Why Most Contractors Are Still Lowballing Themselves

Contractors spend their days bidding jobs, juggling schedules, chasing down invoices, and—if there’s any time left—doing the work itself. It’s a hustle. And in the thick of it, one thing gets quietly neglected: pricing. Not just throwing a number on a bid, but pricing that actually reflects the work, the risk, and the value you’re bringing to the table. The kind of pricing that doesn’t leave you sweating every tax season or crossing your fingers every time the truck needs a repair. Most contractors are undercharging, and the wild part is, they don’t even realize it.

It’s not about greed. It’s about survival. You can’t keep undercutting your way to burnout and still expect to build something long-term. If you’re feeling tapped out, resentful, or wondering why it always feels like there’s more month than money, it’s probably time to take a closer look at your numbers.

Labor Isn’t Just Labor Anymore

Let’s get something straight: your time is not free. Neither is the wear on your body, the cost of missing dinner with your family, or the mental load of managing subs and inspections. Too many contractors treat labor rates like they’re pulling numbers out of thin air. Or worse, they’re pricing themselves based on what someone else is charging down the street.

That guy might be living in his buddy’s basement, paying no insurance, and skipping permits. If you’re legit—running payroll, keeping certifications up to date, carrying proper liability coverage—you need to price like a real business, not a weekend handyman.

There’s also the issue of soft labor, which you’re probably not billing for at all. All those hours estimating, ordering materials, answering client emails, and cleaning up jobsites count. Just because you’re not swinging a hammer doesn’t mean the clock’s not ticking. Start tracking that time. Once you see how much of your week is spent on unpaid admin, it’s a lot easier to build those hours into your overall rate.

The Energy Bill You’re Not Tracking

If you’re running a small crew or even working solo, chances are you’re not tracking your overhead as closely as you should. And one area that slips through the cracks constantly is energy use. Not just gas for the truck or batteries for tools—though those count too—but the ongoing monthly drain of keeping your business physically operational.

Think about the shop. The trailer. The home office. Are you counting the electric bill? Because guess what: it’s not free just because it’s coming out of your personal account. Start carving out a percentage of your home utility bills that directly support your business, and factor it into your overhead. That includes commercial electricity if you’ve got a dedicated shop or warehouse space. Most contractors skip this entirely, and they’re effectively paying to run a business without folding those costs into what they charge.

It doesn’t have to be a full-time accountant’s job. Even a rough number is better than none. Consistently underestimating your overhead is one of the fastest ways to stay broke while working yourself to the bone.

Stop Eating Equipment Costs

Breakdowns are inevitable. Blades dull, drills die, trailers crack. It’s part of the job. But the way most contractors handle it is by reacting instead of preparing. You wait until something fails, slap it on a credit card, then spend the next few months playing catch-up.

That’s no way to run a business. If you’re not actively setting aside money each month for equipment maintenance and replacement, then you’re one major repair away from a cash flow crisis. And if you’ve ever found yourself asking “how much should heavy equipment repair cost,” the answer is: more than you want it to, and often at the worst possible time.

The solution isn’t just to budget for repairs—it’s to bill with them in mind. Every estimate should carry a small baked-in percentage for tool wear, fleet maintenance, and outright replacements. Clients don’t need to see the breakdown. It’s not their business. But if you’re working off the idea that your current tools will last forever, you’re setting yourself up for a hard hit when something gives.

Markup Isn’t Greedy, It’s How You Stay In Business

Materials pricing is a moving target, especially with supply chain hiccups and inflation riding shotgun. What you paid for plywood three months ago might not be what you’re paying now. But contractors too often eat those increases instead of adjusting their markup. Or they feel bad adding a markup at all, like it’s some kind of scam.

It’s not. It’s how businesses function. You’re not just driving to the lumber yard, picking things up, and dropping them off. You’re sourcing, coordinating deliveries, handling returns, managing waste. That’s labor. That’s time. And it deserves a margin.

If you’re only marking up materials 10%, you’re not keeping up. By the time you account for credit card processing fees, returns, backorders, damaged items, and inflation, that margin disappears. Twenty to thirty percent should be your minimum target, not some “aggressive” number. You’re not running a nonprofit. Clients aren’t hiring you just for your hands—they’re paying for experience, reliability, and peace of mind.

You Need to Pay Yourself First—Like, Actually Do It

This part gets messy for a lot of independent contractors. Maybe you take draws whenever there’s extra cash. Maybe you pay yourself last because everyone else comes first—subs, vendors, taxes, you name it. And when tax time rolls around, you’re staring at a pile of receipts and wondering why the numbers don’t reflect the sweat equity you’ve poured in.

Start treating yourself like an employee. Build your salary into your pricing, just like you would if you were hiring someone else to do what you do. Too many contractors are operating off the fumes of what’s left over instead of prioritizing profit from the outset. That’s backwards.

Profit shouldn’t be some rare bonus you get on a “good month.” It should be structured into your pricing, locked in with every bid, and protected like any other line item. If that means raising your rates, so be it. The people who value your work will pay for it. The ones who don’t were always going to be a headache anyway.

Bottom Line 

If there’s one thing contractors know how to do, it’s solve problems. You figure it out on the job, whether it’s pouring rain or the plans just changed for the third time. That same mindset needs to apply to how you run your business. Because it is a business—even if it sometimes feels like chaos in a truck.

Raising your rates, tracking your overhead, protecting your profit—it’s not about gouging anyone. It’s about building something that lasts, something that won’t collapse the second the market shifts or the axle snaps. Undercharging isn’t noble. It’s unsustainable. If you’re tired of wondering where the money went, the answer’s usually buried somewhere in the bid.

Price like your work matters—because it does. Every time you underestimate your value, you’re quietly agreeing that your time and talent are worth less than they are. And that’s one job you don’t need to take.