Contractor Glossary
32 essential terms every contractor should know — from AI quoting to workers' comp.
A
- AI Quoting
- The use of artificial intelligence to automatically generate contractor quotes and estimates. AI analyzes the job description and produces itemized line items with market-rate pricing in seconds instead of the 20-30 minutes manual quoting takes.Learn more →
B
- Bid
- A formal offer to complete a specified scope of work at a stated price. Unlike estimates (which are approximate), bids are typically binding — the contractor agrees to do the work at the bid price.Learn more →
C
- Change Order
- A written modification to the original scope of work after a contract is signed. Change orders adjust the price, timeline, or both when the customer requests additions or the contractor discovers unforeseen conditions.
- CRM (Customer Relationship Management)
- Software that stores customer contact info, communication history, job records, and notes. For contractors, a CRM tracks every customer's quotes, jobs, invoices, and reviews in one place.Learn more →
D
- Draw Schedule
- A payment plan tied to project milestones. Common for large projects: 33% deposit, 33% at midpoint, 34% at completion. Protects both the contractor and the customer.
E
- Estimate
- An approximate calculation of what a job will cost. Unlike a bid, an estimate is not binding — the final price may differ. Estimates should include scope of work, line items, and assumptions.Learn more →
F
- Field Service Management (FSM)
- Software for managing field operations: scheduling, dispatching, work orders, and mobile workforce. thecontractor.app is a field service management platform built specifically for contractors.Learn more →
G
- General Contractor (GC)
- A contractor who manages an entire construction project, hiring and coordinating subcontractors (plumbers, electricians, etc.) for specialized work. GCs typically have a state contractor's license.Learn more →
- General Liability Insurance
- Insurance that protects contractors from claims of property damage or bodily injury caused during work. Required by most states and customers. Typical coverage: $1M per occurrence, $2M aggregate. Costs $500-$1,500/year for small contractors.
- Gross Profit Margin
- Revenue minus direct costs (materials + labor), divided by revenue. A healthy contractor gross margin is 40-60%. Example: $3,000 job - $1,200 costs = $1,800 gross profit = 60% margin.Learn more →
I
- Invoice
- A bill sent to the customer after work is completed (or at agreed milestones). Should include line items, total, payment terms, and due date. Modern contractors send digital invoices with online payment links.Learn more →
J
- Job Costing
- Tracking all costs (materials, labor, equipment, overhead) for each individual job to determine actual profitability. Essential for knowing which types of jobs make money and which don't.Learn more →
L
- Lead
- A potential customer who has expressed interest in your services. Leads come from online booking, phone calls, referrals, door knocking, or advertising.
- Line Item
- A single row in a quote or invoice describing one specific service or material with its quantity, unit, rate, and total. Example: 'Driveway pressure wash — 600 sq ft × $0.30/sq ft = $180'.
- Lien
- A legal claim against a property for unpaid work. Contractors can file a mechanic's lien if a customer doesn't pay. Lien laws vary by state and require specific notice and filing procedures.
M
- Markup
- The percentage added to costs to cover overhead and profit. If materials cost $500 and you mark up 50%, you charge $750. Not the same as margin — 50% markup equals 33% margin.
N
- Net 30
- Payment terms meaning the invoice is due 30 days after the invoice date. Common alternatives: Net 15, Due on Receipt, 50% deposit / 50% on completion.
O
- Overhead
- Business costs that aren't tied to a specific job: insurance, vehicle payments, phone, software, office rent, marketing, bookkeeping. Typically 10-25% of revenue for small contractors.
P
- Permit
- Government authorization required before starting certain types of work (structural, electrical, plumbing, roofing). Permits ensure work meets building codes and is inspected. Pulling permits without a license is illegal in most areas.
- Profit Margin
- The percentage of revenue that's actual profit after all costs. Revenue - All Costs = Profit. A 40% margin means you keep $0.40 of every dollar billed. Track per-job margins with expense tracking software.Learn more →
- Punch List
- A list of minor items that need to be completed or corrected before a job is considered finished. Created during a walkthrough with the customer. Completing the punch list triggers the final payment.
Q
- Quote
- A detailed document showing the proposed scope of work, line items, pricing, and terms for a job. Quotes are typically valid for 14-30 days. AI-powered tools like thecontractor.app generate quotes in 60 seconds.Learn more →
R
- Retainage
- A percentage (typically 5-10%) withheld from each payment until the project is fully complete. Common in commercial and government contracts to ensure the contractor finishes the job.
- ROI (Return on Investment)
- A measure of profitability. If you spend $100 on marketing and get a $1,000 job, your ROI is 900%. Used to evaluate which lead sources and tools are worth the investment.
- Route Planning
- Organizing your daily job schedule to minimize driving time between job sites. Proper route planning saves 1-2 hours per day. Contractor apps show jobs on a map and suggest optimal routes.Learn more →
S
- Scope of Work (SOW)
- A detailed description of what the contractor will do on a job. Includes services, materials, timeline, and what's NOT included. A clear SOW prevents disputes about expectations.
- Service Call Fee
- A flat fee charged by contractors (especially plumbers, HVAC, electricians) for the initial visit to diagnose the problem. Typically $75-$150. Usually applied toward the repair if you hire them.
- Soft Wash
- A cleaning method using low pressure and chemical solutions instead of high-pressure water. Used on house exteriors, roofs, and delicate surfaces that could be damaged by standard pressure washing.Learn more →
- Square (Roofing)
- A unit of measurement equal to 100 square feet of roof area. A typical 2,000 sq ft home has about 20-25 squares. Roofers price materials and labor per square.Learn more →
- Subcontractor
- A contractor hired by a general contractor to perform specific work on a project. Example: a GC hires a plumbing sub for pipe work and an electrical sub for wiring.
T
- Time and Materials (T&M)
- A pricing method where the customer pays for actual labor hours plus actual material costs, plus a markup. Used when the scope can't be defined upfront. Riskier for the customer than fixed-price.
W
- Workers' Compensation Insurance
- Insurance that covers medical expenses and lost wages for employees injured on the job. Required in most states for contractors with employees. Costs vary by trade — roofing is highest.