Most small service businesses price by looking at what the competition charges. That works until you find out a job lost money. A better method is cost-plus pricing: work out what the job really costs you, then add the profit you want. This guide shows the formula and a worked example you can copy.
The formula
Price = (labor + supplies) x (1 + overhead %) / (1 – target margin %)
The last step divides by one minus your margin, not multiplies by one plus a markup. That is what keeps your profit a true percentage of the price. If you are unsure of the difference, read markup vs margin first.
Step 1: Labor cost
Multiply the hours the job takes by what an hour of labor costs you. Include loading, driving and cleanup time, not just the time on site. If you work alone, pay yourself an hourly rate; otherwise your profit is just unpaid wages.
Step 2: Supplies and fees
Add products, fuel, dump or disposal fees and anything you buy for the job. Track a typical amount per job type and review it every few months.
Step 3: Overhead
Overhead is the cost of running the business that is not tied to one job: insurance, software, advertising, vehicle wear. Estimate it as a percentage of your direct costs (many small businesses start with 10 to 20 percent and adjust once they see their real numbers).
Step 4: Target margin
Margin is the share of the price you keep as profit. A 35% margin means $35 of every $100 charged is profit.
Worked example: full car detail
| Item | Amount |
|---|---|
| Labor: 4.5 hours x $25 | $112.50 |
| Supplies | $20.00 |
| Direct cost | $132.50 |
| Overhead 15% | $19.88 |
| Total cost | $152.38 |
| Price at 35% margin: $152.38 / 0.65 | $234.43, round to $235 |
| Profit | $82.62 |
These are example numbers. Put in your own rate and costs. For real-world ranges, see our guides on car detailing prices, junk removal cost and dog grooming cost.
Adjust for size and difficulty
A truck takes longer and uses more product than a sedan; a large dog takes longer than a small one. Apply a multiplier to both hours and supplies (for example 1.25x for an SUV) instead of guessing a flat extra charge.
Common mistakes
- Forgetting travel and setup time. A one-hour job is often a two-hour block.
- Confusing markup and margin. A 50% markup is only a 33% margin.
- No minimum charge. Small jobs cost nearly as much to reach as big ones.
- Never updating prices. Review your numbers when supplies, fuel or wages change.
Want this done for you? The Service Business Pricing Calculator Pack (Excel, $19) has these formulas built in for car detailing, junk removal and dog grooming.
This article is general information for planning prices, not tax or legal advice.
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