Calculate a profitable service quote from labor, materials, overhead, fees, and target margin, or analyze the margin and markup of an existing customer price.
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Service Price Formula
The calculator has two modes: quote for a target margin and margin from an existing price. Enter crew time, hourly labor cost, any additional labor burden, materials and allocated job overhead. Optional costs and percentages are zero when blank.
Cost C = rounded direct labor + rounded additional labor burden + materials + job overhead. Direct labor is workers × hours per worker × hourly cost; added burden is a percentage of that direct labor. Each labor component rounds to cents, half up.
List quote = C / (1 − target margin − payment fee) / (1 − planned discount). Enter percentages as percentages in the widget; the formula uses fractions. A positive cost, margin plus fee below 100%, and discount below 100% are required. The list quote rounds up to the next cent.
Collected revenue = list quote × (1 − discount). Profit = collected revenue × (1 − payment fee) − C. Margin = profit / collected revenue. The existing-price mode takes a customer price after any discount. The percentage fee applies to that revenue. Taxes and fixed transaction fees are excluded. Fee and discount amounts are modeled before rounding, so actual invoice or processor rounding can change the result.
Price markup is (collected revenue − C) / C. It differs from after-fee profit on entered cost when a payment fee applies. Both are undefined when entered cost is zero. Business Victoria explains the distinction between margin and markup.
Allocate overhead to the job before entering it. Include costs once: if an hourly rate already includes payroll taxes and benefits, do not add the same costs again as labor burden or overhead. The result covers only the costs entered.
Illustrative Margins and Markups
Choose targets from your costs, business objectives and market research; there is no universal margin for a service trade. Australian Government pricing guidance discusses costs, competitors and pricing strategies.
Margin and price markup are different. This table shows illustrative arithmetic with no payment fee; displayed percentages and multipliers are rounded:
| Margin | Markup | Multiply cost by |
|---|---|---|
| 15% | 17.6% | 1.18 |
| 20% | 25% | 1.25 |
| 25% | 33.3% | 1.33 |
| 30% | 42.9% | 1.43 |
| 35% | 53.8% | 1.54 |
| 40% | 66.7% | 1.67 |
| 50% | 100% | 2.00 |
Examples and Common Questions
Example 1: Entered job costs. One worker spends 1 hour at $250, with no added burden, $120 of materials and $80 of allocated overhead. Cost is $450. At a 30% target margin, with no fee or discount, the quote rounds up from $450 / 0.70 to $642.86. Estimated profit is $192.86.
Example 2: Crew quote with a payment fee. Two workers spend 4 hours each at $30 per hour. Direct labor is $240; 20% added burden is $48. With $150 materials and $75 job overhead, cost is $513. At a 25% target margin and 3% fee, with no discount, the quote is $513 / 0.72 = $712.50. Unrounded fee is $21.375 and unrounded profit is $178.125, displayed as $21.38 and $178.13. With a planned 10% discount, the list quote rounds up to $791.67.
Should I price by margin or markup?
Margin is easier to compare against revenue and industry benchmarks. Markup is easier to apply at the counter when you only know cost. Pick one and stay consistent so you do not confuse a 30% markup with a 30% margin.
What is a loaded labor rate?
It is the wage plus everything you pay on top of it: payroll taxes, workers comp, liability insurance, paid time off, and benefits. Calculate added burden from your actual employment costs. Use zero additional burden if these costs are already included in the hourly rate.
How do I set billable hours per month?
Start with worked hours per worker per month, then subtract drive time, estimating, callbacks, and downtime. Estimate billable hours from your own records and expected nonbillable work. Use a consistent hours basis when allocating overhead to a job.
Why is my price higher than competitors’ prices?
Either your costs are higher, your overhead is spread across fewer billable hours, or your margin target is more aggressive. Use Margin from an existing price to see the result at your own entered costs. A competitor quote does not reveal that competitor’s costs or profit.
