How renovation pricing
actually works (from the inside)

Twenty years of writing Ottawa renovation quotes has taught me that homeowners assume the number on page one of a quote is mostly material cost. It is not. On a typical kitchen renovation, materials are 28 to 36 percent of the total. The other two-thirds is everything most people never see itemized: labour, overhead, sub-trade margins, contingency, warranty reserve, and profit.

Below is how a real Ottawa renovation quote gets built, in the order we build it, with real percentages and the gap between an honest quote and a cheap one.

The five buckets of any renovation cost

Every renovation quote, whether it is line-itemed transparently or rolled into a "fixed price," divides into five buckets:

1. Direct labour (the people swinging hammers and laying tile)
2. Materials (cabinets, tile, drywall, fixtures, etc.)
3. Sub-trades (plumbers, electricians, HVAC, gas)
4. Overhead and indirect costs (project management, insurance, vehicles, office, permits, software, payroll burden)
5. Profit and contingency

Honest contractors quote with all five buckets explicit or implicit. Cheap contractors short bucket 4 or 5, then make it up in change orders. The difference between a cheap quote and an honest quote on the same scope is almost always in buckets 4 and 5, not 1, 2, or 3.

Bucket 1: Direct labour (typically 22 to 32 percent)

The hourly bill rate for a skilled Ottawa carpenter or tile installer is meaningfully higher than the worker's take-home rate. The bill rate has to cover far more than the wage. It includes:

• The hourly wage paid to the worker
• Payroll burden: CPP, EI, EHT, vacation pay (~17 to 22 percent of wage)
• WSIB premium (4 to 12 percent of wage depending on classification)
• Health benefits (where offered, 8 to 14 percent)
• Tools, vehicles, fuel, parking, gear (varies)
• Productive vs unproductive hour offset (a worker is on payroll for 40 hours but only 30 to 33 are billable to a job; the rest is travel, drive-time, training, paid holidays)

That is why a worker's wage roughly doubles by the time it shows up as a billed hour on the quote. The difference covers what the company pays to keep that worker on payroll legally and properly.

Cheap contractors get this number lower by paying cash (illegal, no WSIB, no payroll burden), classifying employees as subcontractors (illegal, no protection), or skipping insurance. The gap between an above-board crew and a cash crew is real, and on a full kitchen renovation it compounds across hundreds of labour hours. What looks like a discount is the legal and insurance burden being quietly shifted onto the homeowner.

Bucket 2: Materials (typically 28 to 36 percent)

Materials are the most visible cost line and the easiest one to fake-cut. A quote can show a single line for cabinets without specifying the box construction, drawer slide brand, hinge brand, or finish warranty. Here is where the real spread lives:

• Cabinet boxes: particle board with melamine vs plywood vs solid hardwood. This is one of the largest swings in any kitchen.
• Drawer slides: generic side-mount vs Blum/Salice undermount, multiplied across every drawer in the kitchen.
• Quartz counter brand: imported value brand vs Caesarstone, Silestone, Cambria, priced per square foot of counter.
• Tile: generic builder grade vs designer porcelain vs natural stone, each a different tier per square foot.
• Plumbing fixtures: Pfister/Glacier Bay vs Moen/Delta vs Brizo/Kohler.

Honest material quotes specify brand, model, finish, and warranty for every line item, and set a written allowance for anything not yet selected. If a quote just lists "kitchen tile" with a lump figure and no spec, ask for the spec sheet.

Bucket 3: Sub-trades (typically 14 to 22 percent)

Plumbers, electricians, HVAC techs, gas fitters, drywall finishers, painters. Most renovation quotes include sub-trades at the rate the GC pays the sub, plus a 10 to 15 percent coordination markup.

Why the markup: the GC carries the sub's mistakes. If the plumber's rough-in is wrong and the wall has to be re-opened, that cost is on the GC, not the homeowner. The 10 to 15 percent funds that risk and the time spent coordinating, scheduling, and inspecting sub work.

Cheap quotes sometimes pass sub-costs through at zero markup. Sounds great until something goes wrong and the GC tells you the sub-trade dispute is between you and the sub. Sit-in-the-middle markup buys accountability.

