How Much Markup Does a General Contractor Charge?

Homeowners often look at a contractor proposal and ask one question:

“How much is the contractor marking this up?”

The percentage can be useful.

It can also be misunderstood.

Markup, gross margin, overhead, and net profit are different things.

Understanding those differences makes it easier to evaluate a contractor price.

What is contractor markup?

Markup is the amount added to a cost to arrive at a selling price.

If a contractor has $70,000 in direct project cost and sells the work for $100,000, the difference is $30,000.

The markup on the $70,000 cost is approximately 42.9%.

The gross margin on the $100,000 selling price is 30%.

Those percentages describe the same example from different directions.

They are not interchangeable.

Markup % = (Selling Price − Cost) ÷ Cost

Gross Margin % = (Selling Price − Cost) ÷ Selling Price

What does contractor markup pay for?

The difference between direct job cost and the selling price has to support the contractor's business.

That can include:

• project supervision
• estimating time
• project management
• insurance
• licenses
• vehicles
• office expenses
• software
• administration
• warranty work
• unbillable labor
• sales expenses
• schedule risk
• business profit

The exact structure differs by contractor.

That is why a percentage by itself does not tell you whether a bid is fair.

What do industry financials show?

The National Association of Home Builders reported that residential remodelers in its 2024 data averaged a 29.9% gross profit margin and a 6.3% net profit margin.

National Association of Home Builders, “Home Remodeling Profit Margin Jumps on Demand and Business Practices,” published April 10, 2026, summarizing the most recent Remodelers’ Cost of Doing Business Study.

Gross margin and markup are mathematically different.

Example: margin and markup are different

Illustrative example

Imagine a contractor expects $70,000 in direct construction cost.

If the project sells for $100,000:

Direct cost: $70,000

Selling price: $100,000

Gross profit: $30,000

Gross margin: 30%

Markup on cost: approximately 42.9%

This is why homeowners can hear two different percentages describing the same pricing structure.

Does markup mean the contractor is overcharging?

A markup percentage does not answer that question by itself.

Look at the complete proposal.

Ask:

Is the scope complete?

Are the quantities reasonable?

Are the allowances realistic?

Are important costs excluded?

Are material specifications clear?

Is supervision included?

Are permits included?

Does the contractor carry meaningful warranty responsibility?

Does the bid math reconcile?

A contractor can have a healthy business margin and still offer a fair project price.

A contractor can also present a low headline percentage while carrying inflated direct costs or vague allowances.

The full bid matters.

What is overhead?

Overhead is the cost of running the construction business that cannot always be assigned neatly to one trade line.

Examples include:

• office expenses
• insurance
• administration
• estimating
• software
• vehicles
• licenses
• management
• marketing
• accounting
• unbillable time

Contractors account for overhead in different ways.

Some show overhead and profit as a separate line.

Some distribute it across trade prices.

Some use a markup model.

The proposal should still reconcile to the total amount being charged.

What is profit?

Profit is what remains after the company pays its direct project costs and operating expenses.

A contractor needs profit to maintain a sustainable business, absorb risk, reinvest, handle warranties, and continue operating.

The homeowner's job is to evaluate the value and the complete project price.

Where should I look for padding?

Review the specific line items and assumptions.

Look for:

• duplicate charges
• large vague allowances
• unexplained differences between line-item totals and contract totals
• scope charged in multiple sections
• owner-supplied items still priced into the proposal
• large exclusions that make the headline price look lower
• quantities that do not match the project

Ask for clarification when something cannot be tied to actual scope.

Should overhead and profit be shown separately?

There are legitimate pricing structures that show overhead and profit separately.

There are also legitimate structures where those costs are built into line-item pricing.

Clarity matters.

The owner should be able to reconcile the proposal to the stated contract total and understand the scope behind the price.

How should I compare contractor markup between bids?

Start with scope normalization.

If one contractor includes permits, supervision, protection, cleanup, and more complete materials while another excludes them, comparing markup percentages alone will not explain the difference.

Put the bids onto the same project scope.

Then compare the complete offers.

The takeaway

Contractor markup is one part of construction pricing.

Understand:

• direct costs
• scope
• allowances
• exclusions
• overhead
• profit
• project risk
• the final selling price

A clear contractor bid makes those economics easier to evaluate.