The hardest part of running a contracting business in 2026 isn’t finding work. It’s making money on the work you win.
I’ve watched contractors keep their crews busy all year and still finish in the red. The bids looked fine on paper, the jobs came in on schedule, and the profit still wasn’t there. That happens because most contractors build a bid the same way. They add up the costs, tack on a markup, and hope what’s left is enough to live on.
That’s backwards. If you want to bid a job that actually makes money, profit can’t be the leftover. It has to be the first number you write down.
Here’s the short version, and then I’ll walk you through how to do it. Decide the minimum profit you’ll accept before you price anything. Build every cost into the number honestly, including the ones contractors always forget. Then hold that line, even when you’re tempted to shave it to win the award. A contractor doing $25 million a year who prices a few points short and doesn’t control labor in the field can leave one to three million dollars on the table without ever seeing it happen.
Why Are Profitable-Looking Bids Still Losing Money In 2026?
Because the market changed and a lot of bidding habits didn’t.
Contractors told the Associated General Contractors of America they have dampened expectations for 2026, with rising worry about the broader economy, materials costs, and finding qualified workers. Tariffs are moving material prices between the day you bid and the day you build. Labor is scarcer and costs more than it did three years ago.
None of that shows up in a bid you priced the old way. You can win a job at a number that looked healthy in January and lose money on it by June, because the steel or the copper moved and your estimate didn’t. The work is out there. Winning it profitably is the hard part now.
So the answer isn’t bidding on more jobs. It’s bidding better, then controlling the job once you’ve won it.
What Does It Mean To Bid Profit-First?
It means treating profit as the first line item of expense, not the reward you hope is waiting at the end.
We call it Pre-Determined Profits. The idea is simple to say and hard to practice. The minimum profit you need, based on your risk and your investment, is a non-negotiable cost of doing the job. You decide that number first. Then you build the estimate to cover every cost and still deliver that minimum gross profit. If a job can’t be priced to clear your floor, that tells you something useful before you’ve ever put a crew on it.
Most contractors do the opposite. They price the work, chase the award, and find out what the profit was after the job closes. By then it’s too late to do anything about it.
Put profit at the top of the sheet and everything downstream changes. You stop negotiating against yourself. Losses stop turning up in the rearview mirror after a job you can no longer fix. Before you price a single job, decide the minimum gross profit you won’t go below, and treat it as a cost you have to cover.
How Do You Calculate The True Cost Of A Job?
You start by knowing what an hour of your own labor actually costs, and most contractors don’t.
Here’s the pattern I see all the time. A contractor takes a labor rate, adds in some benefits, and then starts negotiating against himself based on what he thinks his competition might do. That’s how you talk yourself into a number that was never going to work.
The real cost of an hour is a lot more than the wage. You have to factor in direct labor with full burden, meaning payroll taxes, workers comp, and benefits. You have to load in your subcontractor costs, your equipment costs, and the downtime that’s going to happen whether you planned for it or not. Leave any of that out and your cost is fiction, and you’re bidding against a number that doesn’t exist.
When I tell contractors this, the first thing I hear is that it can’t work, that the market won’t bear the price. My answer is always the same. It has to work to hit your gross profit minimum. If it doesn’t, the problem isn’t your price. It’s your people or your processes, and both of those you can fix. Get better people or better processes, but don’t solve it by pretending your costs are lower than they are.
Before we ever raised one contractor’s prices, we had to determine his true cost to operate, by man and by category. You can’t set a floor until you know what it’s built on.
How Do You Protect A Bid When Material Prices Keep Moving?
You stop carrying price risk that doesn’t have to be yours.
Material volatility is one of the biggest threats to a bid in 2026, and you have more leverage over it than you think. On commercial work especially, you don’t have to be the one gambling on where steel or copper lands three months from now.
Let the general contractor or the end buyer source and pay for the materials themselves. Then neither of you is lying awake over a price increase, because the risk sits with the party financing the project. Commercial work historically hasn’t come with big deposits up front, so if you want to lock in material costs at today’s prices, have the GC or the end buyer advance the money to do it. You lock the price, they fund the lock, and the volatility stops eating your margin.
The principle holds whether you’re the sub or the GC. Push material price risk up the chain toward whoever is funding the job, and stop treating it as a cost you have to absorb alone.
What If Raising Your Prices Costs You The Work?
Most of the time it won’t, and I can prove it.
This is the fear that keeps contractors underpriced for years. They’re convinced that the minute they raise their numbers, the phone stops ringing. So they keep winning work and keep losing money, and they tell themselves they’re staying competitive.
Years ago we worked with a plumbing contractor in the Midwest doing around $65 million a year. His line of credit was maxed out. He had been losing money month after month for three straight years. When we dug in, the story was plain. He was underbidding his work, he wasn’t covering his hard costs, and he was winning too many of his bids because of it. That high win rate felt like success. It was actually the problem.
After a lot of discussion, and honestly some arm wrestling, we convinced ownership to raise their estimating process by 12 percent across the board. Their award rate didn’t move an ounce. The work kept flowing. Profit replaced the losses. Revenue grew to more than $80 million, and that maxed-out line of credit got paid down by 90 percent.
He was leaving so much on the table that a 12 percent correction didn’t cost him a single job. That’s the part contractors miss. If a modest price increase would cost you all your work, you were probably close to correctly priced already. If it costs you nothing, you were leaving money behind the whole time.
