How to price a service job (with a simple formula)

Most people in the trades undercharge, and they undercharge for the same reason: they price off a gut feeling instead of off their actual costs. The fix isn't to charge more for the sake of it. It's to know your numbers, add a fair margin, and quote with a straight face.

Here's a formula simple enough to do in your head on the drive over, and honest enough that you'll actually make a living from it.

The formula

Price = (Labour hours × your hourly rate) + Materials + Overhead share + Profit margin. Let's take each piece in turn, because the bits people skip are exactly the bits that quietly bankrupt small operators.

1. Your real hourly rate

Not what you'd like to earn an hour. What you need to earn an hour to take home a wage after a realistic number of billable hours. If you want to take home $60,000 a year and you can realistically bill 1,200 hours (not 2,000, because you lose huge chunks to quoting, driving, admin and dead time), that's $50/hour just to pay yourself, before anything else.

2. Materials, at your cost, marked up

Charge what the materials cost you, plus a markup of 15–30%. You're carrying the cost, the trips to the supplier and the risk if something's faulty. That markup is fair, and every established business does it. Don't pass materials through at cost. That's a favour you can't afford.

3. Overhead share

Your van, fuel, insurance, tools, phone, software, accounting. Add it all up for the year, divide by your billable hours, and you get an overhead figure per hour. For a lot of solo operators that lands somewhere between $8 and $20 an hour. If you skip this, your 'profit' is really just paying for your van.

4. Profit

Profit is separate from your wage. It's the buffer that lets you replace a tool, take a week off, or survive a slow month. Add 10–20% on top of everything else. This is the part people feel guilty about. Don't. A business that doesn't make a profit isn't generous; it's fragile.

A worked example

Say you're quoting a half-day job: 4 hours of labour, $120 of materials.

• Labour: 4 hours × $50 = $200
• Materials: $120 + 25% markup = $150
• Overhead: 4 hours × $12 = $48
• Subtotal: $398
• Profit at 15%: ~$60
• Quote: about $458, call it $475

Compare that to the 'I'll do it for $300' you might have blurted out on the doorstep. That $175 difference is the gap between a job that pays and a job that costs you.

Three rules that keep you honest

1. Quote in writing, every time. A spoken number gets remembered as lower than it was.
2. Price the job, not the customer. Charging the same fair rate to everyone is easier to defend and easier to sleep on.
3. Review your rate twice a year. Your costs go up. Your prices should too.

The bottom line

You don't need accounting software or a finance degree to price properly. You need your real hourly rate, an honest overhead figure, a markup on materials, and the nerve to add a profit. Do that on every job and the slow months stop being scary.