Estimating Jobs
How to Price a Job: From Costs to Final Number
Short answer
Price a job by adding direct costs, labor at your loaded rate, overhead absorption, and target margin — then adjust up for urgency, scope risk, and customer-specific value. This is the same five-step process whether the job is $300 or $30,000.
Pricing is the highest-leverage decision in a service business. A 10% pricing improvement drops almost entirely to the bottom line, while a 10% volume increase only moves profit by 2–3%. Yet most owners price by feel, by what they charged last time, or by what the competitor charges. This guide gives you a repeatable formula.
The five-step pricing formula
- Direct costs: materials, parts, sub-contractors, equipment rental, permits, disposal. Look up real numbers — don't guess.
- Labor at loaded rate: estimated hours × your loaded labor rate (wage + burden ÷ utilization). See our Labor Rate Formula guide for the full calculation.
- Overhead absorption: estimated hours × overhead recovery rate. For most shops this is $25–60/hr on top of labor.
- Target margin: add 15–25% on the total above. This is your profit.
- Risk and value adjustments: bump up for urgency, after-hours, code-violation work, sole-source jobs. Bump down only for high-volume repeat customers.
Worked example: a $400 service job
| Line | Amount |
|---|---|
| Materials (parts at cost + 40% markup) | $70 |
| Labor: 1.5 hrs × $125 loaded labor rate | $188 |
| Overhead absorption: 1.5 hrs × $30 | $45 |
| Subtotal | $303 |
| Target margin: 20% | $61 |
| Quote | $364 |
| Round up + urgency adjustment | $395 |
The three pricing mistakes that kill margin
Mistake one: pricing labor at wage instead of loaded rate. You forget to recover payroll taxes, vacation, vehicle, and tools. Fix: always use the loaded rate.
Mistake two: forgetting overhead absorption. If you only charge for direct labor, your rent and insurance come out of profit. Fix: build overhead into the hourly rate.
Mistake three: matching competitor pricing without knowing their cost structure. Their wages, vehicles, and overhead are not your wages, vehicles, and overhead. Fix: price from your costs, not theirs.
Use a calculator instead of math on paper
Our Pricing Calculator and Markup Calculator do the formula for you. Plug in costs and target margin; get the price. Worth using on every quote until the math becomes second nature.
Frequently asked questions
How do I price a job I have never done before?
Estimate hours optimistically, then add 50% for the unknown. After you finish the first one, document actual hours. By the third job you will have a real number.
Should I round my quotes to whole numbers?
Round to $5 or $10. $395 looks priced; $403.17 looks like a robot wrote it. Round always up, never down.
What if the customer says my price is too high?
Ask: 'Compared to what?' Then either justify the value, offer a reduced-scope version, or walk away. Never drop price without dropping scope — it teaches the customer you were padding.
Turn pricing into invoices.
Glo Invoice creates branded estimates and invoices from your pricing in seconds — free for 14 days.
Sources & further reading
Primary sources we consulted when writing and reviewing this guide.