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Most solo operators lose money on a bid in one of two ways: they price too low to win and regret it, or they guess and discover halfway through the job that the number did not cover everything. Learning how to price a job properly fixes both.
This guide gives you the formula, a worked example with real arithmetic, and the markup versus margin mistake that quietly eats profit. It is written for one-truck home-service operators, but the method works for any trade.
To bid a job, add up your direct costs (labor at your true rate, materials with waste, travel and disposal), add a share of overhead, then divide by (1 minus your target margin). Do not just add a percentage on top.
The reason matters: a 20% markup on cost earns only a 16.7% margin, so jobs bid by adding 20% to cost often come in below plan.
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What is a job bid? Bid vs estimate vs quoteHow to bid a job: the cost build-upSetting the price: overhead, margin and contingencyWorked example: bidding a two-day jobMarkup vs margin: the mistake that eats your profitHow to write a bid that winsHow to bid by tradeCommon bidding mistakesFAQ
What is a job bid? Bid vs estimate vs quote
The terms overlap in daily use, and customers mix them up. What matters is that you say in writing whether your number is fixed or approximate.
Rules differ by state and by contract, so spell out your terms on every document you send.
How to bid a job: the cost build-up
Work through these five cost steps in order, and write each number down. The goal is a bid where every dollar of cost is counted before you add profit.
1. Define the scope in writing. Walk the site, take photos and measurements, and list what is included and what is not. A vague scope is the most common reason a good price turns into a bad job.
2. Estimate the hours. Break the job into tasks and estimate each one, then add time for travel, setup and cleanup. If you track past jobs, use your own actual hours rather than a guess.
3. Price your labor at the true rate. For employees, that means pay plus payroll taxes, insurance and benefits, a burden often put at around 30%. For yourself, work backwards from the take-home you want with our free hourly rate calculator.
4. Add materials with waste. Use current supplier prices and add a waste factor, commonly 5% to 10% depending on the material. If you mark up materials to cover purchasing and handling, add it here.
5. Add the other direct costs. Travel, dump fees, equipment rental and permits are easy to forget and they come straight out of profit.
Setting the price: overhead, margin and contingency
Direct costs are not your total cost. Overhead is everything you pay whether or not a job is running, such as insurance, software, the van and your phone.
6. Allocate overhead. Divide your yearly overhead by your yearly billable hours to get an overhead cost per hour, then apply it to the job’s hours. Many small shops instead use a percentage of direct costs.
If the labor rate you used in step 3 already includes overhead and profit, skip this step so you do not count it twice.
7. Apply your margin. Divide your total cost by (1 minus your target margin). Many published guides suggest holding a contingency of roughly 5% to 15% on jobs with unknowns, which you can fold into the costs above.
Worked example: bidding a two-day job
Here is the full formula on a realistic job. The inputs are an illustration, so swap in your own numbers.
Now compare the shortcut of adding 20% to your cost. That gives $3,247.20, which leaves $541.20 of profit, a margin of only 16.7%. The correct method earns you $135.30 more on this one job.
Our free Job Pricing Calculator folds labor, materials, travel, overhead and margin into one price and exports a branded PDF quote you can send from the truck.
Markup vs margin: the mistake that eats your profit
Markup is the percentage you add to your cost. Margin is the share of the final price that is profit. They are different numbers, and the margin is always smaller than the markup.
To hit a target margin, you need a larger markup than the margin itself. The relationship is markup = margin ÷ (1 − margin).
Most operators think in markup but should track margin, because margin is what shows up in your bank account. Pricing with the divide-by formula keeps the two straight.
How to write a bid that wins
A correct price still has to be accepted, and a clear bid wins more than a cheap one. Put these items on every bid you send.
Scope and exclusions. List what is included and what is not, so extra work becomes a change order rather than a dispute.
Price, payment terms and deposit. State the total, when you are paid and any deposit for materials.
How long the price is valid. Material prices move, so give the bid an expiry date and say how price changes are handled if the start date slips.
Timeline and proof. Give a start date, an expected duration and your licence and insurance details.
Send the bid quickly and follow up, because slow proposals lose jobs that were already yours. If you send more than a few bids a month, quoting software helps, and our Jobber vs Housecall Pro comparison covers two popular options.
How to bid by trade
The formula is the same everywhere, but each trade has its own pricing basis and benchmarks. Use these guides for the numbers.
Common bidding mistakes
Most unprofitable bids come from the same few errors. Check your next bid against this list.
Forgetting overhead. If no share of insurance, software and vehicle costs is in the price, you are paying them out of profit.
Confusing markup with margin. Adding 20% is not a 20% margin, as the example above shows.
Skipping waste, travel and disposal. Small costs add up across a week of jobs.
Never checking the result. Compare your bid hours with the hours you actually spent, using the free Job Profit Tracker, and adjust the next bid.
FAQ
How do you bid a job?
Add up your direct costs (labor at your true rate, materials with waste, travel and disposal), add a share of overhead, then divide the total by one minus your target margin. Write the scope, price, payment terms and expiry date into the bid.
How do you bid a job for the first time?
Use the same formula and be conservative with hours. Estimate each task, add time for travel and setup, and track your actual hours afterwards so your next bid is based on real numbers.
What is the difference between a bid and an estimate?
An estimate is usually an approximate, non-binding prediction of cost. A bid is a formal offer, usually at a fixed price, that becomes binding once accepted. Say in writing which one you are sending.
How much profit should I add to a bid?
It depends on the trade, the risk and the competition. Published guides commonly cite margins of roughly 10% to 25%, and margin should be calculated on the price, not added to cost as a markup.
How do you calculate overhead for a bid?
Divide your yearly overhead costs by your yearly billable hours to get a cost per hour, then multiply by the hours on the job. Alternatively use a percentage of direct costs, and do not count overhead twice if your labor rate already includes it.
What is the difference between markup and margin?
Markup is the percentage added to your cost, and margin is profit as a percentage of the selling price. A 25% markup equals a 20% margin, and a 20% markup equals only a 16.7% margin.
How do you bid a job when you are not sure how long it will take?
Break it into tasks, add a contingency for the unknowns and state your assumptions in the bid. For genuinely uncertain work, offer an hourly price with a cap or an approval step instead of a fixed price.
How do you price a job as a one-person business?
Start with your target take-home and yearly costs to find your real hourly rate, which is far higher than a wage. Then use that rate and the bid formula, and compare each bid with your actual hours.
How we researched this: the formula is standard cost-plus pricing, and the markup and margin figures are arithmetic you can check yourself. The worked example is an illustration with stated assumptions, and ranges such as waste factors, burden and margins vary by trade, so replace them with your own numbers.
Last verified: October 2026.
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