How to price a trade job without losing money

You're standing at the kitchen table. The customer wants a number. You run it in your head — a few hours of labor, a couple hundred in parts, round it up so it feels fair — and you say it out loud. It sounds right. It even is right, on the parts of the job you can see.

The trouble is the part you can't see. There's a whole layer of cost sitting underneath every job that never shows up on the invoice, and if it's not baked into your price, you're paying it out of your own pocket on every single call. Here's the real math, in the order it actually matters.

The three numbers that decide your price

Every honest quote is built from three things, not two. Most people price on the first two and forget the third — and the third is the one that keeps the lights on.

Labor is your time. Materials are your parts. Overhead is everything it costs to be a business that can show up at all — the truck, the insurance, the phone, the software, the fuel, the hours you spend quoting and invoicing instead of turning wrenches. Labor and materials are obvious because you can point at them. Overhead is invisible, which is exactly why it's the one that sinks shops.

Overhead: the number that quietly drains you

Add up what it costs to run your operation for a year — truck payment and gas, tools, insurance, phone, licensing, accounting, the field-service or quoting software you use, and the unpaid hours you spend on the phone and at the desk. Divide that by the number of hours you actually bill out in a year. That's your overhead per hour.

Run it honestly and most one- to three-truck shops land somewhere between $80 and $150 an hour — before they've paid themselves a single dollar of wage or profit. That's not the number you charge. That's the number you have to cover before you've earned anything. There's a full walkthrough in what your shop rate should actually be.

Margin vs. markup: the mistake that costs the most

This one is small, it's boring, and it's probably costing you more than any bid you've ever lost. Markup and margin are not the same number, and shops confuse them constantly.

Markup is what you add on top of your cost. Margin is how much of the final price is actually profit. If a part costs you $100 and you add 40%, you charge $140 — that's a 40% markup. But your margin on that sale isn't 40%. The $40 of profit is only 28.6% of the $140 you charged.

If you need a real 40% margin — meaning 40% of the ticket is profit — you don't add 40%. You divide your cost by 0.60. That $100 part has to bill at $166.67, not $140. Price the whole year on a 40% markup while you thought you were making 40% margin, and you've handed back more than eleven points of profit on every part you've touched. We break that down in margin vs. markup, in plain English.

Busy and broke is almost always a margin problem, not a volume problem.

Your hourly rate, built from the bottom up

Now the labor number makes sense. Start from your labor cost — what an hour of your (or your tech's) time actually costs you. Add your overhead per hour. Then add the profit margin you need the business to make. That stack — cost, then overhead, then profit — is your billable rate. Not the other guy's rate. Yours.

A lot of shops also split the first hour from the rest: a higher service-call rate to get the truck to the door, then a continuous rate for the hours after. That's fine — as long as the overhead is riding inside every one of those hours.

Put it together on one job

Say it's a three-hour job. Your billable rate is $182 an hour with a $202 first-hour service rate, and you've got $260 in parts you need a 40% margin on.

Quoted in your head at the kitchen table, that same job becomes "call it nine hundred" — and you just gave away a hundred bucks and most of your parts margin because the math was faster than you were. The number isn't hard. It's just hard to do right, on the spot, with someone watching. Once you've got the number, the next job is handing it over well — that's presenting your price.