Free, no-signup contractor resource
Contractor Pricing Lab
Connect markup, gross margin, labor burden, break-even capacity, and a target billable rate without hiding the assumptions.
Reviewed August 2, 2026. Educational planning aid only; no account or email address required.
Quick answer
A defensible price starts with complete cost and realistic capacity.
First calculate productive-hour labor cost. Add that labor to direct job cost. Choose markup or gross margin deliberately. For service rates, divide annual cost by realistic billable hours to find the modeled break-even rate, then apply a separate target profit margin.
These steps produce a planning result, not a guaranteed market price or profit. Verify every input against current company records.
Transparent math
The contractor pricing formulas in one place
Enter percentage inputs as whole numbers: 25 means 25%. The formulas divide each percentage by 100. Use values below 100 for margin inputs.
Price from markup
Direct cost x (1 + markup / 100)
Markup measures gross profit against cost. A 25% markup on $1,000 produces a $1,250 price and a 20% gross margin.
Calculate with your numbersPrice from target gross margin
Direct cost / (1 - gross margin / 100)
Gross margin measures gross profit against selling price. A 25% gross margin on $1,000 of direct cost requires a $1,333.33 price.
Calculate with your numbersTrue labor cost per productive hour
Total annual employer cost / productive hours
Total employer cost includes paid wages plus the employer costs you enter. Productive hours remove paid time that cannot be assigned to productive work.
Calculate with your numbersBreak-even billable rate
Annual cost to recover / annual billable hours
In this planning model, break-even means modeled revenue equals modeled cost. It does not include a profit allowance.
Calculate with your numbersBillable rate with a target profit margin
Annual cost to recover / (1 - profit margin / 100) / billable hours
The model treats owner target pay, overhead, and direct labor as costs to recover before applying the selected profit margin.
Calculate with your numbersFully labeled illustration
One hypothetical example from wage to price
Hypothetical only — not a benchmark or case study.
These values were selected only to demonstrate the arithmetic. They do not describe a real company, recommended pay, insurance rate, tax rate, utilization target, price, or expected profit.
Step 1
Find true labor cost
The hypothetical field employee is paid $30.00/hour for 2,080 annual paid hours. The illustration subtracts 120 paid-leave hours and 200 other nonproductive paid hours.
- Illustrative employer payroll-tax input: 9%
- Illustrative workers' compensation input: 8%
- Illustrative annual benefits: $7,200.00
- Productive hours
- 1,760
- 2,080 paid hours minus paid leave and other nonproductive paid time
- Annual employer cost
- $80,208.00
- Base wages plus only the employer costs listed in the example
- True labor cost
- $45.57/hour
- Annual employer cost divided by productive hours
- Cost above base wage
- $15.57/hour
- Difference between productive-hour cost and the stated base wage
Step 2
Build direct job cost
The example job uses $2,400.00 of materials and delivery, $600.00 of other direct costs, and 18 field hours at the true labor cost above.
- Field labor
- $820.31
- 18 hours x $45.57
- Total direct job cost
- $3,820.31
- Materials, delivery, other direct cost, and burdened field labor
- Price using 25% markup
- $4,775.39
- This produces a 20.0% gross margin, not a 25% gross margin
- Price using 25% gross margin
- $5,093.75
- $1,273.44 of gross profit before overhead and other costs
Step 3
Check annual billable capacity
For this illustration only, the full annual employer cost for one employee is allocated across the expected billable hours, including paid hours that are not billable. The model also uses $80,000.00 of owner target pay, $60,000.00 of annual overhead, 48 work weeks, and 65% billable time.
- Expected billable hours
- 1,248
- 1,920 available hours x 65 / 100
- Employee cost allocated to billable hours
- $64.27/hour
- $80,208.00 full-year employer cost divided by expected billable hours
- Annual cost to recover
- $220,208.00
- Owner target pay, annual overhead, and the full $80,208.00 annual employee cost
- Modeled break-even rate
- $176.45/hour
- Annual cost to recover divided by expected billable hours; no profit allowance
- Rate with 10% target margin
- $196.05/hour
- A planning output under these assumptions, not a market-rate recommendation
Use your records
Replace every illustration with company-specific inputs
Labor Burden Calculator
Turn paid wages and employer costs into productive-hour cost.
