Most service companies stay busy, but not all of them stay profitable. You might have the phones ringing and trucks out every day, but at the end of the month, you still wonder where the money went. In most shops, the problem is straightforward. The prices don’t cover the actual cost of running the business.
Are You Pricing Your Jobs for Real Profit?
Most service companies stay busy, but not all of them stay profitable. You might have the phones ringing and trucks out every day, but at the end of the month, you still wonder where the money went. In most shops, the problem is straightforward. The prices don’t cover the actual cost of running the business.
Why the Going Rate Keeps You Stuck
Most owners begin by asking friends about their rates or browsing a few local websites. Then they settle on a number that feels fair. While this approach is quick, it can end up costing you more than you realize because it overlooks your actual overhead and labor costs. Most importantly, it neglects the profit you need for growth.
Going-rate pricing skips the most important step: figuring out what it really costs you to run your specific business, with your trucks, your team, your overhead, and your company goals.
Industry reports show most contractors have a lower net profit percentage than well-managed companies because, although those owners are not necessarily busier, they are clear on their numbers.
Your Price Has to Cover More Than You Think
Most contractors consider two main factors when pricing a job: parts and labor. However, the true cost of getting a truck into a driveway goes far beyond just that.
Most owners underreport or overlook hidden overhead costs. If these costs are not included in your price, you're covering them from your profit on each job.
The fix isn't complicated, but it does require knowing the right numbers and where to find them.
One Number Changes Everything
There is a single figure that connects your overhead, labor costs, and profit goals into a useful reference for your price book. Once you understand it, both flat rate pricing and time-and-material pricing become easier to develop and defend.
Want Help Running the Numbers?
We put together a step-by-step guide that walks through the full process; plain language, no accounting background needed. It includes a calculator you can use with your own numbers to determine how much you need to charge per hour to cover your costs and hit your goals.
With the calculator, you can plug in your own numbers and see your real rate in minutes. If you have ever finished a busy month and wondered where the profit went, this is where to start.