How to Price Your Services for Profit, Not Just Coverage
Most contractors underprice. Not because they're bad at math, but because they're only counting the costs they can see. Here's how to price so you actually make money.
Underpricing is the most common mistake in the trades. And it’s almost never caused by greed or carelessness — it’s caused by missing costs.
You know what materials cost. You know what you’re paying your techs. What most contractors don’t fully account for: the hours between jobs, the callbacks, the equipment maintenance, the insurance, the tools, the fuel, the slow weeks in winter. Those costs are real, and if your price doesn’t cover them, you’re losing money on jobs that look profitable.
Start with Your True Hourly Cost
Before you can price a job accurately, you need to know what it actually costs to run your operation per hour of productive work.
This is not your tech’s hourly wage. It’s the fully-loaded cost of having a truck on the road doing work, including:
- Labor (wages + payroll taxes + benefits)
- Vehicle (payment or depreciation + insurance + fuel + maintenance)
- Tools and equipment (purchase price amortized + maintenance)
- Business overhead (insurance, licensing, software, office costs) allocated per hour
- Your own time as owner-operator, if applicable
Take your total monthly costs and divide by the number of billable hours you realistically produce in a month. That’s your break-even rate per hour. Your price needs to be above it.
Build Overhead Into Every Job
Most jobs have a fixed overhead component that doesn’t scale with labor hours — driving to the site, loading the truck, making the follow-up call. These are real costs that need to be in the price somewhere.
A common approach: a minimum job charge that covers your first hour of travel and setup, plus your hourly rate for actual work time, plus materials at cost plus markup.
Material Markup Is Not Optional
Buying materials at retail and charging the customer exactly what you paid is not breaking even on materials — it’s subsidizing the customer’s trip to the hardware store with your time and truck.
A reasonable materials markup (15–30% depending on the trade and project size) covers your sourcing time, the cost of carrying inventory, and the occasional mis-order. It’s standard practice and customers who understand the business expect it.
What the Market Will Bear vs. What You Need to Charge
You should know what competitors charge. But pricing to the market only makes sense if the market price covers your costs. If competitors are charging $95/hour and your fully-loaded cost is $110/hour, matching the market price means losing money on every job.
The better play: understand your cost, set your price above it, and compete on quality and reliability rather than price. Customers who choose purely on price are the hardest customers to keep anyway.
Raise Your Prices
If you haven’t raised prices in two years, you’ve effectively given yourself a pay cut. Materials costs, fuel, insurance premiums — all of it has gone up. Your price should too.
Most customers will not leave over a 10% price increase delivered professionally. The ones who do were probably on the edge of your service area anyway.
A simple approach: once a year, review your costs and adjust your rates to match. Do it in January. Tell long-term customers in advance. Most won’t blink.
Track Your Actual Job Margins
The only way to know if your pricing is working is to look at what jobs actually produce after all costs. Keep records of what each job category — service call, installation, maintenance visit — actually nets. If a category is consistently thin, the price is wrong.
This sounds like a lot of accounting, but it doesn’t have to be. Even a rough sense of which job types make money and which don’t is better than pricing by feel.
