Pricing a service call

Most service companies price by copying the company down the road. This guide prices from the cost side up, which is the only way to know whether the copied number works.

The three parts of a price

1. The call-out fee. Covers the drive there and back and the first half hour. Set it from your average travel time, not your shortest.
2. The hourly rate. Covers the technician's cost, the van, the tools, the insurance and the office. Divide the total by billable hours, not by hours worked. They are not the same, and the gap is usually a third.
3. The parts margin. Covers stocking, collecting and being wrong about what was needed. Twenty to thirty percent on trade price is usual.

A worked example

A technician costs 62,000 a year fully loaded, plus 18,000 for the van and tools. They work 1,800 hours and bill 1,250 of them. The hourly rate needs to be 64 just to break even, before profit. Most companies charging 55 in that position believe they are profitable.

The edge of the territory

A job forty minutes away costs an hour and twenty of driving. If the call-out fee assumes twenty minutes, the job lost money before the technician rang the bell. Either the fee scales with distance or the territory shrinks.