Understanding how a general contractor makes money helps you read bids and plan your project costs. A2Z Construction Management is a licensed contractor in New Jersey and New York with 30+ years of experience, offering clear pricing and reliable results.
A major part of a general contractor’s job is to figure out how much to charge. This often takes time, skill, and experience, especially when the client wants a fixed price upfront.
Learning how contractors price their work helps you compare bids and set expectations. Each pricing model affects the total project cost and how the contractor earns.
Contractors usually work with three pricing models: hourly rate, fixed price, and percentage of project cost.
These general contractor pricing guides help clients choose the right pricing method for their project and budget.
How general contractors estimate jobs is key to setting fair pricing. The best way to do this is by giving clients a detailed cost estimate that outlines expected labor and material costs, overhead, and profit. Sharing a clear general contractor price sheet early builds trust, avoids confusion, and can lead to repeat work.
For example, in a cost-plus contract, clients pay the actual job costs plus a fixed fee. Adding this option to your price sheet can simplify conversations and help move projects forward quickly.
When preparing your estimate, don’t forget these common costs:
How much should a general contractor charge? It depends on the project size:
What percentage do contractors charge? Contractors typically charge 10% to 25% of the total cost. Bigger or more complex jobs may cost more.
Fees cover overhead costs, managing subcontractors, labor, materials, and scheduling. A2Z Construction lists all general contractor fees clearly and adapts pricing to each project. If you're budgeting for a specific remodel, check out our recent posts on the cost to gut and renovate a house and contractor financing options for home improvements.
Beyond base fees, contractors build profit through strategic markups and project efficiency. Understanding these components helps homeowners interpret bids accurately.
Markup is how general contractors make money beyond base labor cost. Most contractors charge a markup on both labor and materials to cover expenses and generate profit.
This covers overhead and profit while accounting for risk. Markups vary depending on project size, material costs, and subcontractor rates. Markup is also used to buffer unexpected costs that may arise during the project.
Profit margins typically fall between 10% and 20%, but they vary widely:
These margins must cover not just labor and material, but also insurance, equipment, permits, and administrative support. Contractors managing multiple trades and schedules need higher profit margins to absorb coordination costs.
Understanding these margins helps clients assess bids realistically. For A2Z Construction, maintaining clear markup practices helps clients know where their money is going and promotes long-term trust.
In the U.S., general contractors generate income through:
Some also earn from offering in-house design, permitting services, or equipment rentals. Contractors with established vendor relationships and economies of scale often increase profit margins through lower material costs. Efficient scheduling, reduced waste, and strong project management systems allow experienced contractors to improve net earnings.
Managing cash flow is essential for project continuity. Contractors often structure payments to ensure adequate resources at each stage of the job.
How do general contractors get paid? Most use staged payments tied to project milestones:
This method helps contractors manage cash flow while aligning with project progress. It also gives homeowners visibility and control over how their funds are used.
These payment arrangements help ensure accountability and minimize delays. A2Z Construction provides detailed payment breakdowns before work begins and sticks to predefined billing stages.
Change orders are a common income stream and risk factor. They occur when clients request additions or alterations mid-project. Contractors typically charge:
Proper documentation, signed approvals, and real-time communication help reduce disputes. Detailed initial scoping, along with strong project management, reduces scope creep and keeps the total cost on track.
Running a successful contracting business goes beyond single-job profits. Scaling operations and managing multiple income streams helps contractors grow sustainably.
Contractors who manage crews across different jobs, keep suppliers on schedule, and switch between sites quickly can earn more without lowering quality.
Good project tools and clear systems help avoid delays and stay on budget.
Labor cost is often the largest variable in a project. Successful contractors:
Using historical data and ongoing performance reviews allows contractors to adjust rates and expectations. These practices keep labor and material costs predictable, helping maintain healthy profit margins.
Growth depends on efficiency and team reliability. To scale, contractors must:
At A2Z Construction, we keep things simple and efficient so we can grow without lowering our quality. Our goal is to finish jobs well while keeping strong profit margins.
Clear estimates, fair pricing, and good money management help contractors build strong businesses. When you hire a general contractor like A2Z Construction, your project is handled with care and experience.
Whether you're planning a small renovation or a full-scale build, A2Z Construction is here to guide you with clear pricing and trusted experience. If you're considering a bathroom remodel or kitchen renovation, we offer detailed quotes and expert project planning to help you get started.
Schedule a free estimate today and find out exactly what your project will cost—no guesswork, no pressure.