How Much Do Contractors Make

Becoming a contractor is a popular career option for those who work in the construction industry. Contractors are either individuals or organizations hired to do construction work for other companies or individuals. This means anyone working on a construction project can be considered a contractor.

Unlike employees who are permanent staff with set working hours and benefits, contractors are their own business entities. This means they are responsible for their bottom lines and must pay for their own items like equipment and health insurance. Even individual contractors working with larger organizations are accountable for their financial outcomes. 

If this career path interests you, you might be wondering, how much do contractors make? Before we dive into average contractor salaries, it's important to cover some examples of the different types of contractors: 

• General Contractors: If you are at all immersed in the world of construction projects, you have likely heard this term. Also referred to as a construction manager, a general contractor manages entire construction projects. They have plenty of room for job growth and oversee things like employee schedules, budgets, risk management, and more. General contractor hourly rates also tend to be the highest among all types of contractors.

• Roofing Contractors (a subcategory of residential contractor): This type of contractor is self-explanatory. They construct and maintain roofs. This involves installing, inspecting, waterproofing, and more. These contractors generally only specialize in roofing, making them experts in their craft. 

• Pool Contractors (a subcategory of residential contractor): Also quite self-explanatory, these contractors specialize in constructing, designing, and maintaining pools. They are also experts in their craft and sometimes offer consultations informing clients about pool materials, features, and maintenance. 

• HVAC Contractors (a subcategory of residential contractor): These contractors work with HVAC, which stands for heating, ventilation, and air conditioning. They specialize in climate control and air quality, making them responsible for their client's comfort and health. Like pool contractors, they can also offer consultations to help clients choose the right temperature and air quality solutions to suit their needs. 

General vs. Residential Contractors

One of the key differences between general and residential contractors is that general contractors coordinate large projects, whereas residential contractors work on smaller residential projects. Due to construction manager’s larger project sizes, they often hire specialist subcontractors to complete work. 

These subcontractors are experts in areas like roofing, pools, HVAC, electrical, plumbing, painting, drywalling and more. When these specialists aren't working on large projects for construction managers, they often work as residential contractors. 

Although subcontractors far outnumber general contractors, general contractors are more experienced. This is because general contractors are managers with experience in all phases of construction projects, from hiring subcontractors to overseeing the final cleaning before a project is presented to the client. 

Now, to help answer the question of how much do contractors make, we can turn to the U.S. Bureau of Labor Statistics. Unfortunately, although they have statistics on the average general contractor salary, they don’t have them for subcontractors.

Average Pay for a General Contractor 

According to the Bureau of Labor Statistics (BLS), the median annual wage for a general contractor is $101,480 per year. This means general contractor hourly rates in the U.S. are around $48.79. 

This number can vary widely depending on the experience of the general contractor. It’s not uncommon for a general contractor with longer tenure to earn much more than a general contractor starting his/her career. According to the BLS, construction managers can earn over $168,390 per year on the high end, and on the low end, they can earn less than $62,210 per year. 

Although general contractors, on average, earn more than subcontractors, it is hard to be certain as the BLS does not offer any statistics for subcontractors. 

Why It's Hard to Estimate Income for Residential Contractors

Estimating the average salary for residential contractors can be challenging because most operate as their own businesses. There are a variety of unique factors that impact a contractor's income, such as:

• The number of hours they work.
• The total cost of acquiring new customers.
• Their ability to acquire new customers.
• How much they charge per hour. 
• The total cost of materials.  
• How long it takes them to complete tasks. 
• The type of construction project they are working on.

When people run their own businesses, estimating their average hourly rate is challenging. Asking exactly how much a contractor makes is like asking how much an entrepreneur makes. It is basically impossible to answer. 

Contractor Profit Statistics

If you are wondering what a general contractor’s hourly rates are, this largely depends on their profit margins. Generally speaking, general contractors make between 6% to 12% profit. This means if a construction manager completes a $1M project, they can expect to make between $60,000 and $120,000 in profit. Residential subcontractors, on the other hand, usually make between 20% to 30% profit. This means if a residential contractor accepts a $100K project, they will make between $20,000 and $30,000. 

Contractor Sales Volume

General contractors typically handle much larger projects than subcontractors. Some examples of the types of projects general contractors might take on are: 

• Industrial facilities like factories, manufacturing plants, warehouses, and distribution centers.
• Multi-family housing projects such as apartments, condominiums, and housing developments.  
• Commercial projects like office buildings, retail centers, restaurants, and hotels. 
• Infrastructure projects such as bridges, roads, water treatment plants and power plants. 

Due to the scale, these are often multi-million dollar projects. In order to complete such large projects, construction managers often hire subcontractors. 

Because General contractors usually handle large projects, they handle less jobs than subcontractors. Subcontractors, in contrast, handle higher volumes of work but rarely do projects worth over one million dollars. To summarize, general contractors do fewer but larger jobs, while residential contractors do more jobs, but the jobs are smaller. 

Who Makes More? General or Subcontractors?

Because they work on large projects with high monetary values and have more room for job growth, general contractors make more than subcontractors on average. The catch is that they also take on more risk because, as we mentioned earlier, their profit margins are only between 6% and 12%, which leaves less room for error. 

In order to make a profit with lower margins, general contractors have to be skilled at keeping costs low and have the ability to stick to budgets rigorously. Some things that general contractors do to keep costs down include: 

• Implementing Accurate Project Estimates: Before a construction project even begins, a general contractor has to predict how long a project will take, labor and material costs, and overhead costs. 

• Eliminating or Reducing Change Orders: Change orders occur when, usually, the client asks for something to be changed mid-way through a project. These orders can become quite costly if they aren’t considered in the initial project budget. As a general contractor, you can eliminate these orders by stating in your building contract that changes are not allowed. These costs can also be reduced by accounting for change orders in your initial budget and discussing the change order process with your clients in advance.

• Subcontractor Management: General contractors must find the balance between paying their contractors fairly and maintaining affordable labor costs. They also have to effectively manage employee's schedules and monitor their work quality and performance. 

• Purchasing Insurance: Many different types of insurance can protect general contractors from financial losses in case of accidents or subcontractor wrongdoings. Builders risk insurance, for example, protects you from financial losses due to property damage while something is being built. General liability insurance, on the other hand, protects against all sorts of third-party claims like bodily injury, property damage and even defamation related to advertising. 

• Purchasing Bonds: General contractors are also responsible for properly bonding a project and its subcontractors. Purchasing the wrong bond or not having a bond in place when it’s required can result in a project being halted for regulatory reasons. 

• Prioritizing Energy Efficiency: Utilizing energy-efficient technologies and construction practices can save both the builder and the client money in the long term. For example, constructing spaces that naturally stay cool in the summer and warm in the winter can save the builder money on installing expensive HVAC systems. 

These are just a few things that construction managers have to consider to keep costs down in order to make a profit. Although subcontractors, on average, make less, they don’t have to consider all of these factors when taking on a project and have more leeway with pricing. For example, if material costs increase, general contractors are impacted much more than subcontractors. 

Hopefully, this article helped show that the answer to the question, how much do contractors make, is not simple. Many factors impact this question, such as the type of contractor you are, how much risk you are willing to take on, the size of your project and, if needed, your management abilities. Before deciding to become a general contractor or subcontractor in the construction industry, it is important to consider not only your salary but also the type of job growth and work you see yourself doing.