectations in your market
- You burn out faster because you’re working harder for less money
Remember: A job that doesn’t make money isn’t worth winning.
The Three Pricing Approaches Every Contractor Should Know
1. Cost-Plus Pricing (The Foundation)
This is your starting point. Cost-plus means you calculate all your costs, then add your desired profit margin.
Your true costs include:
- Materials (with a 10-15% waste factor)
- Direct labor (wages plus payroll taxes and benefits)
- Equipment costs (depreciation, fuel, maintenance)
- Overhead (insurance, office rent, utilities, phone, licensing)
- Administrative time (estimating, invoicing, scheduling)
- Callbacks and warranty work (budget 2-5% of job cost)
Example calculation:
- Materials: $3,000
- Labor (40 hours × $35/hour): $1,400
- Equipment costs: $200
- Overhead allocation: $500
- Administrative time: $150
- Total costs: $5,250
- Desired profit (20%): $1,050
- Final price: $6,300
2. Value-Based Pricing (The Upgrade)
This approach focuses on the value you’re delivering to the client, not just your costs. It works especially well for:
- Emergency repairs
- Specialized skills
- Projects with tight deadlines
- High-end residential work
- Commercial clients where downtime is expensive
Questions to ask yourself:
- What’s the cost to the client if this problem isn’t fixed?
- How much time/stress am I saving them?
- What specialized skills am I bringing?
- How urgent is this project?
A burst pipe repair at 2 AM on Christmas Eve isn’t priced the same as routine maintenance in July.
3. Competitive Analysis Pricing (The Reality Check)
You need to know what your competition charges, but don’t automatically match their prices. Instead, use this information to:
- Position yourself strategically (premium, mid-range, or budget)
- Justify your pricing by highlighting your unique value
- Avoid pricing yourself out of realistic market ranges
- Identify opportunities where competitors may be under or overpricing
Research methods:
- Check competitor websites and marketing materials
- Network with other contractors (non-competing trades)
- Ask suppliers what typical project costs run
- Survey past clients about other bids they received
- Use tools like iSqFt or Dodge Data & Analytics to research market rates for commercial projects
The Pricing Strategy That Actually Works
Here’s the step-by-step process successful contractors use:
Step 1: Calculate Your True Hourly Rate
Most contractors underestimate what they need to charge per hour. Use this formula:
Annual expenses + desired salary ÷ billable hours per year = minimum hourly rate
If your expenses are $80,000, you want to make $60,000, and you can bill 1,500 hours per year: ($80,000 + $60,000) ÷ 1,500 = $93.33/hour minimum
Step 2: Build Your Estimate Template
Create a standardized template that includes:
- Detailed material lists with current pricing
- Realistic labor time estimates
- Equipment and overhead allocation
- Permit and inspection costs
- Cleanup and disposal
- Contingency buffer (5-10%)
Pro tip: Instead of building estimates from scratch every time, consider using professional estimating software like ServiceTitan for larger operations or Jobber for smaller contractors. These platforms can cut your estimating time in half while ensuring you never forget to include important costs.
Step 3: Present Multiple Options
Instead of giving one price, offer three tiers:
- Good: Basic scope, standard materials
- Better: Enhanced scope, quality materials
- Best: Premium scope, top-tier materials, extended warranty
This gives clients choice while protecting your margins.
Step 4: Factor in Job Difficulty
Apply multipliers based on:
- Location access (easier = 1.0x, difficult = 1.2x)
- Client type (easy-going = 1.0x, demanding = 1.3x)
- Timeline pressure (normal = 1.0x, rush = 1.5x)
- Weather conditions (ideal = 1.0x, challenging = 1.2x)
Common Pricing Mistakes to Avoid
Mistake #1: Forgetting About Overhead Your overhead is real whether you account for it or not. Track it monthly and allocate it to every job.
Mistake #2: Not Tracking Actual Job Costs Keep detailed records of actual time and materials used. This data makes your future estimates more accurate. Apps like Clockwise or TSheets make time tracking simple and can sync directly with your accounting software like QuickBooks to give you real-time profitability insights.
Mistake #3: Competing Only on Price If price is the only factor, you’re talking to the wrong clients. Focus on value, quality, and reliability.
Mistake #4: Not Adjusting for Inflation Review and update your pricing quarterly. Material costs change, and so should your prices. Set up price alerts through suppliers or use market tracking tools like Trading Economics to stay on top of material cost trends.
Mistake #5: Not Having Professional Contracts Protect your pricing with solid contracts. If you’re still using handwritten estimates, consider upgrading to professional contract software like PandaDoc or HelloSign for digital signatures and legally binding agreements.
How to Handle Price Objections Like a Pro
When they say: “Your price is too high.” You respond: “I understand price is important. Let me explain what’s included in this estimate and why it represents good value for your project.”
When they say: “I got a lower bid.” You respond: “That’s not uncommon. Can you help me understand what’s different about their approach? I want to make sure we’re comparing the same scope of work.”
When they say: “Can you match their price?” You respond: “I price based on the quality of work and service I provide. Let me show you what you get for this investment.”
Building Long-Term Pricing Success
Track everything. Keep detailed records of:
- Actual vs. estimated costs
- Time spent on different project types
- Client satisfaction scores
- Profit margins by job type
Consider using comprehensive business management software like BuilderTREND or CoConstruct that can track everything from initial estimates through final billing. For smaller operations, FreshBooks offers excellent project profitability tracking without the complexity.
Raise prices gradually. Increase prices 3-5% annually, even for existing clients. A simple: “Due to increased costs, our 2025 rates will reflect a modest adjustment” works fine.
Specialize when possible. The more specialized your skills, the less price-sensitive your market becomes.
Essential Tools for Better Pricing
Estimating Software:
- ServiceTitan – Comprehensive solution for larger service contractors
- Jobber – Perfect for small to medium contractors
- Buildertrend – Great for construction and remodeling projects
- PlanSwift – Digital takeoff and estimating software
Time & Cost Tracking:
- TSheets – GPS-enabled time tracking
- QuickBooks – Job costing and profitability analysis
- FreshBooks – Simple project profitability tracking
Market Research:
- iSqFt – Commercial construction market data
- Trading Economics – Material cost tracking
Professional Contracts:
Your Pricing Action Plan
- Calculate your true hourly rate using the formula above
- Download our pricing worksheet to standardize your estimates
- Research 3-5 competitors to understand your market position
- Create estimate templates for your most common job types
- Practice your pricing conversations until they feel natural
Remember: Profitable pricing isn’t about being the cheapest—it’s about being the best value. Clients who only care about price make terrible long-term customers anyway. Focus on the clients who value quality work, reliable service, and fair pricing.
The contractors who thrive aren’t necessarily the busiest ones—they’re the ones who get paid well for the work they do.
Ready to improve your pricing strategy? Download our free Contractor Pricing Worksheet below to calculate your true costs and build profitable estimates.
[Download Free Contractor Pricing Worksheet →]
Need help implementing these pricing strategies? Check out our recommended tools and software in the Essential Tools section above, or explore our full guide to contractor business software here.
Disclosure: Some links in this article are affiliate partnerships that help support ContractorWorldLand at no extra cost to you.
