How to use the service pricing calculator
- Enter labour hours for the job, your labour cost per hour and materials.
- Enter monthly overhead and the hours you actually bill per month to get an overhead rate.
- Choose target margin or markup and enter the percentage; the tool shows the equivalent of the other.
- Optionally add your sales tax, VAT or GST rate.
- Edit the three package tiers to compare prices, and read the formulas used.
Worked example
5 hours at $40, $150 materials, $6,000 overhead over 120 billable hours, 25% margin
Overhead rate $6,000 ÷ 120 = $50 per hour. Cost = 5 × ($40 + $50) + $150 = $600. Price at 25% margin = $600 ÷ 0.75 = $800 ($160 per hour), which is a 33.33% markup. A 25% markup instead would price the job at $750, only a 20% margin. All inputs are examples.
How it works
Overhead rate = monthly overhead ÷ billable hours. Cost = hours × (labour cost + overhead rate) + materials. Target margin: price = cost ÷ (1 − margin). Markup: price = cost × (1 + markup). Margin = profit ÷ price; markup = profit ÷ cost; markup = m ÷ (1 − m). Tax = price × tax rate. Per hour = price ÷ hours.
Assumptions
- Labour cost, materials, overhead, billable hours, margin or markup and tax rate are your own figures; starting values are examples.
- Overhead is spread evenly over billable hours.
- Package tiers share the same rates and target.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit divided by price. Markup is profit divided by cost. The same dollar profit gives a smaller margin than markup: a 25% margin equals a 33.33% markup.
Why use billable hours for overhead?
Only billed hours generate revenue to cover fixed costs. Spreading overhead over all hours worked, including admin and travel, underprices every job.
Should tax be included in my price?
That depends on local rules and whether you quote tax-inclusive prices. The tool shows the price before tax and, if you enter a rate, the price including tax.
Limitations
- Does not consider competitor pricing or what your market will pay.
- Single overhead rate; no separate rates for different crews or equipment.