How to Price Field Service Jobs for Profit
Most service contractors price jobs one of two ways: they guess based on what they charged last year, or they undercut the competitor down the street. Both approaches destroy profit. The right way to price a service job is to work backward from your required margin.
The formula has four steps:
Calculate Direct Cost
Labor hours × hourly rate × number of techs, plus your materials cost.
Apply Overhead
Multiply direct cost by (1 + overhead%). Overhead covers everything that isn't on the job: insurance, vehicles, admin, tools, marketing.
Set Your Price for Target Margin
Price = Total Cost ÷ (1 − Target Margin%). This is markup-to-margin conversion.
Reality-Check Against Market
If your price is well above market, your costs or margin target may be off. If it's well below, you're leaving money on the table.
Common Pricing Mistakes That Kill Margins
Forgetting Overhead Entirely
The #1 reason contractors are busy but broke. Labor + materials covers job-level costs, but you also have insurance, vehicles, tools, office staff, marketing, and your own salary. If overhead isn't in your price, it comes out of your profit.
Confusing Markup with Margin
A 30% markup on a $1,000 job means you charge $1,300 and make $300. A 30% margin means you need to charge $1,428. That's a $128 difference per job — thousands of dollars per year on volume.
Not Billing Drive Time
If you run 6 jobs a day with 30-minute drives between each, that's 2.5 hours of unrecovered labor. At $75/hour across two techs, you're giving away $375 a day.
Using the Same Rate for All Job Types
An emergency same-day call carries more cost (urgency, disruption to schedule) than a pre-planned maintenance visit. Flat pricing across job types leaves money on urgent work and overcharges routine calls.
Not Updating Rates for Material Inflation
Parts and materials prices fluctuate — sometimes significantly. If you haven't updated your materials pricing in 6–12 months, you may be absorbing cost increases that should be passed through.
Industry Pricing Benchmarks
These ranges are based on industry surveys and publicly available trade data. Your actual numbers will vary by region, experience level, and business model — use them as a sanity check, not a prescription.
| Trade | Typical Labor Rate | Overhead % | Gross Margin Target |
|---|---|---|---|
| HVAC | $65–$95/hr | 20–30% | 25–35% |
| Plumbing | $75–$110/hr | 20–25% | 30–40% |
| Electrical | $70–$100/hr | 20–30% | 25–35% |
| Lawn Care | $30–$50/hr | 15–20% | 35–50% |
| General Contractor | $60–$90/hr | 25–35% | 20–30% |
| Cleaning | $25–$45/hr | 15–20% | 40–55% |
Sources: Bureau of Labor Statistics, ACCA, PHCC, NALP, industry surveys. Data reflects U.S. market conditions.
Frequently Asked Questions
How do I price a field service job for profit?+
Start with your direct costs: labor (hours × rate × techs) plus materials. Then apply your overhead percentage to cover indirect costs like insurance, vehicles, and admin. Finally, divide by (1 − your target margin) to find the price that delivers the profit margin you want.
What overhead percentage should a service business use?+
Most small-to-mid service businesses run 15–30% overhead. Overhead covers everything that isn't directly billable: insurance, fuel, shop rent, tools, marketing, and back-office staff. Track your actual overhead monthly and update your rate accordingly.
What profit margin should I target on service jobs?+
Industry benchmarks vary by trade. HVAC and plumbing typically target 25–35% gross margin. Electrical tends toward 25–30%. Lawn care and cleaning often run 35–45% due to lower labor rates but higher volume. Your net margin (after all overhead) should be at least 10–15%.
What is the difference between markup and margin?+
Markup is calculated on cost: a 50% markup on a $100 job means you charge $150. Margin is calculated on revenue: a 33% margin on that same $150 job means $50 profit. Many contractors confuse these and underprice. This calculator uses margin (industry standard for pricing).
How do I account for drive time and setup in my pricing?+
Include drive time and setup in your labor hours. If a job takes 2 hours on-site but 45 minutes of drive time and 30 minutes of setup, your billable hours should be at least 3.25 hours. Some contractors bill travel as a separate line item; others build it into their rate.
Why am I not profitable even when I'm staying busy?+
The most common cause is underpriced jobs. Contractors often set rates based on what competitors charge without accounting for their actual overhead. If you don't know your true cost-per-hour including overhead, you're guessing — and often guessing low. Use this calculator to reality-check every job type you run.