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Contractor Estimate Guide
Professional formatting, payment schedules, and common mistakes in contractor estimates.
How Should a Contractor Format an Estimate?
A professional contractor estimate should be 2–5 pages with a clear structure: header, scope, itemized costs, timeline, terms, and signature block.
- Header: Company name, license #, insurance info, contact details
- Client info: Name, project address, date
- Scope of work: Bullet-point description of all included work
- Cost breakdown: Line items grouped by phase or trade
- Payment schedule: Deposit (10–33%), progress payments, final payment
- Exclusions: Clearly state what's NOT included
Estimates sent as PDF (not Word) look more professional and prevent accidental edits.
Key Takeaways
- Professional estimate: 2–5 pages structured
- Include license #, insurance info in header
- Send as PDF, not editable document
Standard Payment Schedule for Contractors
Most residential contractors use a 3–5 payment milestone schedule tied to project phases, not calendar dates.
- Deposit: 10–33% at contract signing (covers material ordering)
- Rough-in: 25–30% after framing/rough mechanical
- Mid-point: 20–25% at drywall/finishes start
- Substantial completion: 15–20% when punch list is generated
- Final payment: 5–10% after punch list completion
Never front-load payments more than the value of work completed. Most states cap deposits at 10–33%.
Key Takeaways
- Deposit: 10–33% (state laws vary)
- Tie payments to milestones, not dates
- Never pay ahead of work completed
Common Estimate Mistakes That Cost Contractors Money
Underestimating labor hours is the #1 cause of unprofitable jobs, followed by missing scope items and inadequate contingency.
- Labor underestimate: Track actual hours vs. estimated on every job to build accurate rates
- Missing demolition/prep: Demo, haul-away, site protection are often forgotten ($500–$3,000)
- No waste factor: Materials need 5–15% overage for cuts and defects
- Stale pricing: Material prices change quarterly — verify supplier quotes before bidding
- No contingency: Remodels need 10–15% contingency for hidden conditions
Key Takeaways
- Labor underestimation = #1 profit killer
- Verify material prices quarterly
- Remodel contingency: 10–15% of total
How to Use This Calculator
Enter Company and Client Info
Fill in your company details and client information. This brands the estimate with your business and identifies the project and client.
Add Categorized Line Items
Add line items organized by category: materials, labor, equipment, subcontractors, permits, and other. Each item has a description, quantity, unit, and unit price.
Set Markup and Tax
Enter your markup percentage (typically 10-20% for overhead and profit) and applicable tax rate. The template auto-calculates subtotals, markup, tax, and grand total.
Preview and Print
Click Preview to see a professionally formatted estimate grouped by category with subtotals. Use the Print button to save as PDF or print a hard copy.
Free to Embed on Your Website
Add this calculator to your blog, resource page, or client portal — just copy one line of code. Your visitors get a useful tool, you get more engagement.
EstimationPro AI For Contractors, By Contractors Go Beyond Templates With AI-Powered Estimates
Templates are a start. EstimationPro generates complete, customized estimates from your project details.
Frequently Asked Questions
What should a contractor estimate include?
A professional estimate should include: company information and license number, client and project details, a scope of work description, itemized costs by category (materials, labor, equipment, subcontractors), markup and tax, payment terms, a project timeline, warranty information, and exclusions.
How much markup should a contractor charge?
Most contractors apply a 10-20% markup on top of direct costs to cover overhead and profit. Overhead includes office rent, insurance, vehicle costs, and admin time. Specialty or high-risk work may warrant 20-30%. The right markup depends on your market, competition, and actual overhead costs. Never work without adequate markup.
What is the difference between an estimate and a quote?
An estimate is an approximation of costs that may change as the project develops. A quote (or bid) is a firm price commitment for a defined scope of work. Estimates give flexibility for unknowns, while quotes lock in pricing. Use estimates for complex or uncertain projects, and quotes when the scope is well-defined.
How do I organize line items in an estimate?
Group line items by category: materials, labor, equipment, and subcontractors. Within each category, list items in order of construction sequence. Include quantities and units so the client can verify the scope. Show subtotals per category and a grand total with markup and tax broken out separately for transparency.
Should I show my markup on the estimate?
This depends on your business model and client relationship. Showing markup builds trust and transparency with informed clients. However, many contractors prefer to build markup into unit prices to keep the presentation simple. For cost-plus contracts, you must show markup separately. Choose the approach that fits your market.
Why Contractors Choose EstimationPro AI
Estimates in 60 Seconds
AI generates detailed, line-item estimates from basic project details. No more hours on spreadsheets.
Accurate Pricing Data
Built on real contractor pricing and industry cost databases, updated for 2026 market conditions.
Professional Proposals
Send polished PDF estimates with your branding. Clients see a professional contractor they can trust.
Get Paid Faster
Built-in invoicing and Stripe payments. Collect deposits and progress payments directly from estimates.
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