General vs. Residential Contractors
Average Pay for a General Contractor
Why It's Hard to Estimate Income for Residential Contractors
Contractor Profit Statistics
Contractor Sales Volume
Who Makes More? General or Subcontractors?
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:
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.
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.
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:
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.
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.
General contractors typically handle much larger projects than subcontractors. Some examples of the types of projects general contractors might take on are:
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.
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:
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.