Passing through a sub's invoice at cost is the fastest way to lose money on a project. Calculate the right markup for subcontracted work—overhead, coordination time, risk, and margin—so every sub line item contributes to your bottom line.
When you bring in a sub, you spend time sourcing them, verifying their insurance, scheduling them, communicating with the customer, inspecting their work, and handling their invoices. That time has a cost. A typical GC or prime contractor spends 3–8 hours per sub trade coordinating. At $75–$100/hr, that's $225–$800 in real cost before any overhead or profit. If you pass through the sub invoice at cost, you've worked those hours for free—and absorbed all the risk.
When something goes wrong with a sub's work, your customer calls you—not the sub. You're the prime contractor; you're responsible. A 5% risk reserve on sub work is not profit—it's insurance against callbacks, warranty repairs, and the occasional sub who does shoddy work or disappears. Standard GC markup on subs ranges from 15–25%, which covers overhead, coordination, risk, and a slim margin. Anything less and you're exposing your business to uncompensated risk.
General contractors and trade contractors who use subs consistently price sub work at 15–25% over the sub's invoice. This is not gouging—it's standard and it's disclosed in most AIA and ConsensusDocs contracts. If a customer pushes back on sub markup, the answer is simple: "My markup covers my insurance, coordination, inspection, and warranty on work I'm responsible for. If you'd like to manage the sub directly, you can, but then it's not covered under my contract." Most customers back off immediately.
The Tradesman's Business Starter Kit includes financial tracking forms, service agreement templates, and markup reference guides that make your business pricing automatic. Guide from $19 — Complete Kit with all 19 templates, $49.
Get the Business Kit — $19When you hire subs and bill the client, you need to markup their cost to cover your coordination time, liability, and profit. This calculator takes your sub's cost and your target markup to give you the price to charge the client — and shows why a 20% markup doesn't mean a 20% margin. Use it to stop passing sub costs through at cost and leaving money on the table.