Know your real costs first
Many small contractors underprice because they count only materials and crew wages. A job also costs you:
- Direct costs: materials, crew labor (including payroll taxes and workers' compensation if you have employees), subcontractors, rentals, disposal and permits.
- Overhead: insurance, license and bond fees, trucks and fuel, tools, phone, software, advertising, accounting and office costs.
- Your own time: estimating, driving, calls, purchasing, scheduling and paperwork. This is real work even if nobody sees it.
- Slack for surprises: bad weather, hidden damage, returns for a missed part and callbacks.
Write these down once, in a simple spreadsheet. Then update it every few months. If you don't know your yearly overhead, you can't know your real price.
Markup versus margin
These two words get mixed up, and mixing them up can cost you real money.
- Markup is what you add on top of your cost. If a job costs $1,000 and you add 25% markup, you charge $1,250.
- Margin is the share of the final price that is profit. On that $1,250 job, your profit is $250, which is 20% of the price, so the margin is 20%.
A 25% markup does not give you a 25% margin. If you want a 25% margin, you need a higher markup than 25%. Decide which number you're targeting and use the matching formula. Those figures are only examples to show the math, not recommended rates.
An accountant or a trusted bookkeeper can help you choose targets that fit your business and your trade. The U.S. Small Business Administration also publishes free guides on pricing and managing business finances.
Choose a pricing method that fits the job
- Fixed price (lump sum). One price for a defined scope. Good for clear, repeatable work. Your scope must be written carefully.
- Time and materials. You charge for hours and materials as they happen. Good when the scope is unknown, such as repairs that open into surprises. Explain how it works up front.
- Unit pricing. A price per square foot, per fixture or per linear foot. Handy for painting, concrete, flooring and landscaping, as long as you've tested the unit against your costs.
- Good, better, best options. Offer two or three levels so the customer chooses between options, not between you and someone else. See writing estimates that win.
Whichever method you use, write down what is and isn't included.
Don't race to the bottom
When you price below what the job needs, the customer gets the work and you get the risk. Underpriced jobs can lead to rushed work, cut corners, unpaid bills and burnout.
Some ways to compete without being the cheapest:
- Show your license, insurance and real project photos. Trust is worth money. See your license number on your website.
- Respond fast and communicate clearly. Many homeowners pick the contractor who answers first. See following up on quotes.
- Offer a clear written scope, timeline and warranty.
- Collect reviews so people see proof of your work.
- Be willing to walk away from jobs where the price can't work.
If a customer says a competitor is cheaper, you don't have to match it. Compare what each bid includes and explain the difference.
Be careful with market comparisons
Prices vary by city, season, materials, access, permits and the scope of each job, so a rate quoted by someone else may not match your situation. Use local competitor information only as a gut check, after you know your numbers. A figure you found online isn't a reason to lower your price below your cost.
Raise prices on a schedule
Costs change. Plan to review your numbers at least once or twice a year, and update your prices when your costs go up. Give existing customers fair notice about changes to future work. A small, regular update is easier on everyone than a big jump after a bad year.
Put the price in writing
Price only means something if the scope is clear. Put the work, the price, the payment schedule and the terms in a written agreement. California has specific contract requirements for home improvement work, and the CSLB publishes guidance. This is general information, not legal advice, so check the CSLB site and ask a qualified professional about your contracts.
Where ObraUp can help
ObraUp builds the website that presents your work and your value. ObraUp add-on services are quoted for each business and are not part of the plan price. If you'd like help getting the right customers, consider the Photo quote form, Automatic follow-ups or the Monthly results report.
When you're ready, start with my website. For plan details, see pricing.
Questions people ask
What markup should I use?
There's no single right answer. It depends on your overhead, your trade and how you run jobs. Work out your costs and the profit you need, then convert that into a markup with the right formula.
Should I list prices on my website?
Many contractors don't, because scopes vary. Explain what affects the price and invite people to ask for a quote. Choose what suits your business.
How do I handle a customer who says I'm too expensive?
Stay calm and compare what each quote includes. Offer a smaller scope or a different option if it makes sense. Don't cut the price without cutting the work.
Sources
- CSLB, Contractors State License Board (checked October 2026)
- U.S. Small Business Administration, Manage your finances (checked October 2026)