How to price service work (without guessing)

The one number that matters: your true cost per billable hour

Every pricing mistake in the trades comes from the same place: confusing what you pay a tech with what an hour of their time costs the business. Wages are just the down payment. The truck, the insurance, the office, the callbacks, the hours nobody can bill — they all ride along on every invoice, whether you price them in or not.

The math has three steps. Grab last year's numbers and a coffee.

Step 1 — Fully loaded labor cost

Take a tech's wage and add everything that comes with employing them: payroll taxes, workers' comp, health contributions, PTO, training days. For most US shops that "burden" runs 25–35% on top of the wage.

• Wage: $34/hr
• Burden at 30%: +$10.20/hr
• Fully loaded: $44.20/hr

Step 2 — Overhead per billable hour

Here's where shops bleed. Add up a month of everything that isn't direct labor or materials: rent, truck payments, fuel, insurance, phones, software, advertising, the office wage, your own salary (yes — put yourself on payroll, you are not free). Then divide by billable hours, not paid hours. A tech paid for 173 hours a month might bill 120 after drive time, quotes, shop time and the job that went sideways.

• Monthly overhead for a 4-tech shop: $18,400
• Billable hours: 4 techs × 120 hrs = 480 hrs
• Overhead per billable hour: 18,400 ÷ 480 = $38.33/hr

Step 3 — Add the margin you're actually in business for

Cost recovery isn't profit. If the business doesn't make money after your salary, you own a stressful job, not a company. A healthy service shop targets 20–30% net margin on labor.

If your current rate is under that last line, you're not "staying competitive" — you're quietly paying customers for the privilege of working. And if the shop down the road charges $85/hr, they're not undercutting you; they're going out of business slowly and taking local price expectations down with them.

Flat-rate vs. time-and-materials

Once you know your billable-hour cost, flat-rate pricing is just packaging: estimate the standard hours for a task, multiply by your rate, add materials with markup, and print it in a price book. Do it once, honestly, and quoting stops being a nightly negotiation with your own conscience.

• Flat rate wins for residential service — homeowners hate meters running, and your fast techs stop being punished for being fast.
• T&M wins for diagnostic mysteries and commercial accounts — where scope is honestly unknowable up front.
• Either way, present options. A good-better-best quote turns "how cheap can this be?" into "which of these do I want?" — same honesty, better average ticket.

The three mistakes we see weekly

1. Pricing off paid hours instead of billable hours. It hides a 30–40% cost gap and it's the single most common reason "busy" shops are broke.
2. Leaving your own salary out of overhead. If the price only works when you work free, it doesn't work.
3. Raising prices only when suppliers do. Overhead creeps every year. Recalculate every January, not every crisis.

Where software fits (the honest version): a price book in every tech's pocket keeps the math you did above from being rounded down in a driveway conversation, and job costing tells you which work quietly loses money. FieldOps does both — but the math in this guide works fine on paper too. Do the math first; buy software second.