Introduction: Why Pricing Can Make or Break Your Business
Pricing your jobs correctly is one of the biggest challenges contractors face. Charge too little, and you’re barely scraping by. Charge too much, and you risk losing potential clients. Finding the sweet spot between profitability and competitive pricing is tricky, but getting it wrong can cost your business thousands every year.
The truth is, most pricing mistakes come down to avoidable errors—underestimating material costs, ignoring labor fluctuations, or failing to account for overhead. The good news? Once you know what to look for, you can fix these issues fast and start pricing jobs in a way that maximizes profits without scaring off clients.
Let’s break down the 5 biggest pricing mistakes contractors make—plus simple fixes to avoid them.
1. Underestimating Material Costs
Why This is a Problem
Many contractors rely on outdated pricing estimates or guesswork when calculating material costs. But with market prices constantly fluctuating, this can lead to underquoting jobs and eating into your profits.
How to Fix It
✔ Use Updated Pricing Sources – Instead of estimating costs manually, check with suppliers frequently to ensure your numbers are current.
✔ Add a Buffer for Price Changes – Always include a 5-10% buffer in your material pricing to account for unexpected increases.
✔ Track Common Material Costs – Keep a digital or written record of materials you use frequently so you’re never guessing.
2. Ignoring Labor Fluctuations
Why This is a Problem
Labor costs aren’t fixed. Employee wages, overtime, subcontractor rates, and hiring costs all fluctuate—yet many contractors price jobs as if labor costs never change. This leads to shrinking margins when rates go up unexpectedly.
How to Fix It
✔ Regularly Review Labor Costs – If your labor costs have increased by 15% in the last year, your pricing should reflect that.
✔ Account for Overtime & Special Rates – Certain jobs require premium pay, especially for rush work or specialty tasks.
✔ Use a System to Track Labor Costs – Relying on memory alone can lead to costly mistakes.
3. Not Charging for Overhead Costs
Why This is a Problem
Your truck, gas, insurance, tools, office expenses, and marketing are all part of the cost of doing business. Yet many contractors fail to include overhead in their pricing, cutting deep into their profits.
How to Fix It
✔ Calculate Your Monthly Overhead – Write down every business expense (vehicle payments, insurance, software, etc.).
✔ Divide Overhead Across Jobs – If your monthly overhead is $5,000 and you complete 10 jobs per month, each job needs to cover at least $500 in overhead costs.
✔ Use Pricing Tools to Automate This – Instead of manually calculating, use a simple system that ensures overhead is factored into every estimate.
4. Competing on Price Instead of Value
Why This is a Problem
Many contractors lower their prices to win jobs, thinking clients only care about cost. But low-balling leads to razor-thin margins, and customers who choose based on price alone often cause the most headaches.
How to Fix It
✔ Focus on Quality & Reputation – Showcase your expertise, reviews, and past projects instead of just offering the lowest bid.
✔ Offer Tiered Pricing – Instead of one price, offer good, better, and best packages so clients see the value of premium services.
✔ Present Professional Estimates – A detailed, well-organized estimate with clear breakdowns makes a huge difference in how your price is perceived.
5. Failing to Follow Up on Unapproved Estimates
Why This is a Problem
Too many contractors send out an estimate and forget about it. But just because a client hasn’t responded doesn’t mean they aren’t interested. A simple follow-up can increase approved bids by 30% or more.
How to Fix It
✔ Send Follow-Ups Regularly – Check in 2-3 days after sending an estimate to keep your bid top of mind.
✔ Offer a Limited-Time Discount – If a client is hesitant, a small incentive (like a quick-start discount) can help seal the deal.
✔ Keep a System for Pending Estimates – Manually tracking follow-ups is tough—a simple reminder system can make all the difference.
How to Price Jobs the Right Way (Without Guesswork)
Pricing is a science, not a guessing game. The best contractors use accurate data, real-time costs, and smart strategies to ensure their pricing is both profitable and competitive.
Here’s how to avoid pricing mistakes going forward:
✅ Use updated material & labor pricing instead of relying on old numbers.
✅ Always factor in overhead costs so you’re actually making a profit.
✅ Compete on value, not price—stand out with professional estimates.
✅ Follow up on unapproved estimates to close more deals.
There’s an easier way to get your pricing right—discover a tool that helps contractors automate estimates, factor in real costs, and win more profitable jobs.
