How to Price a Service Call: Labor, Overhead, and Margin
Here's the quiet killer in the trades: pricing a job off labor and materials, adding "a little for profit," and calling it done. The job feels profitable. The truck, the insurance, the software, the time spent quoting the three jobs you didn't win — none of that made it into the price. At the end of the year the bank account says you worked for wages.
The three layers of a real price
- Direct costs — materials plus the labor hours on the job at what those hours actually cost you (wage + taxes + comp).
- Overhead — everything that keeps the business alive whether or not you're on a job: vehicles, fuel, insurance, tools, phones, licensing, admin time. Most small shops run 20–35% of direct costs, and most owners guess low.
- Margin — profit on top of covering every cost. This is not optional. It funds slow months, broken equipment, and growth.
Markup is not margin
This one mistake costs contractors real money. A 20% markup on cost gives you a 16.7% margin on price. If you want to keep 20 cents of every dollar the customer pays, you need to divide by 0.8, not multiply by 1.2:
Price = total cost ÷ (1 − target margin)
On a $1,000 job, that's the difference between quoting $1,200 and $1,250. Across a year of jobs it's a vehicle payment.
Do the math before the quote goes out
We built a free job pricing calculator that stacks all three layers — materials, true labor cost, overhead, and margin — and shows you the price and the profit side by side. If your current quotes come in well under what it suggests, that gap is why the busy months don't feel busy in the bank account.
When speed matters more than precision
You don't need a perfect overhead study to start. Take last year's total overhead spend, divide it by last year's billable hours, and add that number to every labor hour you quote. Refine it quarterly. A rough number applied to every quote beats a precise number applied to none — and if your quoting process itself is the bottleneck, we wrote about that too.