Most trade business owners set their prices the same way: look at what the competition charges, add or subtract a few bucks, and hope for the best. It works — until it doesn’t. One slow month, one unexpected truck repair, one workers’ comp increase, and suddenly those margins you thought you had evaporate.
Pricing isn’t guesswork. It’s math. And once you understand the formula, you’ll never underbid a job again.
Know Your True Cost Per Hour
Before you can price a job, you need to know what it actually costs you to put a technician on-site for one hour. This number is almost always higher than people think.
Start with the obvious: wages, payroll taxes, insurance, and benefits. For a tech making $28/hour, your real labor cost is closer to $38–$42/hour once you factor in employer-side taxes, workers’ comp, health insurance, and paid time off.
Then add your overhead. Rent, utilities, office staff, software, vehicle payments, fuel, tools, uniforms, marketing — every dollar your business spends that isn’t tied to a specific job gets divided across your billable hours. If your monthly overhead is $12,000 and your team bills 800 hours per month, that’s $15/hour in overhead per tech.
Your true cost per billable hour = Labor cost + Overhead per hour
In our example: $40 + $15 = $55/hour. That’s your break-even. Every dollar above that is margin.
The Profit Margin You Actually Need
A lot of owners target 10–15% profit margins and think they’re doing well. But net profit margins in field service should be 15–25% to sustain growth, handle emergencies, and build real equity in your business.
Here’s the math. If your break-even cost is $55/hour and you want a 20% net margin:
Billing rate = Cost ÷ (1 – Target margin) $55 ÷ 0.80 = $68.75/hour
Round that up to $70 and you have a rate that covers every cost and puts money in the bank. Most owners who “feel” like they’re profitable are actually billing at or near break-even because they forgot to account for vehicle depreciation, callback time, or unbillable hours spent on estimates.
Flat-Rate vs. Hourly: When to Use Each
Hourly billing works for:
- Diagnostic calls where scope is uncertain
- Time-and-materials maintenance contracts
- Jobs where the customer wants transparency on hours
Flat-rate pricing works for:
- Common, repeatable jobs (water heater installs, AC tune-ups, panel upgrades)
- Situations where speed and efficiency should reward you, not penalize you
- Creating a premium, professional impression
The sweet spot for most trade businesses is a hybrid. Use flat-rate for your top 20–30 most common jobs and hourly for everything else. Track your actual time on flat-rate jobs — if you’re consistently beating your estimate, your price is right. If you’re going over, adjust.
Building a Flat-Rate Price Book
Your price book is one of the most valuable assets in your business. Here’s how to build one:
- List your 20 most common jobs — the ones your team does every week
- Track actual time on each job type for 30 days, including drive time
- Calculate average duration including setup, work, cleanup, and paperwork
- Apply your hourly rate to the average duration
- Add materials at your cost plus a 25–40% markup
- Add a complexity buffer of 10–15% for surprises
A flat-rate book removes pricing decisions from the field. Your techs present a price, the customer says yes or no, and nobody’s standing in a basement doing mental math.
Pricing for Different Customer Types
Not every customer should pay the same rate. This isn’t about being unfair — it’s about reflecting the true cost of serving different segments.
Residential one-time calls carry the highest customer acquisition cost. You marketed to find them, you’re dispatching a truck to a new address, and there’s no guarantee of repeat business. Price accordingly.
Residential maintenance plan customers cost less to serve over time. They’ve committed to recurring revenue, they’re easier to schedule efficiently, and they refer others. A 10–15% discount on service calls is a good investment.
Commercial accounts have different economics entirely. Larger jobs, predictable schedules, net-30 payment terms (which cost you money), and volume expectations. Price to reflect both the scale advantage and the cash-flow cost.
Stop Discounting, Start Adding Value
When a customer pushes back on price, the instinct is to drop your rate. Resist. Every dollar you discount comes straight out of profit — not revenue, profit.
Instead of lowering the price, add value at low cost to you:
- Throw in a free filter or small part (costs you $5, feels like $50 to the customer)
- Offer priority scheduling for their next call
- Include a free system inspection with the repair
- Extend your labor warranty by 30 days
These gestures cost almost nothing but make the customer feel like they got a deal. Your margins stay intact.
Review Pricing Every Quarter
Costs change. Fuel goes up. Insurance renews at a higher rate. Your best tech gets a raise. If you set prices once and forget them, you’re slowly bleeding margin every month.
Block 30 minutes every quarter to review:
- Has your overhead changed?
- Are material costs up?
- What’s your actual margin on the last 90 days of jobs?
- Are you hitting your target profit percentage?
Adjust your price book and hourly rates accordingly. Small, regular increases (2–3% every 6 months) are easier for customers to absorb than a sudden 15% jump after years of holding steady.
The Bottom Line
Pricing is the single biggest lever you have for profitability. You can’t cut your way to a healthy business — you have to charge what your work is worth. Know your numbers, build your price book, and review it regularly. Your future self will thank you.
