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Plain answer

What markup should an electrical contractor use on a bid?

There is no single right number. Work out your own: your overhead as a share of the direct cost you expect to put through jobs in a year, plus the profit you need, then adjust for each job's risk, size and competition. And know whether you mean markup or margin: they're different, and mixing them up is a common way to under-price a job.

See a sample reportWhere labor units come from

Markup vs. margin

Markup
Added on top of cost. A job that costs $100,000 with a 20% markup is priced at $120,000.
Margin
The share of the price left after cost. That same $120,000 price has a margin of about 16.7%, not 20%.
Converting
Margin = markup ÷ (1 + markup). Markup = margin ÷ (1 − margin). A 20% margin needs a 25% markup.
Why it matters
If you want a 20% margin and add a 20% markup, you've priced the job about 3.3 points short on every dollar.

Work out your own overhead and profit

  1. 1

    Add up a year of overhead

    Everything that isn't direct job cost: office and shop rent, vehicles not charged to jobs, insurance, office staff, estimating time, software and accounting.

  2. 2

    Divide by your annual direct cost

    Direct cost is the labor, material, equipment and subcontracts you expect to put through jobs in the year. Overhead divided by direct cost is your overhead rate.

  3. 3

    Burden your labor

    Payroll taxes, workers' compensation, benefits and union contributions belong on the labor rate, not in overhead. Check that your rate carries them.

  4. 4

    Set the profit on purpose

    Profit pays for growth, equipment and bad years. Decide the rate you need instead of taking whatever is left.

  5. 5

    Adjust per job

    Raise it for risk: a difficult GC, liquidated damages, a tight schedule, unclear documents, or work outside your usual type. Lower it only when you know exactly why.

Questions estimators ask

What's the difference between markup and margin?
Markup is a percentage of cost added on top. Margin is the percentage of the selling price that's left after cost. A 25% markup gives a 20% margin.
Should I mark up material, labor and subcontracts differently?
Many contractors do: a material markup, a separate markup on subcontracted work, and overhead and profit on the whole job. Whatever you choose, do it the same way every time so jobs can be compared.
How does Bidprobe handle markup?
You set your labor rates and burden, material and subcontract markups, overhead and profit once in your company profile. Every estimate applies them and shows the breakdown, and you can change them for a single job.

Price with your own rates and markups.

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