General Contractor: Definition and Use in a House Budget
A general contractor is the firm that manages a building project: it hires and schedules the trade subcontractors, buys or coordinates materials, and answers for the finished work under one contract with the owner.
- Updated October 2026
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General Contractor at a glance
- Role
- Manages the build and hires the trades
- Builder profit, NAHB 2024
- 11.0% of a new home's price
- Overhead, NAHB 2024
- 5.7% of a new home's price
- Profit plus overhead
- 16.7%, about $86,100 on the $332,000 example
What a general contractor does
A general contractor manages a building project from start to finish. The firm hires and schedules the trade subcontractors, buys or coordinates materials, inspects progress and holds one contract with the owner.
The general contractor stays responsible for the quality of all work, including work done by subcontractors. Excavation, concrete, framing, roofing, plumbing, electrical and finish crews each do their own trade. The general contractor sequences them and settles problems between trades.
General contractor versus trade contractor and owner-builder
Wikipedia describes a general contractor as a type of construction manager hired by a client. A trade contractor, also called a subcontractor, does one kind of work, such as electrical or roofing.
| Role | Holds the contract with | Hires the trades |
|---|---|---|
| General contractor | The owner | Yes |
| Trade contractor (subcontractor) | The general contractor, or the owner when there is no general contractor | No |
| Owner-builder | Each trade directly | Yes, the owner |
How a general contractor shows up in the price
A general contractor makes money through the margin built into the price, on top of trade and material costs. NAHB's 2024 survey of builders puts profit at 11.0% and overhead at 5.7% of a new home's price. Together that is 16.7%.
On the $332,000 example used on this site, the implied builder-sold price is about $515,500. Profit plus overhead is then roughly $86,100. Treat that as an illustration for builder-sold homes. It is not a quote.
Licensing and insurance
Each state or local authority sets who may act as a general contractor and what license is needed. Check your own building department before you sign.
Verify the license with the issuing authority instead of relying on a number printed in a proposal. Ask for proof of insurance and for references from recent projects of a similar size.
Questions to ask before you hire
Put these questions to every bidder:
- What does the price include, stage by stage?
- What does it leave out?
- How are change orders priced?
- What is the payment schedule?
- Who pulls the permit?
A written scope lets you set the bid against the eight NAHB build stages, so you can see where a price runs heavy or light.
Common mix-ups
A general contractor is not a trade contractor. The general contractor hires the trades and holds the contract with you. A building contract is also not a loan, so the owner usually arranges the financing and pays progress payments.
The 11.0% and 5.7% figures are survey averages for builder-sold homes. A real bid can sit above or below them.
Put the figures to work
Enter your floor area and split the budget across the eight NAHB build stages.
General Contractor Questions
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Rachel Torres is a construction education specialist holding an M.Ed. and NCCER Master Trainer certification (#MT-2018-4492). With 14 years bridging field engineering at Kiewit Infrastructure and classroom instruction, she writes CalcSummit's conversion calculators, educational guides, and glossary content to NCCER and ICC curriculum standards. She developed the 'Construction Math Made Simple' course used by ACTE member programs.
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