General contractors typically mark up subcontractor work by 10-30%, with 15-25% the most common range in residential and light commercial construction. The exact number depends on job size, trade type, overhead structure, and how competitive the local market is. That gap between what you pay the sub and what the client pays you is the core of construction arbitrage.
(Figures in USD - the model and the maths are identical in any currency.)
What the markup on subcontractors actually covers
The markup is not free money. It pays for real things, and understanding that is what lets you defend it confidently to yourself and, if it ever comes up, to clients.
A GC sitting between the client and the subs carries:
- Coordination. Scheduling trades, sequencing work, managing access, chasing progress. That time costs money.
- Commercial risk. If the sub walks off, produces defective work, or goes bust mid-job, the liability sits with you. The markup is partly a risk premium.
- Warranty and callbacks. Clients call you, not the sub, when something goes wrong six months later. You own the result.
- Admin and overhead. Quotes, contracts, invoicing, chasing payment, insurance certificates, site visits. None of it is free.
- Profit. The return on capital and risk. Without it there is no business.
The industry rule of thumb - sometimes called the "10 and 10 rule" - is 10% for overhead and 10% for profit, giving a 20% total markup as a minimum floor. Most well-run operators land above that once real overhead is accounted for, with 25-35% being typical on residential renovation work.
The markup vs margin distinction that trips everyone up
This is worth getting right because it affects every quote you write.
Markup is calculated on your cost. Margin is calculated on revenue. They are not the same number, and quoting your "margin" as if it were your markup - or vice versa - is a quiet way to underprice yourself.
An example:
| Subcontractor charge | $10,000 |
| Your markup (25%) | $2,500 |
| Price to client | $12,500 |
| Your gross margin | 20% (2,500 / 12,500) |
So a 25% markup gives you a 20% margin. To price your margin correctly, use: markup = margin / (1 - margin). If you want a 30% gross margin, you need a 42.9% markup on cost - not 30%.
Most operators who think they are running 30% margin are actually running closer to 23%. That gap compounds badly across a year.
General contractor markup on subcontractors: typical ranges by project type
These are indicative ranges based on industry practice - your numbers will differ based on your market, overhead, and trade mix:
Residential renovation and small works: 20-35% markup on sub costs is common and competitive. The management-to-value ratio is high on small jobs, which justifies the wider spread.
Light commercial (fit-outs, offices, retail): 15-25% is more typical. Competition is tighter, project sums are larger, and clients tend to be more commercially aware.
New build residential: 15-20% on subcontract packages, sometimes with a separate management fee or preliminaries line on larger contracts.
Specialist or high-risk trades: HVAC, fire suppression, structural steel, complex electrical - the markup can be wider (20-30%+) to reflect the harder sourcing, higher consequences of failure, and greater coordination demand.
On larger projects, the percentage often compresses but the cash figure grows. A 15% spread on a $200,000 subcontract package is $30,000. A 30% spread on a $10,000 job is $3,000. Scale changes the maths.
What this means for the construction arbitrage spread
The spread - the gap between what you pay subs and what you charge clients - is not arbitrary. It is the market rate for coordination, risk, and accountability. A client calling three companies for a quote is really asking: who will manage this outcome for me, at what price, with what guarantee?
When you price correctly, the spread you keep is the reward for taking that accountability and running it efficiently. See how much money construction arbitrage actually makes for how that spread converts into annual income at different job volumes.
The spread is not what you take from the sub. It is what you earn by being the person the client trusts to get the job done.
A common beginner mistake is anchoring to what the sub charges and feeling guilty about the markup. Don't. Every business in every industry marks up its inputs. A restaurant marks up ingredients 300%. A retailer marks up wholesale 100%+. A GC marking up subcontractor labour 20-25% is at the conservative end of the business-as-usual spectrum.
A worked example: bathroom renovation
Say a plumber quotes $3,500 for the rough-in and fit-out on a bathroom renovation. You also have a tiler at $1,800, a painter at $600, and a handyman for fixtures at $400.
| Trade | Sub cost | Markup (25%) | Billed to client |
|---|---|---|---|
| Plumber | $3,500 | $875 | $4,375 |
| Tiler | $1,800 | $450 | $2,250 |
| Painter | $600 | $150 | $750 |
| Handyman | $400 | $100 | $500 |
| Total | $6,300 | $1,575 | $7,875 |
Add materials at cost plus a 15% sourcing markup and a 7% contingency, and your full price to the client lands around $10,000-$11,000 for a complete bathroom. Your gross margin is roughly $2,500-$3,000 on the labour coordination alone, before materials margin.
For a detailed walkthrough of building that quote from zero, read Pricing Jobs and Protecting Your Margin. For the mechanics of whether a GC can legally sub out everything on a project, see Can a General Contractor Subcontract All the Work?.
The floor and the ceiling
The floor is whatever covers your real overhead and delivers a return worth the risk. If you do not know your overhead number, you do not know your floor, and you are guessing on every quote.
The ceiling is the market rate for the finished result. Research what competitors charge for the same job in your area. The spread you can sustain lives between those two numbers.
In most residential markets, that gap is wider than beginners expect - which is why the model works. In competitive commercial markets, it is tighter, and margin discipline matters more.
The next step is understanding how to source trades who are priced right and reliable enough to build a real spread on - that is covered in How to Find Subcontractors for Construction Arbitrage.
Last checked: 18 June 2026.
Frequently asked questions
Is a 20% markup on subcontractors reasonable?+
Yes. 20% is a common and defensible starting point - it covers coordination overhead and basic profit. On straightforward residential work, 20-30% is entirely normal. Some operators run higher on smaller or more complex jobs where the management burden is proportionally heavier.
Do you have to tell subcontractors how much you're marking them up?+
No. You present one price to the client. What you pay your subs is your business, not theirs and not the client's. The sub is paid their agreed rate; the client pays the all-in price. The spread is yours.
What is the difference between markup and margin?+
Markup is calculated on cost. Margin is calculated on revenue. A 25% markup on a $10,000 sub bill means you bill $12,500 - that's a 20% margin. These are not the same number, and confusing them is one of the most common pricing errors in construction.
Can you mark up subcontractors too high and lose jobs?+
Yes. If your total price lands above what the market will pay, you lose the job. The ceiling is market rate for the finished work - whatever the client can get the job done for elsewhere. Your spread lives in the gap between what subs charge and what the market pays. Know both numbers.
Does markup vary by trade?+
It does. Lower-risk, high-volume trades like general labourers or painters often carry a tighter markup because competition is fierce and subs are easy to find. Specialist trades - HVAC, structural, electrical on complex jobs - can carry a wider spread because you take on more coordination risk and specialists are harder to source.
Mohamed El HadriCo-Founder
I'm a co-founder of several construction companies. I built a construction business from a 30-van operation into a lean model with 1,400+ subcontractors in the database - winning the work as the main contractor, subbing it out, and running it as a system from a laptop across multiple countries. I write this site from what actually works.
@mointhemarket · 30k followers on Instagram →Run the model with people who already do
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