Bucket 4: Overhead and indirect costs (typically 12 to 18 percent)

The bucket homeowners hate to see and that contractors who do not charge it go bankrupt. Overhead covers:

• Project management (your PM's salary, allocated across active projects)
• Office rent, utilities, IT, software (estimating, scheduling, accounting)
• Liability insurance (carried annually and allocated across active jobs)
• Vehicle fleet, fuel, maintenance
• Marketing and lead generation
• Bookkeeping, accounting, legal
• Owner salary and administrative staff

A small Ottawa renovation company with five field staff and one PM carries a substantial block of fixed annual overhead. Spread across a year of revenue, that is roughly 10 to 14 percent of every dollar. Larger firms can spread more efficiently. One-person operations sometimes carry less but also offer less (no PM, no warranty support, no office to call).

Bucket 5: Profit and contingency (typically 8 to 14 percent)

Profit is what is left after the company pays its labour, materials, subs, and overhead. Net profit margins for residential renovation companies in Ontario typically run 6 to 12 percent of revenue. Anyone telling you contractors pocket 30 to 40 percent on a job has never run a renovation business.

Contingency is the cushion against unexpected conditions. On a fixed-price contract, contingency lives inside the contract price. If we hit it, we eat it. If we don't, profit goes up slightly. Standard contingency on a typical Ottawa renovation:

• 3 to 5 percent on a renovation in a home built after 2005 (newer construction, fewer surprises)
• 5 to 8 percent on a home built 1985 to 2005
• 8 to 14 percent on a pre-1985 home (knob-and-tube risk, plaster, asbestos, galvanized plumbing)

The contingency is real money. We track every job's actuals against quoted line items and feed the variance back into next quarter's pricing model. Honest companies do this; the alternative is bankruptcy.

A real kitchen breakdown, by share of the total

A real kitchen renovation we closed in Westboro in late 2025. Mid-tier scope, single-wall removed, semi-custom cabinets, mid-range appliances, no structural surprises, delivered on a fixed written price.

How that price broke down internally, as a share of the total:

• Direct labour: 28%
• Materials (cabinets, counters, tile, hardware): 33%
• Sub-trades (plumbing, electrical, HVAC, drywall, paint): 19%
• Overhead allocation: 13%
• Profit and contingency: 7%

Margin on this job after all costs: 7.3 percent. That is normal for an Ottawa fixed-price renovation done right. The contractor claiming 25 percent on this scope is either lying about the scope or about to cut a corner that will show up in year three.

The cheap-quote mechanism

How does a competing quote come in well below an honest one on the same kitchen scope? Five typical mechanisms:

1. Lower labour rate via cash payroll or sub-classification. Looks like savings, transfers risk to the homeowner if WSIB or CRA audits.
2. Cheaper materials hidden in vague spec lines. "Quartz counter" without brand, "porcelain tile" without spec sheet, "soft-close hardware" without brand. The price drops and so does the finish quality.
3. Zero contingency budget. Becomes a change order the moment any surprise hits.
4. No overhead allocation. Indicates the company will not be around long.
5. Missing line items entirely. Demolition disposal, permit fees, paint, baseboards, transitions, hardware, exhaust ducting. They come back as add-ons.

Stack any three of those and an honest quote turns into a cheap-looking one. The work to be done is identical; the question is who pays for the missing pieces and when.

The price of a renovation is the price of a renovation. The only thing a cheap quote changes is who pays for the missing scope and when they find out.

What to ask when comparing quotes

Five questions that surface the bucket-4 and bucket-5 gaps:

1. What is the total dollar contingency in this contract, and what triggers using it?
2. Which line items are allowances, and what are the per-unit allowance amounts?
3. Is WSIB and liability insurance documented? Can I see the certificates?
4. What is the warranty term, what is excluded, and who pays for callbacks in year two?
5. If you discover knob-and-tube wiring or asbestos mid-project, what is the change order process?

If a contractor cannot answer those crisply, the quote is a number, not a price. For more on what we include in our project estimating process, see the Ottawa project estimating page. We publish our line-item structure there along with three example projects.

The bottom line

An honest Ottawa renovation quote carries 6 to 10 percent net margin for the contractor. A kitchen renovation is mostly people, materials, and the legal cost of running a business that can warranty its work. Pay the price for the work that is actually being done. Phone 613-862-4555 for a fixed-price quote with every bucket itemized so you know exactly where the money goes.