Pricing Jobs for Profit: Stop Guessing and Start Charging What You're Worth

Ask most contractors how they price a job and you’ll hear, “I look at what everybody else charges,” or “I just know.”

That works until it doesn’t. Then they’re working 60 hours a week and can’t figure out where the money went.

Here’s the truth: you can’t make up for bad pricing with more jobs. If every job loses a little money, more jobs means losing more money, faster.

Let’s fix that.

The 5 things every price must cover

Every job’s price must pay for five things:

1. Materials, plus waste and delivery
2. Labor, plus the real cost of an employee (not just the wage)
3. Overhead: the costs of running the business that don’t belong to one job
4. Your pay as the owner
5. Profit, so the business can grow and survive slow months

Most underpriced contractors forget numbers 2, 3 and 5.

Labor costs more than the wage

If you pay a worker $25 an hour, that hour costs you more than $25. On top of the wage you pay:

• Payroll taxes (Social Security, Medicare, unemployment)
• Workers’ comp (in Ohio, through the Bureau of Workers’ Compensation)
• Paid time off and holidays
• Any benefits
• Time they’re on the clock but not on a job (driving, shop time, rain days)

A simple rule many owners use: multiply the wage by at least 1.25 to 1.35 to get the real cost. Then account for hours that aren’t billable.

Overhead: the costs you forget

Overhead is everything you pay just to be in business:

• Trucks, fuel, insurance and repairs
• Tools and equipment
• Insurance (liability, auto)
• Phone, software, website
• Office rent, utilities
• Marketing
• Office help, bookkeeping, accountant
• Licenses and permits

Add up a full year of overhead. Then figure out what share each job must carry. Our job pricing calculator does it as a percentage of direct cost.

Markup vs. margin: the mistake that costs thousands

This trips up almost everyone. Markup and margin are not the same thing.

• Markup is how much you add on top of your cost.
• Margin is how much of the final price is profit.

Say a job costs you $8,000:

• Add a 25% markup: $8,000 + $2,000 = $10,000. Your profit is $2,000.
• But $2,000 out of $10,000 is only a 20% margin.

If you want a 20% margin, use this formula:

Price = Cost ÷ (1 − margin)

$8,000 ÷ 0.80 = $10,000

If you’ve been using markup when you meant margin, you’ve been making less than you thought.

Know your true hourly rate

Even if you price by the job, you should know what your time is worth.

Most owners only bill 25 to 30 hours a week, even if they work 60. The rest is driving, estimates, phone calls, buying materials and paperwork.

So if you want to earn $80,000, and your overhead is $40,000 a year, and you bill 30 hours a week for 46 weeks, you need to bring in about $100 an hour with a 15% profit on top. Many owners are charging half that.

Run your own numbers in the true hourly rate calculator.

Know your break-even

Your break-even is how much you need to sell each month just to pay the bills. After that, every job is profit.

Break-even sales = monthly overhead ÷ gross margin

If your overhead is $12,000 a month and your gross margin is 40%, you need $30,000 a month in sales just to break even.

Check yours in the break-even calculator. Knowing this number changes how you think about slow months and discounts.

Why discounts hurt so much

Say your gross margin is 35%. You give a 10% discount. It doesn’t cut your profit by 10%. It cuts it by more than a quarter:

• $10,000 job, 35% margin: $3,500 gross profit
• 10% off: $9,000 price, same $6,500 cost: $2,500 gross profit

To make the same profit, you’d need to sell 40% more jobs. Try it in the discount calculator.

Instead of discounting, add value: a longer warranty, a free cleanup, a bonus service. It costs you less and protects your price. See Irresistible Offers.

The fastest way to more profit: raise your prices

Jay Abraham teaches that one of the three ways to grow a business is to raise the average sale. Alex Hormozi pushes owners to charge more and then deliver so much value that it’s an easy yes.

Here’s why it works. Say your margin is 20%. You raise prices 10%, and you lose a few price shoppers. Even if you sell 10% fewer jobs, you likely make more profit, and you work less.

How to raise prices the smart way:

1. Raise prices on new estimates first. Keep past customers at their old price for a while if you want.
2. Add something so the new price feels fair: faster scheduling, a longer warranty, better cleanup.
3. Use good, better, best options. Many people pick the middle.
4. Stop apologizing for your price. Explain what’s included and why it costs what it does.
5. Watch your close rate. If you close more than 50% of estimates, you’re probably too cheap.

Pricing in Northwest Ohio

A few things that affect pricing in our area:

• Seasons: Our winters slow down outdoor trades. Price your summer jobs so they carry you through the slow months.
• Storms: After big storms, material and labor costs can jump. Put a “price good for 30 days” line on estimates.
• Licensing: Ohio licenses some trades (like plumbing, HVAC and electrical) through the Ohio Construction Industry Licensing Board, and many cities require their own registration. Build permit costs and time into your price.
• Workers’ comp: In Ohio, coverage comes through the BWC. Include it in your labor burden.

Use a written estimate every time

A clear, written estimate protects you and helps you sell. It should have:

• What you’ll do, in plain words
• What’s included and what’s not
• Options (good, better, best)
• Price and payment terms
• Warranty
• How long the price is good for
• The cancellation notice Ohio requires for in-home sales

Our free job estimate template covers all of these.

Your pricing checklist

• I know my real labor cost per hour (wage × burden)
• I know my yearly overhead and add a share to every job
• I price for margin, not markup
• I know my true hourly rate and break-even
• I give good, better and best options
• I add value instead of giving discounts
• I review my prices at least twice a year

Price for profit, and the business can pay you, grow and survive a slow winter. Price to match the cheapest guy, and you’ll always be working for free.