If you want to grow from one-off remodels to steady work, you need to know how to bid job costs for residential and commercial projects. Most contractors I talk to already know how to price a kitchen or a bathroom. They can look at a job, price the materials, estimate the labor, and land somewhere close. Commercial work looks like the same skill set until you actually try it. The overhead is different, the payment terms are slower, and the markup that works on a house will leave you underwater on a retail buildout. I am going to walk through how to price work for both markets, where the numbers diverge, and what to watch so you do not absorb costs you should have passed through.

This sits inside our broader guide to job costing for contractors. If you are still building your tracking system, start there. Here I am focusing on the bid itself.

What's the real difference between residential and commercial bids?

Residential clients usually want one number. They are emotionally invested in the space, they are living in it while you work, and they want certainty so they can budget. Commercial clients — property managers, business owners, general contractors — want a breakdown. They are comparing line items, and they often have a budget column that came from a construction loan or a tenant improvement allowance.

The biggest shift is who bears the risk of change. On a residential job, if you open a wall and find rot, the homeowner pays more or the scope shrinks. On a commercial job, the contract often says you eat unforeseen conditions up to a threshold, or you are working from drawings that the architect later revises. That risk has a price, and you have to put it somewhere in the bid.

Should I use cost-plus or fixed-price when I bid job costs?

Use fixed-price on residential work when the scope is tight and the client wants one number to write a check against. Use cost-plus or unit-price on commercial work when the drawings are incomplete, the general contractor expects transparency, or the finishes are still being selected. Cost-plus protects you. Fixed-price protects the client.

On residential jobs, a fixed price lets you capture efficiency. If you finish faster, you keep the difference. On commercial jobs, a fixed price with a vague scope is a trap. The general contractor will issue change orders that cut your profit, or the owner will delay decisions and eat your schedule. If the contract is cost-plus, bill every hour and every material receipt. Document everything. The job costing system you use matters here, because vague tracking turns a cost-plus job into a donation.

What overhead costs do residential contractors usually forget?

The number that lands in front of the client is rarely the whole story. Contractors often remember the shingles and the labor hours, but they forget the costs that do not attach to one specific wall. General liability and workers compensation insurance should be allocated across your annual volume and added per job. Vehicle costs for material runs, site visits, and estimates add up fast. Permit fees, inspection fees, and the time you spend on the phone coordinating subs are real costs.

Then there is the labor burden. If you pay a guy $30 an hour, his true cost is higher once you load in FICA and unemployment. After workers comp and state taxes, you are often at $38. Some trades push that to $40. If you are using 1099 subs instead of employees, you avoid the burden but you still need to issue Form 1099-NEC for anyone you pay $2,000 or more in 2026. That threshold moved to $2,000 under IRC §6041 (OBBBA §70433), and missing the filing carries a penalty.

How much markup makes sense for residential vs commercial work?

Residential remodel work often carries 30% markup at the low end. On complex or high-touch jobs, that number can run to 50%. The client is buying trust and convenience as much as they are buying studs and drywall. Commercial subcontract work often runs 15%. On larger negotiated work, 25% is more realistic. The margin is thinner, but the volume can make up for it if your overhead is tight.

The key is knowing whether you are marking up on cost or margin. Say you buy materials for $1,000. A 20% markup adds $200. You charge the client $1,200. Your margin on that line item is 16.7%. That is not 20%. If you need a 20% margin to cover overhead and profit, the markup has to be higher. In this case, you mark up 25%. I break this down in detail in the markup vs. margin post. Get this wrong and you are working for your overhead instead of your family.

How do payment terms change the math on a commercial bid?

Commercial jobs pay on monthly progress billing, usually net-30. Some general contractors push that to net-45. The general contractor or owner will hold 5% retainage on some jobs. On others, the holdback is 10%. That means you are carrying labor and material costs for 45 days at minimum. The retainage stretch can last months after you finish. If your bid assumes you get paid when the invoice is signed, you are financing the job with your own cash.

You have to build carrying cost into the bid. If you need a line of credit to float payroll, the interest is a job cost. If you are pulling from your own reserves, there is an opportunity cost. On residential jobs, you often get a deposit up front and progress payments at rough-in and finish. The cash cycle is shorter and the risk of non-payment is lower because the homeowner is living in the result. On commercial jobs, the risk shifts to slow payment and back-charges. Read the pay application terms before you sign. If the contract says "paid when paid," you are taking the general contractor's credit risk. Price that in.

When should I say no to a job?

Say no when the scope is undefined, the client demands a fixed price on a vague spec, or the payment terms would force you to borrow at high interest to make payroll. Bidding a job wrong is worse than not bidding it. If you cannot get a clear drawing, a written spec, or a payment schedule you can survive on, pass. There is no tax deduction for working for free.

I also push back when a residential client wants ten rounds of revisions on the estimate but balks at a design fee. Charging for estimates is standard in commercial work and it should be in residential too, especially on large remodels. Your time is a cost. If you give it away, you are training the market to treat your expertise as free.

What's the short version?

Bid job costs by adding direct materials, direct labor, labor burden, allocated overhead, and profit markup. Residential allows higher markup and faster payment. Commercial demands tighter markup, slower payment, and bulletproof documentation. Do not use your residential formula on a commercial job without adjusting for cash flow and overhead. And do not bid commercial work on handshake scopes — the change order game will eat you alive.

Bidding a job and not sure your numbers will hold up? We help contractors build estimates that cover true costs, account for tax, and leave margin at the end. Book a meeting with our team here.