One more thing about that story, because it’s the part people skip. Raising the price wasn’t a standalone move. It held because we paired it with real change underneath. We built a consistent training program for the estimators, put the accounting team on tracking costs in real time, and had the project managers controlling labor hours in the field. Nothing was stand-alone. It was all a concerted effort. You can’t just raise your number and walk away. You have to build the discipline that protects it.
How Do You Know If You’re Winning Too Many Bids?
If your award rate keeps climbing, that isn’t always good news. Sometimes it means you’re the cheapest one at the table, and cheapest is a hard place to make a living.
I’ll be straight that this is judgment, not a formula. A lot of factors weigh on any one contractor’s award rate: your workload, your ability to staff the work, your buyer’s timeline, scheduling, weather, the time of year, the difficulty of the job, and your bonding capacity. All of it moves the number.
That said, when I see an award rate above 15 percent, especially on large bids over $20 million, I start to wonder if something is amiss. Winning too often can be a sign you’re leaving margin on the table on every job you take.
But hear me on this. Nothing gives you an OK to go below your minimum gross profit target, ever, no matter how slow the month is or how hard a competitor or a buyer leans on you for a better price. Your award rate is a signal worth watching. Your profit floor is a line you don’t cross.
Which Numbers Tell You A Bid Is Actually Working?
A bid is a prediction. These are the numbers that tell you whether the prediction is coming true while you still have time to do something about it.
A miss between the estimate and the actual in the field always has to be read against the size of the job and what that job means to the whole company. A 2 percent miss on a $500,000 job is $10,000. That stings, but for a $25 million contractor it might not move the needle. A combined 6 percent miss on a $2.5 million job is $150,000, and now you’re talking about real money that shows up in the year-end number. Same percentages, very different consequences. You have to know which misses actually threaten the business and which ones you can absorb.
Here’s what I tell every contractor to keep an eye on:
- Your pipeline of work for the next 6, 12, 18, and 24 months. You should always know what’s ahead of you.
- How often, and how many days, your jobs are getting delayed by your GC or your end buyer. Every delay carries a cost.
- Direct labor as a percentage of revenue. Track this one like a hawk. It’s the fastest early warning that a job is starting to slip.
- Your AIA or percentage-of-completion billings. Get them out on time. Late billing is a cash flow wound you inflict on yourself.
- Rental equipment. It costs you real money every day it sits. If it’s not being used, it should have gone back yesterday.
None of these are complicated. They’re the difference between catching a problem while the job is still open and finding it after the job has closed. Track direct labor as a percentage of revenue every week, on every job, and you’ll catch most margin problems while you can still fix them.
Stop Bidding To Stay Busy. Start Bidding To Make Money.
Bidding to make money isn’t about being the highest number or the lowest. It’s about knowing your true costs, setting a profit floor you refuse to cross, and building the discipline to protect that floor once the crew shows up.
That’s the work we do alongside owners, on-site, in construction and the trades. Healthy, stalled, or distressed, we take the work on either end. We’re not here to hand you a report and walk out. We’re here to help you install the controls that let you keep the profit you bid.
If you’re winning work and still wondering where the money went, let’s talk. Book a discovery call and we’ll walk through where your bids are leaking and what it would take to stop it.
Frequently Asked Questions
Job costing is tracking labor, materials, and overhead against a specific project, so you know what it’s actually costing versus what you bid. Timing is everything. Done at closeout, it’s a post-mortem. Done in real time, it’s a warning system that lets you fix a job while it’s still open.
It depends on the size of the job relative to your company. A 2 percent miss on a $500,000 job is $10,000, which a large contractor can absorb. A combined 6 percent miss on a $2.5 million job is $150,000, and that shows up in your year-end number. Same percentages, very different consequences.
A fully burdened labor rate is the true cost of an hour of work, not the wage. It includes payroll taxes, workers comp, and benefits, plus the costs contractors routinely leave out: subcontractor costs, equipment costs, and jobsite downtime. Leave those out and you’re bidding against a number that doesn’t exist.
Start from the fully burdened cost of an hour, then build from the real hours the work will take. The common mistake is taking a wage-plus-benefits figure and negotiating against yourself over what a competitor might bid. Price your true cost. If it won’t clear your profit minimum, fix the people or the process, not the number.
There’s no universal number, and chasing someone else’s benchmark is how contractors get into trouble. The right minimum is the profit a specific job needs to justify its risk and your investment, decided before you price anything. Treat that floor as a non-negotiable cost. If a job can’t clear it, that’s the job telling you something.
Markup is what you add on top of your cost. Margin is what you keep as a percentage of the final price. They aren’t the same: a 25 percent markup is only a 20 percent margin. Confusing the two is how contractors believe they’re making more than they keep. Set your target as a margin and price up to hit it.
About The Author
Lou Mosca is President of American Management Services, a management consulting firm that has worked on-site with business owners since 1986, helping them turn stalled and distressed operations into profitable, well-run companies.
He’s a Forbes contributor since 2015, a member of the U.S. Conference of Mayors small business task force since 2002, and a frequent keynote speaker.
AMSERV’s consultants and advisors have worked alongside owners across construction and the trades for decades, installing the financial and operating controls that protect profit on every job.
