Service Pricing Calculator
Undercharging for services is one of the most common mistakes service businesses make - and it is usually because overhead and non-billable time are never factored in. This calculator builds a price from the ground up: labor cost, materials and direct costs, a share of your monthly overhead, and your target profit margin. It tells you what to quote and shows the effective hourly rate so you can sense-check whether it is competitive.
How to use this tool
- 1Enter the hours required to deliver this service and your effective hourly labor cost (your own rate or what you pay staff, including employer taxes and benefits).
- 2Add any direct material costs - physical materials, subcontractor fees, tools, or software licences used specifically for this project.
- 3Enter your total monthly overhead (rent, software, insurance, admin) and how many projects you deliver per month. The calculator allocates a fair share of overhead to this project.
- 4Set your target profit margin as a percentage of the quoted price. Service businesses typically target 20-40% for standard work; specialist or high-demand services can sustain more.
- 5Read the recommended quote, total cost, profit amount, and effective hourly rate. Adjust any input to model different scenarios.
Formula used
Example
Hours: 12. Hourly labor cost: 35 (freelancer's own rate). Materials: 0. Monthly overhead: 800 (software, workspace, insurance). Projects/month: 4. Overhead per project: 200. Total cost: (12 x 35) + 200 = 620. Target margin: 30%. Recommended price = 620 / 0.70 = 886. Profit: 266. Effective hourly rate: 73.80.
Hours: 3 (2 staff x 1.5h each). Hourly labor cost: 18 per hour per person = 54 total labor. Cleaning supplies: 12. Monthly overhead: 1,200. Projects/month: 40. Overhead per project: 30. Total cost: 54 + 12 + 30 = 96. Target margin: 25%. Recommended price = 96 / 0.75 = 128. Profit: 32. Effective hourly rate (3h): 42.67.
Common use cases
- Freelancers and consultants building a quote for a specific project and wanting to ensure it is profitable
- Service businesses setting a standard price list based on real cost and margin data
- Agencies calculating the minimum billable project fee after staff time and overhead are covered
- Tradespeople (plumbers, electricians, builders) pricing a job including labor, materials, and van running costs
- Personal service businesses (photographers, tutors, coaches) setting hourly or project rates that reflect their actual costs
Common mistakes
- Forgetting overhead - rent, insurance, software, and admin time are real costs that must be recovered from project fees, not absorbed as losses.
- Using gross pay as the labor cost - the true cost of an employee includes employer payroll taxes, pension contributions, and benefits, which typically add 20-30% on top of gross pay.
- Setting margin too low for one-off projects - a regular client with guaranteed volume can sustain a lower margin than a new client whose project carries higher risk and setup time.
- Confusing margin and markup - a 25% margin on a 100 cost project means a price of 133, not 125. This calculator uses margin (profit as a % of price), not markup.
Frequently asked questions
What is a good profit margin for service businesses?
It depends heavily on the service type and market. Consulting and professional services typically target 20-40% gross margin after direct labor and materials. High-skill specialist services (legal, financial advisory, niche tech) can sustain 40-60%. Commodity services (cleaning, basic trades) operate at 10-25%. The right margin is one that, after covering overhead and taxes, leaves a viable net income for the business owner.
What should I include in overhead?
Include all business costs that are not tied to a specific project: rent or home-office allocation, software subscriptions, insurance, phone and internet, marketing spend, accounting fees, vehicle running costs if used across multiple clients, and any paid admin or management time. Do not include direct project costs here - those go in the materials field.
What hourly labor cost should I enter?
For your own time as a solo operator, enter the minimum hourly rate you need to earn to cover your personal living costs and a business buffer - or your market rate if higher. For employees, enter their gross hourly rate plus employer contributions (typically gross x 1.2 to 1.3 to account for payroll tax, pension, and benefits).
Is my data stored or uploaded?
No. All calculations run in your browser. Nothing is sent to any server. Refresh the page and all inputs are cleared.
How is overhead allocated per project?
The calculator divides your monthly overhead equally across the number of projects you deliver per month. If overhead is 1,200 and you do 10 projects, each project absorbs 120. For projects of very different sizes or durations, you may want to allocate overhead by hours instead - divide monthly overhead by total billable hours per month, then multiply by this project's hours.
Can I use this for recurring retainers?
Yes. For a monthly retainer, enter the total hours per month, the labor cost, materials, and your full monthly overhead (since the retainer is your only project). The result is the minimum monthly retainer fee at your target margin. If you have multiple retainer clients, enter each separately and allocate overhead proportionally.
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