An estimate that is built from the bottom up cannot forget a cost. Materials and line items, labour, contingency for the unexpected and overhead recovery all go in before a single percentage of profit is added.
Estimate total
$11,992.20
EST-208 from Your Contracting Co. for Acme Corporation, priced on $9,994 of cost and valid until Oct 14, 2026
| Step | Amount | Share of price |
|---|---|---|
| Materials and items | $4,300.00 | 35.9% |
| Labour (48 hours at $75.00) | $3,600.00 | 30% |
| Direct cost | $7,900.00 | 65.9% |
| Contingency (10%) | $790.00 | |
| Overhead recovery (15%) | $1,303.50 | |
| Everything the job costs | $9,993.50 | 83.3% |
| Profit markup (20%) | $1,998.70 | 16.7% |
| Price before tax | $11,992.20 | |
| Estimate total | $11,992.20 |
The markup is 20% of cost but only a 16.7% margin on the price. Break-even on this job is $9,993.50, so anything below that price loses money.
| Item | Qty | Unit cost | Amount |
|---|---|---|---|
| Cabinet units | 12 | $210.00 | $2,520.00 |
| Worktop, cut and fitted | 6 | $240.00 | $1,440.00 |
| Fittings and adhesive | 1 | $340.00 | $340.00 |
| Labour | 48 | $75.00 | $3,600.00 |
| Materials total | $4,300.00 |
Labour is listed with the materials so a client can see what the hours are, rather than discovering them in the total.
| Milestone | Share | Amount |
|---|---|---|
| Deposit | 30% | $3,597.66 |
| Progress payment 1 | 35% | $4,197.27 |
| Final payment on completion | 35% | $4,197.27 |
| Total | 100% | $11,992.20 |
Front-loading the deposit and paying as the work progresses is what keeps a job from turning into an interest-free loan to the client. Contractors lose more money to the final invoice than to bad pricing.
This generator prices the job, shows the true margin behind the markup, and splits the total into a deposit and progress payments, so the work is never funded entirely out of your own cash.
Direct cost is materials plus labour. Contingency is a percentage of that, for the surprises every job has, and overhead recovery is added next: insurance, vehicles, tools, office, admin time and everything else a business pays whether or not this job exists.
Only then does markup apply. Marking up the direct cost alone is the classic mistake, because the overhead the job consumed never gets charged to anyone.
A 20% markup on a $1,000 cost produces a $1,200 price, which is a $200 profit on the price: a margin of 16.7%, not 20%. To earn a 20% margin you have to mark up by 25%.
The same confusion works against you in reverse. Cutting your price by 10% at a 20% markup leaves a 6.7% margin, which is why discounting costs far more profit than it appears to.
If the contingency is added into profit and then spent on the inevitable extra, the profit disappears quietly. Adding it as a cost line keeps it visible: what is left is real profit, and the customer sees an honest total rather than a variation order later.
On renovation and construction work a 10% contingency is a floor. Anything older, occupied or partially hidden behind walls needs more, and a fixed-price quote on a 100-year-old house needs the most.
A deposit before work starts covers materials and proves the client is committed. Progress payments keep the cash balance moving as the job runs, and the final payment should be small enough that it is not the only money at risk.
Paying for materials out of pocket and billing at completion means financing the client for the length of the job. Ordering materials is exactly the moment to have their money in hand.
Each example below was run through the calculator on this page when the site was built, so the numbers match what you see when you enter the same inputs.
Estimate total
$11,476.08
EST-208 from Your business for Client, priced on $9,563 of cost and valid until Oct 14, 2026
A 20% markup produces a 16.7% margin, and the deposit plus two progress payments means three quarters of the money arrives before the job is finished.
Estimate total
$5,000.00
EST-208 from Your business for Client, priced on $4,000 of cost and valid until Oct 14, 2026
Marking up by 25% is what it takes to keep 20% of the price: the same cost, a fifth of the price more profit.
Estimate total
$8,602.00
EST-208 from Your business for Client, priced on $7,820 of cost and valid until Oct 14, 2026
With the markup cut to 10% the margin falls to about 8.3%, and the contingency is the only thing standing between the job and a loss.
Markup is a percentage of cost, margin is a percentage of the price. A 20% markup is a 16.7% margin, and a 25% markup is a 20% margin. The estimate table shows both so you can see which one you are quoting.
Ten percent on straightforward work, more on anything with hidden conditions: old buildings, occupied sites, underground services or long supply chains. Contingency is a cost line, not profit, so unspent contingency stays in the job.
A percentage scales with the job, which is why 20% to 30% is common for work with material costs. On small jobs a fixed minimum covers the trip and the admin, which is why a minimum deposit is often quoted alongside the percentage.
30 days is normal, 14 days when material prices are moving quickly, and 90 days only when you have firm supplier pricing. The validity date belongs on the quote itself, not in a covering email.
Not necessarily, but showing the labour hours and the materials avoids arguments about scope, and a client who can see what the work involves is less likely to demand extras for free. Present the total, not the individual margins.
Last reviewed 2026-09-14. This page is an estimate tool, not financial, tax or legal advice.Read the full disclaimer.