Open calculatorMarkup vs. Margin Calculator
Compare the two pricing methods with your direct job cost.
Open calculatorBillable Hourly Rate Calculator
Translate annual cost, capacity, and profit into a planning rate.
Open calculatorNo gate, no account
Print or download the blank pricing worksheet
The print control opens your browser's print dialog, where you can print paper or save a PDF. The CSV is a blank, portable input list; it does not contain hidden formulas or collect data.
Enter percentage inputs as whole numbers: 25 means 25%. The formulas divide each percentage by 100.
BuildMetric planning worksheet
Contractor pricing worksheet
Company / project:
Date:
1. Labor burden
- Base wage and annual paid hours
- Paid leave and other nonproductive paid time
- Employer payroll taxes
- Workers' compensation
- Employer-paid benefits
- True cost per productive hour
2. Direct job cost
- Materials and delivery
- Field labor at true labor cost
- Subcontractors
- Equipment, permits, and job-specific costs
- Waste and project contingency
- Total direct job cost
3. Annual cost and capacity
- Owner target pay
- Annual overhead
- Available work hours
- Realistic billable percentage
- Expected billable hours
- Annual cost to recover
4. Price decision
- Break-even billable rate
- Chosen markup or gross margin
- Target profit margin
- Calculated price or target rate
- Scope and risk adjustment
- Records checked and review date
Decision notes
Planning aid only, not a bid, accounting opinion, legal advice, or profit guarantee. Confirm tax, insurance, accounting, and contract decisions with current records and qualified professionals.
Evidence boundaries
Primary-source notes
Government references help define cost categories and compliance records. They do not validate the hypothetical inputs or set a price for a specific contractor.
- U.S. Small Business Administration: break-even guidance
Defines break-even as the point where total cost and total revenue are equal and explains fixed, variable, and mixed costs. The hourly-rate version here adapts that principle to service capacity.
- IRS Publication 15: Employer's Tax Guide
Use the current guide and your payroll records when identifying federal employer tax obligations. The example's payroll-tax percentage is illustrative, not a tax rate recommendation.
- BLS Employer Costs for Employee Compensation methodology
Lists wages, paid leave, insurance, retirement, and legally required benefits as employer compensation-cost categories. Published averages should not replace company records.
- U.S. Department of Labor: workers' compensation
Directs private-company and state or local government workers to state workers' compensation boards. Use the applicable policy and state information for your input.
What this lab does not decide
- Market demand or what a customer will accept
- Project scope, schedule, contingency, or contract risk
- State-specific tax, insurance, licensing, or labor rules
- Cash timing, financing, income tax, or entity-specific owner pay treatment
- Whether every overhead item is complete or correctly classified
- Whether a target margin will be achieved after actual performance
Plain-language answers
Contractor pricing FAQ
Are markup and gross margin the same percentage?
No. Markup divides gross-profit dollars by cost, while gross margin divides gross-profit dollars by selling price. The same percentage therefore produces different prices.
What is a break-even billable rate?
It is the annual cost to recover divided by expected billable hours. Under the assumptions entered, modeled revenue equals modeled cost at that rate, before a profit allowance.
Which records should I use for labor burden?
Use current payroll reports, employer tax records, workers' compensation policy documents, benefit invoices, and time records. Do not use the hypothetical percentages on this page as benchmarks.
Does the worked example recommend a market price?
No. It is a hypothetical arithmetic illustration, not a quote, benchmark, case study, or promise of profit. Market demand, scope, risk, taxes, and contract terms still require separate review.
Review how BuildMetric handles assumptions
The methodology page explains rounding, browser-local inputs, source selection, and limitations across every calculator.