# 14.6, Pricing domestic vs commercial, different worlds
Domestic work is about people, kitchens and cash-in-hand risk; commercial is about contracts, retentions and long payment chains. You can earn good money in both, but they're very different games.
Domestic vs commercial: how pricing actually differs
Domestic = you price for homeowners. Commercial = you price for businesses and contractors.
Domestic (homeowners):
- Mostly fixed quotes per job (bathrooms, rewires, extensions).
- Higher headline margins on individual jobs if you're organised (15–25% on top of costs isn't unusual).
- Smaller job values, lower paperwork, but more quoting and more "tea and chat".
Commercial (contractors/developers):
- Tenders, schedule of rates, dayworks, price‑work, framework rates.
- Headline margins per job can look slimmer (often 5–15% at main contractor level), but with bigger volumes.
- Heavy on contracts, programmes, variations, retentions, and compliance.
Simple version: domestic is margin‑per‑job with direct customer contact; commercial is margin‑on‑turnover with more paperwork and more risk if you misprice.
Payment terms, margins, cashflow and risk
Payment terms
Domestic:
- You set the terms: deposits, stage payments, balance on completion.
- It's normal to take 20–40% deposit on larger jobs, with staged payments on milestones.
- Most payments are within days of finishing (or they should be), but there's still a big late‑payment problem in home improvement.
Commercial:
- Typical main contractor terms: 30, 45 or 60 days end of month, plus retentions of 3–5% held back until completion and defects period.
- You submit applications or valuations monthly; they get certified, then paid later.
- Big UK surveys show late payment is brutal: around 90% of businesses report delays, and construction is one of the worst‑hit sectors.
Result: domestic gives you faster potential cashflow if you enforce deposits and stages; commercial ties up cash for longer but on bigger sums.
Margins
Numbers vary by who you are in the chain, but as a rough feel:
Residential/domestic builders and small contractors: Many guides and accountants quote 15–20% gross margin, with net profit for small residential builders often around 3–7% after all costs.
Commercial contractors/subbies: Big UK reports show average net profit margins for contractors often down at 1–5%, with top‑performing specialist contractors (M&E, fit‑out) more like 8–15%.
As a small trade business (plumber, spark, plasterer, etc.):
- Domestic: targeting 20–30% gross margin on a job (labour + materials + overhead + profit) is realistic if you're priced right.
- Commercial: you may be working at 10–20% gross on packages, sometimes less once the main contractor has taken their cut.
Margins are often thinner in commercial but applied to bigger projects; in domestic you can make more per day if you're sharp, but there's more quoting and more customer hand‑holding.
Cashflow and risk
Domestic risk:
- Fewer formal contracts, but more risk of "we'll pay when we're happy" unless you use clear terms.
- Risk of cancellations, scope creep, and disputes over quality.
- Lower risk of big retentions and less exposure to one large client going bust.
Commercial risk:
- Retentions (3–5%) held for months/years.
- Main contractor insolvency, pay‑when‑paid, disputed variations.
- One bad job, or one large client not paying, can wipe out a year's profit if your margins are only a few percent.
Bottom line: commercial is more paperwork and finance risk; domestic is more people and expectation risk.
When it makes sense to focus on domestic
You're usually better leaning into domestic if:
- You're a one‑person or small team and don't want to spend your life buried in contracts and tender portals.
- You're good with customers in their homes – explaining, tidying up, managing expectations.
- You want to control your own pricing, deposits and payment terms.
- You're happy doing lots of smaller jobs (or medium‑size projects like bathrooms, kitchens, small extensions) rather than chasing a few big contracts.
Domestic suits people who want flexibility, control and higher per‑job margins, and who can be disciplined about deposits and written quotes.
When it makes sense to focus on commercial
Commercial starts to make more sense if:
- You're comfortable with CIS, RAMS, method statements, drawings, programmes, and QSs.
- You've got (or want) a crew, and you're happier managing site output than drinking tea in someone's kitchen.
- You can handle slower payments and retentions because you've got cashflow support (overdraft, invoice finance, or just a strong balance).
- You'd rather secure bigger, longer packages than constantly quote domestic work.
Commercial suits trades who want more volume and scale, and are prepared to live with tighter margins and slower cash as the trade‑off.
Typical domestic vs commercial margins (rough guide)
These are broad UK benchmarks from trade/accounting and construction profit guides – they're not a promise, but they show the shape of things.
| Work type | Level | Typical margin band |
|---|---|---|
| Small domestic trade jobs | Gross (single job) | ~20–30% |
| Domestic builder (extensions) | Net (whole business) | ~3–7% |
| Residential contractor (packages) | Gross | ~15–20% |
| Commercial subcontractor | Gross | ~10–20% |
| Main contractor (commercial) | Net (whole business) | ~1–5% (top performers 5–10%+) |
For a self‑employed trade focusing on domestic, aiming for 20–30% gross margin and a clean, fast payment profile is usually healthier than chasing big commercial jobs at low margin and 60‑day terms.
What to do next
- Read: 14.1 – Day rate vs price work vs quoted (pick the right pricing model for domestic vs commercial)
- Read: 14.2 – How to price your first job without underselling yourself
- Read: 1.17 – Interim payments and stage claims (how commercial payment cycles actually work)
- Read: 1.5 – Retentions: what they can hold (and how to get your money back)
- Download: Payment schedule and deposit terms template (essential for domestic work)
- Download: Cashflow forecast – 12 week template (essential for commercial work)
- Use: Late Payment Calculator (when either type of customer pays late)
Sources (UK)
- BEIS / Build UK payment surveys – late payment data in UK construction; ~90% of businesses report payment delays.
- RICS / BCIS construction market data – contractor profit margin benchmarks (1–5% net for main contractors).
- FMB State of Trade Survey – small builder margins, payment terms and business confidence data.
- IronmongeryDirect / Electrical Direct Trades Survey 2025 – day‑rate and payment issue data for UK trades.
- ONS Annual Survey of Hours and Earnings (ASHE) – earnings data for construction and building trades.
- Accountancy guides (Gorilla Accounting, Wise, trade‑specific) – gross and net margin benchmarks for small trade businesses.
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