How to Price a General Labor Job
Pricing a general labor job is a method where you add up your hourly rate, materials and drive time to find the job's true cost, then set a price earning the margin you want.
Key takeaways
- Your hourly rate is not your true cost. True cost also includes materials, drive time, fuel and a share of overhead.
- Work out the cost first, then choose a price. Don't start from what you think the customer will accept.
- Price = cost ÷ (1 − target margin). Adding a percentage on top of cost leaves you with a thinner margin.
- Small jobs need a minimum charge, because drive time costs the same on a small job as on a big job.
- Quote a flat price built from your hours.
Why general labor is hard to price
No two jobs look alike: a faucet fix, a bed assembly, a yard cleanup. Without a pricing method, you guess each time. With a method, you use the same line items on every job and only the numbers change.
The line items
- Hourly rate. For each person on the job, use a loaded rate covering wages and payroll costs. If you work alone, pay yourself a real rate for the hours. The U.S. Bureau of Labor Statistics publishes Employer Costs for Employee Compensation, which splits what employers pay per hour worked into wages and benefits.
- Materials. Parts, hardware, bags, dump fees: whatever you buy for the job.
- Drive time. The trip there and back, per person, plus fuel. The IRS sets a standard mileage rate for business use of a vehicle each year, which you can compare with your own truck costs per mile.
- Overhead share. Insurance, tools, software, marketing and other fixed costs.
- True cost. The total of all of the above. True cost is the number to build your price from.
Worked example: faucet fix (illustrative numbers)
| Line item | How it's figured | Cost |
|---|---|---|
| Hourly rate | 1 person × 1.5 h × $30/h | $45.00 |
| Materials | Supply lines and cartridge | $22.00 |
| Drive time | 40 min round trip × $30/h | $20.00 |
| Fuel | Round trip | $4.00 |
| Overhead share | Allocated to the job | $8.00 |
| True cost | $99.00 |
At a 40% target margin: $99 ÷ (1 − 0.40) = $165.
Adding 40% on top of cost would give $99 × 1.40 = $138.60. Profit would be $39.60, or about 28.6% margin, not 40%.
Three jobs side by side (illustrative numbers)
| Line item | Faucet fix | Furniture assembly | Yard cleanup |
|---|---|---|---|
| Labor | 1 person × 1.5 h × $30 = $45 | 1 person × 2 h × $30 = $60 | 2 people × 3 h × $25 = $150 |
| Materials | $22 | $3 | $35 (bags, dump fee) |
| Drive time and fuel | $24 | $18 | $31 |
| Overhead share | $8 | $8 | $12 |
| True cost | $99 | $89 | $228 |
| Price at 40% margin | $165 | about $148 | $380 |
Set a minimum charge
Some jobs are quick, but the drive time doesn't shrink. Work out the cost of the shortest job you're willing to take (drive, setup and the smallest billable block of time), and never quote below the price earning your target margin on the shortest job.
Hourly or flat price?
Use hours to build the cost, then quote a flat price. If the scope of the job is unclear, say what the price includes. If the scope may change, say how extras are priced.
What if the job runs long or needs a second trip?
The first estimate is rarely the final cost. Take the faucet fix above: if the job takes 2.5 hours instead of 1.5, labor rises by $30 and the true cost goes from $99 to $129. At the $165 price, profit falls from $66 to $36, which is about 21.8% margin instead of 40%.
A second trip costs money too. If you have to go back for a part, add another 40 minutes of drive time ($20) and fuel ($4). With the second trip, the true cost of the faucet fix becomes $123, and margin at $165 is about 25.5%.
A quote can protect the job's margin in two ways. Quote the time you expect plus a cushion for the usual surprises, or write the scope into the quote, for example "includes up to 2 hours on site; extra time is billed at the hourly rate shown." Quoting a cushion and writing the scope into the quote both beat absorbing the overrun without noticing.
Why the price is higher than your hourly rate
The faucet fix is $165 for 1.5 hours on site, which works out to $110 per on-site hour. The $110 looks high next to a $30 loaded rate, but the gap is not extra pay. The gap covers materials, the drive, fuel, overhead and your margin. If you billed only $30 an hour for the on-site time ($45), you would lose money on the faucet fix once the extra costs came out. The gap between $110 and $30 is why a flat price built from true cost is safer than an hourly rate covering only your wage.
Job types outside the example table
- Two-person jobs. Count each person's hours and drive time. A helper who is not on the main task still adds labor cost.
- Dump fees and disposal. Count dump fees as materials and keep the receipt.
- Jobs you can't scope from a photo. Quote a first visit to inspect the job, or price the visible work and say what the price excludes.
How Nerd in an App prices a general labor job
Nerd in an App takes your hourly rate, materials, drive time and overhead and works out the true cost of the job. Nerd shows the price needed to hit your target margin. You can change the final price, and Nerd recalculates your profit so you can see what the change costs you.
FAQ
What should my hourly rate be for general labor?
Start with the pay you want, then add payroll costs and your share of overhead. The resulting hourly rate is the rate your jobs have to cover.
Do I charge for drive time?
Yes, count drive time as a cost. You pay for the drive time and the fuel whether or not you charge for drive and fuel, so the job price has to cover both.
How do I price a job with an uncertain number of hours?
Estimate on the high side, or scope the job in writing and price extras separately. Don't absorb unknown extra hours without noticing.
Should I mark up materials?
Count materials at your purchase cost, and let your margin cover the rest. Either way, include materials in the true cost before you set the price.
What is a minimum charge for?
A minimum charge stops a short job from losing money. Drive time and setup cost the same on a 30-minute job as on a 3-hour job.
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