Mark up subcontractors 20% on a residential remodel, never go below 15%, and go to 30% or more when the sub's bill is small. Published ranges run 10-30%, with 20-35% on residential renovation (constructionarbitrage.com), and the gap between the bottom and the middle of that range is most of your profit. Remodelers spend about 30% of revenue on trade contractors and keep 6.3% net (NAHB). On a $60,000 kitchen that is $18,000 of subs and $3,780 of profit. Mark the subs up 10% instead of 25% and you give away $2,700. That is 71% of what the job was going to make.
What does the markup on a sub's price actually pay for?
Your time running the sub, and the risk you carry for him. Scheduling, sequencing, the inspection, the callback he won't answer, the insurance paperwork. None of that is on his invoice, and all of it lands on you.
Here is the same $60,000 kitchen, with four subs on it: plumber, electrician, drywall and the countertop fabricator. $18,000 between them.
| What the markup pays for | How it's worked | Cost |
|---|---|---|
| Scheduling and sequencing | 4 trades x 5 hours of calls, walks and inspection meetings x $75 | $1,500 |
| One slipped start | Your 2-man crew idle a day waiting on rough-in: 16 hours x $55 | $880 |
| One callback the sub won't take | A return trip for a weeping supply line in month eight | $400 |
| Insurance and lien paperwork | Certificates, releases with each draw, 2 hours x $75 | $150 |
| Total | $2,930 (16.3% of the sub costs) |
The hours and rates are placeholders. Put in your own. The shape holds: before you have earned a dollar on the subs, managing them costs somewhere in the mid-teens as a percentage. At 10% you are paying to have them on the job. At 20% you keep about $670 on the lot, and at 25% about $1,570.
Two of those lines deserve more than a placeholder, because they are law, not habit.
The lien. If you don't pay a sub, he can go after the homeowner's house. Florida makes you print that in every residential contract over $2,500, in 12-point capital letters: the people who are owed money "may look to your property for payment, even if you have already paid your contractor in full" (Fla. Stat. 713.015). Collecting a release from every sub with every draw is what keeps that from happening. It is work, and it is part of what the homeowner buys from you.
The comp audit. Pay a sub who can't produce a workers' comp certificate for the dates he worked, and at audit your carrier may treat what you paid him as your own payroll (Fisher Phillips). An $8,000 drywall sub at a rate of $10 per $100 of payroll is $800 of premium you never priced. The markup is where that risk lives, and the certificate on file is how you keep it from being called.
Should you mark up subs more than materials?
Yes, or at least as much. A box of tile doesn't miss its start date. It doesn't fail an inspection or stop picking up the phone after the final payment clears. A sub can do all of that, and every time he does, your crew and your name absorb it.
We argue for 15-20% on stock materials in how much to mark up materials. Subs should sit at or above that, because the handling cost of a sub is mostly your hours and your exposure, not freight and leftovers.
Remember that the percentage you add is not the percentage you keep. A 20% markup is a 16.7% margin, and a 25% markup is 20% (constructionarbitrage.com). If you set targets in margin terms, convert before you price. The full working is in markup vs margin.
Should the percentage change with the size of the sub's bill?
Yes, and in the opposite direction from what feels fair. The coordination doesn't shrink with the invoice. An electrician adding one dedicated circuit for a microwave takes the same phone calls and the same inspection slot as a $6,000 rough-in. So small tickets carry a higher percentage. This is a recommendation, not a survey:
| The sub's bill | Example | Markup |
|---|---|---|
| Under $1,500 | Add a circuit, move a supply line, patch after the plumber | 30-35%, or a flat coordination fee |
| $1,500-$10,000 | Kitchen rough-in, drywall hang and finish | 20-25% |
| Over $10,000 | Full-house electrical, HVAC replacement, a large countertop package | 15-20% |
| First job with a new sub | Anyone you haven't seen through a callback yet | Add 5 points |
Twenty percent on a $650 circuit is $130. That doesn't cover the two hours you spent getting him there. Thirty-five percent is $228, and nobody has ever lost a kitchen over it.
The bottom row is the one contractors skip. A sub you have worked with for six years, who comes back for callbacks without being chased, is cheaper to run than his invoice suggests. A new one is dearer. Price the difference.
What do you say when the homeowner sees the sub's invoice?
Tell them what the difference buys, in their terms, and stop. It happens: a sub leaves his quote on the counter, or hands the homeowner his card on the way out, and now they have done the subtraction.
Something like this, said standing in the kitchen:
"That's what the plumber charges me. My number is him here on the right day, the rough-in passing inspection the first time, him being paid so nobody puts a lien on your house, and me answering the phone when a drain leaks next summer. If you hire him yourself, all of that is yours."
Don't apologise for the number and don't knock it down on the spot. A discount offered at that moment tells the homeowner the markup was padding, and then they go looking for more of it on every other line. On a fixed-price job, the fix is upstream: sub quotes stay in your file, and the estimate shows the plumbing line, not the plumber.
What if the homeowner wants to hire the sub directly?
Let them, and price the rest of the job without it. Arguing costs you the relationship and rarely saves the line.
Write down what changes, because the homeowner will assume nothing does:
- Their sub, their schedule. If he isn't done when your drywall crew is booked, the delay is theirs, and so is the cost of your crew coming back.
- Their sub, their lien exposure. You aren't collecting his releases and you aren't paying him.
- Your warranty stops at your work. A leak in his supply line is his callback. If you go out to find it, it's a service call at your rate.
- A coordination fee stays. You still sequence him, open the walls for him and close them after. Price that as a line, not as a favour.
The job still works if your own labor was priced right. It only hurts the contractor who was using the sub markup to carry overhead that belonged on the hour, which is the argument in overhead cost per field hour.
What this misses
The coordination table is illustrative. Five hours per trade and one slipped day are plausible for a kitchen, not measured. A GC with a tight, long-standing sub bench has less of both and can run lower.
Published ranges are soft. The 10-30% band comes from a trade site, not a survey with a sample size. We couldn't find a published study of residential sub markups with a method behind it, so treat every range here, ours included, as a starting point.
Lien and comp rules are state by state. Florida is used because its warning is printed in statute. Your state's notice deadlines and audit practice will differ. Ask your carrier how they treat uncertified subs before the audit, not during it.
Cost-plus jobs are different. There, the homeowner sees every sub invoice by design and your fee is a negotiated percentage, often lower than a fixed-price markup. The table above is for fixed-price work.
None of this works unless each sub's price sits on its own line where the markup can reach it. BidWalk keeps sub lines separate from your own labor and material as you walk the job, so the percentage you meant to charge is the one that goes out.
