Start with your real labor cost, not the wage
The number you pay someone per hour is not what that hour costs you. Payroll taxes, insurance, vehicle time, tool wear, and paid time off all sit on top of it. If you price against the raw wage, you are quietly donating the difference on every job.
Work out a loaded hourly cost per person: total annual cost of employing them, divided by the hours they are actually billable. Billable hours are always fewer than paid hours — drive time, shop time, and slow weeks all take a cut.
- Take the annual wage and add taxes, insurance, and benefits.
- Add vehicle, fuel, phone, and tool allowance for that person.
- Divide by realistic billable hours per year, not 2,080.
- Expect the loaded cost to land 30-60% above the raw wage.
Price materials with waste and a handling margin
Materials are the easiest line to underquote because the supplier invoice looks like the whole story. It is not. There is offcut waste, the trip to pick things up, the item that arrives damaged, and the money tied up between purchase and payment.
Add a waste factor appropriate to the trade and a modest handling margin on top of cost. You are being paid to source, transport, and warrant the material, not just to hand it over at cost.
Cover overhead before you talk about profit
Overhead is everything that keeps the business alive whether or not you work this week: insurance, software, the office, accounting, advertising, licences, and your own admin time. It has to be recovered from the jobs you sell.
Total your annual overhead, then divide it across the billable hours you realistically sell in a year. That gives an overhead rate per hour that belongs in every quote. Skipping this step is the single most common reason a busy business still feels broke.
Add profit deliberately, as a margin not a markup
Profit is not what happens to be left over. It is a number you choose and then defend. Decide the net margin the business needs to fund equipment, absorb a bad month, and pay you properly for carrying the risk.
Be careful with the difference between markup and margin. Adding 20% to your cost does not give you a 20% margin — it gives you about 16.7%. To hit a target margin, divide your cost by (1 minus the margin) rather than multiplying by the margin.
- Cost $1,000 with a 20% markup sells at $1,200 — a 16.7% margin.
- Cost $1,000 at a 20% target margin sells at $1,250.
- The gap compounds across a year of jobs and is worth getting right.
Build a price book so you quote from a decision, not a mood
Once you have loaded labor, material handling, overhead recovery, and a target margin, turn the common jobs into fixed line items. A price book means the tenth quote of the week is as disciplined as the first, and anyone on the team can produce one.
Review it on a schedule — quarterly is enough for most trades, more often when material prices move. A price book that has not been touched in two years is a slow leak.
Watch close rate alongside price
If you win nearly everything you quote, your prices are probably too low. If you win almost nothing, either the price or the pitch is wrong. A healthy close rate for most trades sits somewhere in the middle, and the only way to know yours is to track quotes sent against quotes won by job type.
That single ratio, broken down by service, tells you where to raise prices and where to compete harder — and it is why quoting inside a system beats quoting in a notebook.