How to price a job: cost, overhead and profit

Price a job as direct cost plus overhead plus profit. Direct cost is materials, labor and job extras. Overhead is your yearly business costs spread over the hours you can bill. Profit is added on top. Work out your real hourly rate once, then use it on every quote.

Updated October 30, 2026

The formula

Price = direct cost + overhead + profit (sales tax goes on top).

• Direct cost: what this job alone costs you. Materials with waste, labor hours at your real cost per hour, and extras like disposal, permits, rentals and delivery.
• Overhead: what it costs to run the business whether you work or not. Vehicle, insurance, tools, phone, software, office, accounting, advertising and licenses.
• Profit: what the business keeps after everyone and everything is paid. It pays for growth, slow months and new equipment.

Step 1: know your billable hours

A full-time year is about 2,000 hours. But driving, quoting, buying materials, weather days and paperwork are not paid by a customer. Many trades bill 1,200 to 1,600 hours a year per person. Use your own number from last year if you have it.

A quick way to find it: take the hours your customers actually paid for last year, from your invoices or timesheets. If you do not track that, start with 1,400 and check again after three months. Seasonal trades, such as roofing or landscaping in places with cold winters, may bill fewer hours in total and need a higher rate to make up for it.

Step 2: work out overhead per hour

Add up a year of business costs and divide by your billable hours.

Example: $40,000 of yearly overhead ÷ 1,400 billable hours = $28.57 per billable hour. Every hour on a job has to carry that amount, on top of wages.

If you have a crew, use the billable hours of the whole crew, not just your own. More billable hours spread the same overhead thinner, which is one reason a busy crew can charge less per hour and still earn more.

Step 3: set your hourly rate

If you work alone, your rate needs to cover the pay you want, your overhead and a profit.

Example: you want $60,000 a year, overhead is $25,000, you bill 1,400 hours, and you want 15% profit.

• ($60,000 + $25,000) ÷ 1,400 = $60.71 an hour
• × 1.15 for profit = $69.82 an hour, or $558.57 for an 8-hour day

Try your own numbers in the free contractor hourly rate calculator.

For employees, use their full cost per hour, not just their wage: add payroll taxes, benefits, paid time off and any other cost of employing them. These differ by country.

Step 4: price the job

Example numbers only. Prices vary by region; always check local costs.

Some contractors put overhead and profit together as one markup on cost. That works, but check that the markup really gives you the margin you need. See markup vs margin.

Common pricing mistakes

• Pricing labor at the wage only, not the full cost of an hour.
• Assuming 2,000 billable hours a year.
• Forgetting waste, disposal, permits and travel.
• Using last year's material prices.
• Copying a competitor's price without knowing their costs.
• Never checking after the job whether the hours matched the quote.
• Dropping the price to win a job without knowing what margin is left.

The fix for most of these is the same: write your numbers down once (pay rates, overhead per hour, profit, crew pace for your common tasks), use them on every quote, and update them every few months.

Check your price, then track it

Before you send, run the job through a free quote calculator for your trade as a sanity check. After the job, compare quoted hours and materials with what really happened, and fix your pace and prices for next time.

In Vorkeon you set your pay rates, overhead and profit once, and every quote uses them. When the AI builds a quote, it asks for your crew's real pace and remembers it. On the Crew plan and up, job costing shows quoted vs actual for each job. See pricing.

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Contractor hourly rate calculatorMarkup vs marginHow to write a quoteQuote calculatorsPricing