Most service owners price jobs by feel, by copying a competitor, or with one hourly rate for everything. That works until a job takes twice as long as expected, and you only find out when the money is already gone. This guide gives you one simple formula and five steps to fill it in.
Step 1: Count the labor honestly
Add every hour a crew member spends on the job: time on site, drive time, loading and unloading, setup and cleanup. Multiply by the number of people, then by what each hour truly costs you. That cost is more than the wage. It includes payroll taxes, insurance and workers’ compensation.
Step 2: Add materials and supplies
Include everything used up on the job: chemicals, parts, bags, tape, disposal fees. Small items add up. If you do not track them per job, they quietly come out of your profit.
Step 3: Add the vehicle and fuel
Trucks, vans, trailers and equipment cost money every hour they are used, not only when they break. Add fuel, wear and a fair per-job vehicle charge so a long drive to a small job shows up in the price.
Step 4: Choose the margin that pays for everything else
Your job costs are steps 1 to 3. Everything else, such as office staff, advertising, software, insurance and your own pay, has to come out of the margin on top. That is why a thin margin that looks fine on one job can leave a company with nothing at the end of the month. Pick a margin that covers overhead and still leaves profit. Your own number depends on your trade and your overhead.
Step 5: Divide, do not multiply
To get a margin of 55%, divide the job costs by 0.45. Do not add 55% on top of the costs. Adding a percentage on top is called markup, and it gives you a smaller margin than you expect. The margin vs markup guide shows the difference with a calculator.
A worked example (illustrative numbers)
| Item | How it is worked out | Amount |
|---|---|---|
| Labor | 2 people × 3 hours (including drive time) × $30 loaded hourly cost | $180 |
| Materials | Supplies used on the job | $40 |
| Vehicle and fuel | Truck time and fuel for this job | $35 |
| Job costs | $255 | |
| Price at a 55% margin | $255 ÷ 0.45 | $567 |
| Left after job costs | $567 − $255 | $312 |
Where the price goes in this example
Every dollar of the price, split into the costs it covers and what is left over.
- Labor $180 (32%)
- Materials $40 (7%)
- Vehicle and fuel $35 (6%)
- Left after job costs $312 (55%)
The whole bar is the price the customer pays: $567. Illustrative numbers, built from the table above.
These numbers are an example to show the method. They are not a price list and not a promise of what your jobs will earn.
Five pricing mistakes that cost owners money
- Leaving out drive time. A job 40 minutes away can quietly cost a crew an extra hour and a half.
- One hourly rate for every job. Hard jobs, small jobs and far-away jobs cost more per hour than easy ones.
- Copying a competitor. You do not know their costs, their crew speed or whether they are making money.
- Using the average and ignoring the spread. A good company-wide margin can hide jobs that lose money. Job costing shows them.
- Never checking after the job. If you do not compare the real hours to the estimate, the same mistake repeats next month.
Keep reading
- Overhead cost calculator: what each crew hour and job must carry
- Quote follow up: a day-by-day plan that wins the job without cutting your price
Questions owners ask
How do I price a service job?
Add up the job costs (crew time including drive time, materials, vehicle and fuel), then divide by one minus the margin you want. For example, $255 of costs at a 55% margin gives a price of $255 divided by 0.45, which is about $567.
What profit margin should a service business aim for?
It depends on your trade and how much overhead you carry. Overhead and your own pay must come out of the margin left after job costs, so work out your overhead first, then choose a margin that covers it and still leaves profit.
Should I charge by the hour or by the job?
Customers usually prefer a set price per job, and a set price lets a fast crew earn more. Work out the price from real costs either way, and use the hourly figure as a check on whether the job is worth taking.
What if my price is higher than the competition?
A lower price only helps if the job still makes money. Check what the lower price would leave after job costs before you match it. A job that would have earned you nothing is not worth winning.