Pricing is where most service contractors leave money on the table. Either they price off gut feel and "what the last guy charged," or they cost a job at raw wages and parts, tack on a round number, and hope it works out. A repeatable pricing method removes the guesswork and protects your margin on every ticket.
The core formula
Every price needs to cover four things, in this order:
- Burdened labor — the true cost of the people on the job, including travel time.
- Materials — your cost for parts and consumables.
- Overhead — this job's share of running the business.
- Profit — your target margin on top of all of it.
If a price does not clearly cover all four, it is not a price — it is a hope.
Markup vs margin: don't confuse them
This trips up a lot of owners. Markup is added on top of cost; margin is the profit as a share of the price. A 50% markup is not a 50% margin. If a job costs $200 and you mark it up 50%, you charge $300 — but that is only a 33% margin. To hit a true 50% margin you would charge $400. Decide your target margin first, then back into the markup that achieves it.
Worked example
Say a repair job runs:
- Burdened labor: 2 hours × $59 = $118
- Materials: $90
- Overhead allocation: $40
Total cost is $248. For a 40% margin, divide cost by (1 − 0.40): $248 ÷ 0.60 = about $413. Charge $413 and you keep roughly $165 in profit. Charge a "round $325" by feel and your margin quietly drops to 24%.
Build a price book for repeatable work
Most service shops repeat the same 20–40 jobs. Cost each one properly once, set the price to your target margin, and put it in a price book. Now your team quotes consistent, profitable prices in seconds instead of re-guessing every time — this is the backbone of flat-rate pricing.
Stop letting discounts erase margin
A $50 discount on a $400 job with a 40% margin does not cut your profit by 12% — it cuts it by about 30%, because the discount comes entirely out of profit. Track discounts as their own line and you will quickly decide to give fewer of them.
Review actuals against your prices
Pricing is not "set and forget." Compare what a job was supposed to cost against what it actually cost. If real jobs consistently run longer or use more material than your price assumes, your price book is out of date and your margin is leaking.
Final takeaway
Profitable pricing is a system, not a vibe: know your burdened costs, set a target margin, convert it to the right markup, and check actuals against estimates. Do that and you stop wondering whether a job made money — you decide it before you ever quote it.
Price from real numbers
MarginMate shows the true cost and margin of each job so your price book stays accurate and your quotes stay profitable.