What markup should a change order carry?

At least your normal margin, and usually more, because a change is lower volume, less predictable and disruptive. Many contractors carry a distinct change order rate for exactly that reason and state it in the original contract so it is not a surprise later.

What if the customer refuses to pay for a small extra?

That is a conversation worth having before the work rather than after. If it is genuinely small and genuinely goodwill, do it deliberately and record it as such — a decision you made is completely different from a leak you did not notice.

How do I price disruption?

Estimate the hours the change costs the rest of the job, not just the hours of the change itself. A rule of thumb some contractors use is that a mid-job change costs roughly half again its own labour in lost efficiency, but the honest figure comes from costing a few jobs where changes happened against a few where they did not.

Free tool

Change order pricing calculator

Change orders are where job profit quietly goes. Not because they are unprofitable, but because they are done, not documented, and never billed.

Method reviewed by Darren Lim, US CPALicence CPA.74253602

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Price this change order at

$1,207

Pricing it on the extra work alone would give $1,021 — $186 short, because the change also cost the original job 3.0 hours of efficiency.

Extra labour6 hrs at $46.00$276

Extra materials$480

Disruption to the original job3.0 hrs of lost efficiency$138

True cost of the change$894

Priced at 35% markup$1,207

If you ignore disruption$186 of margin given away on this one change$1,021

Small extras never invoicedat about $210 each7/mo

Work performed free, per yearInvisible in your P&L, which is why it persists year after year$17,640

Billing half of them would be worthper year, for a process change rather than a price change$8,820

A change order costs more than the work in it

The extra labour and material are the obvious part. The part that gets left out is disruption: the crew stops, the sequence changes, something already installed comes out, and the original job takes longer than it would have.

That disruption is a real cost of the change and it belongs in its price. Contractors who price change orders at bare cost plus normal markup are systematically underpricing them, because the change made the whole job less efficient and nobody charged for that.

The unbilled ones are the expensive ones

Most contractors can name the change orders they billed. Very few can name the ones they did not — the small extras done on the spot to keep a customer happy, which individually are trivial and collectively are a category of work performed free.

This calculator asks how many of those happen and what they typically cost, because that annual figure is usually the surprise. It is also completely invisible in a P&L, which is why it persists year after year.

Getting them approved is a process problem

The rule that works is simple and unpopular: nothing extra starts without written approval, and written includes a text message with a number in it. Verbal approval is not approval when the invoice arrives sixty days later and the person who agreed has left.

Price it, send it, get a reply, then do the work. The friction is the point — it is what converts a favour into a billable item, and customers accept it far more readily than contractors expect.

For anything long, agree the change order process in the original contract so the first one is not a negotiation about whether there is a process.

Common questions

What markup should a change order carry?: At least your normal margin, and usually more, because a change is lower volume, less predictable and disruptive. Many contractors carry a distinct change order rate for exactly that reason and state it in the original contract so it is not a surprise later.
What if the customer refuses to pay for a small extra?: That is a conversation worth having before the work rather than after. If it is genuinely small and genuinely goodwill, do it deliberately and record it as such — a decision you made is completely different from a leak you did not notice.
How do I price disruption?: Estimate the hours the change costs the rest of the job, not just the hours of the change itself. A rule of thumb some contractors use is that a mid-job change costs roughly half again its own labour in lost efficiency, but the honest figure comes from costing a few jobs where changes happened against a few where they did not.

What we do about it

Change orders tracked against the original job so you can see what proportion of each job they represent, what was billed, and what was performed and never invoiced.