General contractors get paid through a mix of base fees, markups on labor and materials, and percentage charges built into the total project cost. Most use staged payments tied to project milestones, starting with a deposit and ending with a final payout after sign-off.
The exact fee structure depends on contract type, project size, and how the bid is built.
A major part of a general contractor’s job is to figure out how much to charge. This often takes time, skill, and experience, the same foundation required to become a licensed general contractor in the first place.
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.
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:
Contractors typically charge 10% to 30% 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 margin is what stays with the contractor after paying labor, materials, subcontractors, insurance, permits, and overhead. It's not the same as the fee charged on top of the project cost.
These 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.
The fee a contractor charges is only one part of how the project actually pays. Experienced GCs build additional margin through general conditions, self-perform work, sub buyout, and schedule efficiency. None of this is hidden, but most homeowners never see it broken out.
General conditions cover the costs of running the job site: project manager and superintendent salaries, site office, dumpsters, fencing, temporary power, and insurance. GCs bill these costs at a rate above their actual cost.
A superintendent paid $84 per hour, fully loaded, may be billed to the project at $120 per hour. See how contractor salaries compare to what gets billed. Insurance and bond rates often carry a similar markup.
When a GC bids the job, they use sub quotes to build the total. After the contract is signed, they often negotiate those sub-quotes lower. The savings stay with the GC. On a year-long mid-size project, sub buyout commonly produces 1 to 3 percent of total contract value in additional margin.
When a GC performs work in-house instead of subbing it out, they keep both the trade-level profit and their own GC fee on top. Concrete, framing, and demo are the most common self-perform packages.
Every week saved on the schedule is a week of general conditions the GC doesn't pay out. Finishing a 12-month job in 11 months saves a full month of trailer rent, supervision, insurance, and overhead. Those savings drop to the bottom line.
Change orders carry a contractually agreed markup, typically 10 to 20 percent over the cost of the added work. Frequent change orders on a job add up to a meaningful revenue stream beyond the original contract value.
Across the US, general contractor income comes from base fees, markups, change order revenue, and the margin sources covered above. Vendor relationships, repeat sub crews, and bulk material purchasing let experienced contractors hold their costs lower than what they bill on the project.
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.
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.
When a homeowner pays a general contractor, that money is supposed to flow to subs and suppliers. If it doesn't, those subs can file a mechanic's lien against the property, even though the homeowner already paid.
A lien waiver is a signed document from each sub or supplier stating they've been paid for work to date. Homeowners should ask for conditional and unconditional lien waivers at every progress payment.
Retainage also protects the homeowner. This is a percentage of each progress payment, usually 5 to 10 percent, held back until the project is complete and signed off. It gives the contractor a financial reason to finish punch list items and resolve any defects before final payout.
When you're comparing bids, price alone doesn't tell the full story. A contractor who runs tight schedules, uses established sub crews, and buys materials in volume can often deliver better work at a similar price point than a lower bidder who makes up the difference through change orders or slow progress payments.
Look for these in a bid:
A contractor who is efficient with their own costs doesn't need to pad the bid to protect themselves. That's the contractor you want, here's how to find a general contractor who meets those criteria.
A2Z Construction provides itemized estimates and written payment schedules on every project. 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.