How to Price Home Services Without Leaving Money on the Table
Learn flat-rate vs. hourly pricing, how to calculate burden rate, and strategies to raise prices without losing customers.
1. Hourly vs. Flat-Rate Pricing
Hourly billing is simple but penalizes efficiency — the faster you work, the less you earn. Flat-rate pricing rewards expertise and gives customers price certainty upfront. Most successful service companies move to flat-rate as they grow. Build a price book with flat rates for common jobs and use hourly only for truly unpredictable work.
2. Calculate Your True Cost Per Hour
Your burden rate is what a technician actually costs you per billable hour, including wages, payroll taxes (7.65% FICA), workers' comp, health insurance, vehicle costs, and training. A tech making $25/hour typically costs $40-55/hour fully loaded. If you're billing at $75/hour, your real margin is $20-35 — not the $50 you might think.
3. Build in Overhead and Profit
Overhead includes rent, office staff, software, marketing, and admin time. Calculate your total monthly overhead and divide by total billable hours to get your overhead cost per hour. Then add your target profit margin. A healthy service business formula: (Labor Burden + Materials + Overhead) / (1 - Target Profit %) = Your Price.
4. Raise Prices Without Losing Customers
Raise prices annually by 3-5% and communicate it as an investment in quality. Give existing customers 30-60 days notice. Lead with added value: better warranties, faster response times, premium materials. The customers you lose to a 5% price increase were almost certainly your least profitable ones.
5. Use Tiered Service Packages
Offer good-better-best options for common jobs. The middle tier should be your target — it anchors the expensive option while making the basic option feel like it's missing something. Include maintenance agreements as a recurring revenue stream that smooths out seasonal dips.
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