General Contractor Pricing: How to Markup Sub Bids + Materials

General contractors don't swing hammers all day — they coordinate. They manage 4-8 subcontractors, handle material procurement, schedule inspections, solve problems when the plumber finds a rotted joist that wasn't in the plans, and take the call from the homeowner at 9 PM asking if the tile color they picked two months ago is still available.

That coordination has a cost. The GC's markup on sub bids and materials isn't a tax — it's payment for project management, risk, and accountability. But many GCs undercharge because they don't know how to calculate their true overhead, they're afraid of losing bids, or they confuse markup with profit.

Here's how to build a GC pricing structure that covers your overhead, pays you a real profit, and is defensible when the homeowner asks "why is your price $30,000 more than if I hired the subs myself?"

The GC Cost Structure

Every GC project has four cost layers:

1. Direct costs (hard costs): Subcontractor bids + materials you buy directly + your own labor (if you self-perform any scope) + equipment rental + permits
2. Overhead: The cost of running your business — insurance, vehicle, office, admin staff, software, phone, continuing education, license fees
3. Profit: What's left after all costs. This is your compensation for risk, capital, and the opportunity cost of your time.
4. Contingency: A buffer for unknowns, typically 5-15% on renovation work

Your price to the homeowner = Direct costs + Overhead + Profit + Contingency. Simple in theory. The problem is most GCs don't know what their overhead actually is, so they guess — and they guess low.

Calculating Your Real Overhead

List every cost you incur regardless of whether you have active jobs. Here's a typical annual overhead for a small GC operation in Ontario:

If your annual revenue target is $500,000, your overhead is 7-16% of revenue. If your target is $300,000, it's 12-27%. This is why smaller GCs need higher markup percentages — the overhead is spread across fewer dollars.

How to Markup Subcontractor Bids

When a plumber gives you a bid for $8,500 and an electrician bids $12,000, you don't just pass those numbers through to the homeowner. You add a GC markup that covers:

• Coordination time — scheduling, sequencing, conflict resolution
• Quality management — inspecting work, managing callbacks
• Payment administration — paying subs, managing holdbacks
• Warranty responsibility — you're the single point of contact for 1-2 years
• Risk — if the sub damages something or doesn't finish, it's your problem

Standard GC Markup on Subs

On a $150,000 residential renovation where $80,000 is sub work, a 15% markup on subs generates $12,000 in GC revenue from sub coordination alone. That's not all profit — your overhead eats into it — but it's how you get paid for the 100+ hours you'll spend managing those subs over a 3-month project.

How to Markup Materials

Materials you procure directly deserve a higher markup than sub bids because you're doing more work:

• Sourcing the right product
• Comparing supplier prices
• Scheduling delivery to match the construction sequence
• Receiving, inspecting, and storing materials
• Managing returns and damage claims
• Carrying the float (you pay the supplier before the client pays you)

Material Markup Ranges

The key distinction: materials included in a sub's bid are already marked up by the sub. Your GC markup is only on the sub's total bid, not on the materials within it. Materials you buy directly from suppliers get your full material markup.

Building the Project Budget: A Real Example

Here's how a $200,000 kitchen + bathroom renovation breaks down for the GC:

At ~$198,000, the GC's total revenue over $139,000 in hard costs is ~$59,000. After overhead ($19,281), the GC profit is roughly $40,000 on a project that will take 8-12 weeks of active management. That's real compensation for coordinating 6+ subs, solving daily problems, and carrying the warranty.

Answering "Why Don't I Just Hire the Subs Myself?"

Every GC has heard this. Here's the honest answer, which you should be able to articulate to any homeowner:

• Sequencing. Subs need to arrive in order — demo before framing, framing before rough mechanical, rough mechanical before drywall. Miss the sequence and the project stalls for weeks.
• Accountability. When you hire subs directly, each one is responsible for their scope only. When the plumber cuts a joist and the framer says "not my problem," who fixes it? The GC. One throat to choke, as the industry says.
• Pricing. GCs get better sub prices than homeowners because subs know a GC will give them repeat work. The sub who charges a homeowner $12,000 will charge a GC $9,500 for the same scope because the GC brings 10 jobs a year.
• Warranty. If the tile pops off in year one, who does the homeowner call? One person: the GC. Not the tile guy who may or may not return their call.
• Time. Managing a renovation is a full-time job. The homeowner would need to take weeks off work to do what the GC does daily.

FAQ

What is a standard GC markup on subcontractor bids?

10-20% for residential, 8-15% for commercial. 15% is the most common for residential renovation. This covers coordination, scheduling, quality management, warranty responsibility, and risk.

Should I markup materials differently than labor?

Yes. Materials you buy directly get 15-35% markup (covering procurement, delivery coordination, waste, and float). Materials included in sub bids are already marked up by the sub — your GC markup is on the sub's total bid, not the materials within it.

How much should a GC charge for project management?

GC overhead + profit combined typically runs 20-35% on top of hard costs. That's 10-18% overhead (insurance, vehicle, office, admin) plus 8-15% profit. On a $100,000 renovation, the GC's fee is $20,000-$35,000 — covering months of daily coordination and accountability.