Question 1

What markup should an electrical contractor charge?

Accepted Answer

Most electrical contractors target 25-40% markup on burdened labor and materials. NECA benchmarks put average net profit at around 3% after taxes, which means markup has to cover all overhead before profit starts. To hit a 20% gross margin (a common baseline), you need a 25% markup. To hit 30%, you need 42.9%. Price to a margin target, not a markup assumption.

Question 2

How is markup different from margin for trade contractors?

Accepted Answer

Markup is the percentage you add to your cost. Margin is the percentage of revenue you keep. They are calculated on different denominators, so they always produce different numbers. A 25% markup produces a 20% margin, not 25%. If you are targeting a 20% margin but applying a 20% markup, you are walking away with 16.7% instead. On a $100,000 job, that difference is $3,300.

Question 3

What is a 40% markup as a margin?

Accepted Answer

A 40% markup equals a 28.6% gross margin. If your job costs $10,000 and you mark it up 40%, you bill $14,000. Your profit is $4,000. $4,000 divided by $14,000 equals 28.6%. This is a common blended margin target for commercial electrical and HVAC contractors covering higher overhead on multi-phase work.

Question 4

What markup do HVAC contractors use?

Accepted Answer

HVAC contractors typically mark up equipment 25-50% and small parts and materials 75-100% or higher. The blended markup across a full job commonly runs 35-50%, targeting a gross margin in the 26-33% range. Most HVAC contractors use tiered markup rates, higher on small parts and lower on major equipment, rather than a flat rate across the full job cost.

Question 5

How do plumbing contractors calculate job markup?

Accepted Answer

Plumbing contractors calculate markup on burdened labor (base wage plus payroll taxes, insurance, and benefits) plus material cost. Industry benchmarks put target net profit for specialty trade plumbing at 6.9-8.5%, which requires gross margins of 25-35% depending on overhead load. Calculate your overhead as a percentage of projected revenue first, then set markup to cover both overhead and your profit target.

Question 6

What markup is needed to hit a 20% net margin?

Accepted Answer

It depends on your overhead rate. Under the 10-10 rule baseline (10% overhead, 10% profit), you need a 25% markup to hit 20% gross margin and roughly 10% net after overhead. If your overhead runs 15%, you need closer to 42.9% markup to hit 30% gross and the same 15% net. Start with your overhead percentage, not a number you have seen someone else use.

Question 7

What does the "10-10 rule" mean for contractors?

Accepted Answer

The 10-10 rule is a baseline: 10% for overhead coverage and 10% for profit, totaling a 20% gross margin target. To hit 20% gross margin, you need to mark up job costs by exactly 25%. Most contractors treat this as a floor. Specialty commercial work and complex projects warrant higher margins to account for greater project management time and risk.

Question 8

Why do contractors lose money even with a healthy markup?

Accepted Answer

Three reasons. First, the markup vs margin math error: applying 20% markup when you meant 20% margin quietly costs you 3.3% on every job. Second, outdated material prices: construction input costs rose at a 6% annualized rate in early 2025, so bids based on prices from six months ago are already underbid before the job starts. Third, uncaptured scope: when change orders do not get written up, that extra work becomes free labor.

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