Service business pricing guide
How to price a job when employees replace the owner.
The price that pays an owner-operator can fail the moment a crew takes over. The fix is to separate labor from profit, load the crew's wages, allocate overhead honestly, and solve for margin on revenue.
The short answer
Add loaded crew labor, any owner time that remains, materials, job-specific operating costs, customer-acquisition cost, and allocated overhead. Then divide that fixed job cost by one minus payment fees, callback reserve, and target operating margin.
The crew-pricing formula
Loaded crew labor = people × job hours × hourly wage × (1 + payroll burden)
Overhead per job = annual fixed overhead ÷ realistic annual jobs
Crew-ready price = fixed job cost ÷ (1 − fees − reserve − target margin)
What belongs in each input
| Input | Include | Common mistake |
|---|---|---|
| Owner labor | The market wage required to replace the physical work you perform. | Calling all cash left after materials “profit.” |
| Loaded crew labor | Wages plus employer payroll taxes, workers' compensation, paid time off, benefits, training, uniforms, and other employment costs that apply to your business. | Using hourly wage alone. |
| Direct job costs | Materials, supplies, fuel, disposal, equipment wear, subcontractors, and other costs caused by the job. | Counting only the largest material purchase. |
| Customer acquisition | The realistic cost to produce one booked job, not merely one lead. | Leaving marketing out because it is paid monthly. |
| Overhead | Rent, software, office payroll, insurance, phones, bookkeeping, vehicles, and other costs that exist across jobs. | Dividing by an optimistic job volume. |
| Fees and reserve | Payment processing and a realistic allowance for callbacks, warranty work, or rework. | Applying percentage costs as fixed dollar amounts. |
| Target margin | Operating profit as a percentage of customer revenue after the costs above. | Confusing margin with markup on cost. |
A worked example
Assume a two-person crew works three hours at $22 per person, with 28% payroll burden. Loaded crew labor is about $169. Add $17.50 of remaining owner time, $135 of other direct costs, and about $117 of overhead per job. That produces roughly $439 of fixed job cost.
If payment fees and callback reserve total 5.9% and the target operating margin is 20%, divide $439 by 74.1%. The modeled crew-ready price is about $592. A $425 price loses money after the entered costs, even if the owner previously felt profitable doing the labor personally.
When more volume helps—and when it does not
More jobs spread fixed overhead across more work. That helps only when every additional job contributes something toward overhead and profit. If the customer price does not cover loaded labor, direct costs, fees, reserves, and the target contribution, volume magnifies the problem.
Use real records before making the hire
This calculation is a planning floor, not a market-demand forecast or professional tax advice. Replace assumptions with recent job times, payroll quotes, workers' compensation costs, booked-job acquisition cost, and trailing overhead. Employer payroll obligations vary; use current guidance from the IRS and applicable state agencies, then have an accountant or payroll professional review the hiring model.
Run the numbers on one typical job.
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