After years of quoting jobs and wondering why my bank account never matched what I thought I was making, I finally figured out what I was missing.
Most contractors calculate: hours × rate + materials = quote
The real formula is: (hours × rate) + labor burden + overhead allocation + materials markup = your true cost
Here’s what each one means:
Labor burden — your hourly rate doesn’t account for SE tax (15.3%), health insurance, or workers comp. Add 20-28% on top of your base labor cost. That’s what the job actually costs you in labor.
Overhead allocation — add up your monthly fixed costs. Truck payment, insurance, phone, tools, software, fuel. Divide by your billable hours per month. That number gets added to every job hour you work. For most solo contractors this is $8-15 per hour.
Materials markup — you’re not a supply house. 15-20% markup on materials covers your time sourcing, carrying costs, and waste.
Example: 10 hour electrical job at $65/hr
• Base labor: $650
• Labor burden (22%): $143
• Overhead ($10/hr): $100
• Materials $500 + 20% markup: $600
• True cost: $1,493
• At 30% margin, quote: $2,133
Most guys would quote this at $1,150 and wonder why they’re tired and broke.
Happy to answer questions if anyone wants to break down their own numbers.