How to Price Home Service Work Profitably

You finished a $200 job. Materials cost $80. Took 3 hours.

After gas and taxes... you made $25/hour.

That's not a business. That's a bad job.

The Pricing Formula

Price = Materials + Labor + Overhead + Profit

Materials: What you pay for parts (add 20-30% markup)

Labor: Your hourly rate × time

Overhead: Truck, insurance, tools, marketing (~30% of labor)

Profit: What's left after you pay yourself (~15-20%)

Example Calculation

Water heater install:

• Materials: $400 (charge $500 with markup)


• Labor: 4 hours × $75/hour = $300


• Overhead: $300 × 30% = $90


• Profit margin: 15% of total

Subtotal: $890
With 15% profit: $1,024

Your quote: $1,000-$1,100

Common Pricing Mistakes

Mistake 1: Forgetting overhead
Truck payment, insurance, fuel, phone, tools—all costs.

Mistake 2: Undervaluing time
Travel time, quoting time, admin time. It all counts.

Mistake 3: Racing to the bottom
Lowest price wins... the worst jobs and worst customers.

Flat Rate vs Hourly

Flat rate pros:

• Customer knows cost upfront


• You're rewarded for efficiency


• Easier to quote

Hourly pros:

• Protects you on complex jobs


• Fair for unknowns

Best practice: Flat rate for common jobs. Hourly for unusual/complex work.

Raising Prices

If you're too busy, raise prices. If customers never push back, you're too cheap.

Annual raise: 3-5% minimum (covers inflation)

How to communicate: "Our rates are increasing to $X effective [date]. Existing customers are grandfathered until [date]."

Know Your Numbers

Track:

• Average job revenue


• Average job cost


• Profit per job


• Close rate by price point

If you don't know your numbers, you're guessing.