By QuoteIron TeamUpdated 11 min read
Key takeaways
- Labor rate =(take-home + overhead) ÷ realistic billable hours. Illustration: ($55,000 + $9,000) ÷ 900 = $71.11, rounded up to $75/hour.
- Mark materials up as their own line (25% and 30% are common starting points). Published service-call fees cluster around $75 to $150.
- Worked example: 0.75 h × $75 plus a $16 part × 1.30 is $77.05, rounded to $80, with the $85 service-call fee credited when the customer proceeds.
Related: Flat rate pricing for contractors: how it works and how to set it · How much should a handyman charge per hour · How to build a flat-rate price book · free book builder · handyman price book
The Three Numbers You Need Before Your First Quote
Every price you say out loud is built from the same three inputs.
- Labor rate — what you charge per hour of work, built from what you need to earn and how many hours you can bill, not your calendar.
- Materials markup — a percentage added to what parts cost you, kept as a separate line from labor so raising one number doesn't force you to re-price the other.
- Service-call fee — a flat charge for showing up and diagnosing the problem, so a "just looking" call and a wasted trip aren't unpaid work.
Skip any one of the three and the gap shows up somewhere: skip the labor-rate math and you guess low under pressure; skip the markup and materials quietly eat your profit; skip the service-call fee and every no-sale diagnosis is time you gave away for free.
Your Labor Rate: From Take-Home Income to an Hourly Number
Your labor rate is not your old hourly wage. It's every dollar the business needs per hour you actually bill, to pay you and keep the truck running.
Take-home income you actually want — not revenue, the number that lands in your account after the business pays its own bills. Pick a real target for your first year, not an aspirational one.
Annual overhead — insurance, tools, vehicle costs, licenses, phone, basic marketing — add it up as a yearly number, separate from what you want to take home.
Realistic billable hours — this is where new tradesmen most often overshoot. A general contractor rate calculator from Housecall Pro puts it plainly: "Most independent contractors are only billable for 60–70% of their working hours," which turns a 40-hour week into roughly 24–28 billable hours (source). In your first year, expect the low end of that range or below it, while the client list fills.
Add your take-home target to your annual overhead, divide by your realistic billable hours, and you have a floor. It's a floor, not a final answer — check it against what other solo operators in your trade charge before you quote it. As one electrical-contractor pricing guide puts it, fully burdened labor rates in the trade commonly run "$85–150 per hour" (source); if your math lands far outside that range, recheck your inputs rather than splitting the difference on the job in front of you.
Illustrative only, not a recommendation: a new solo tradesman targeting $55,000 take-home in year one, carrying $9,000 in annual overhead (insurance, tools, an older work truck, a phone line, basic licensing), and realistically billing 900 hours that first year, deliberately conservative while the client list fills, lands at ($55,000 + $9,000) ÷ 900 = $71.11/hour. Rounded up, that's $75/hour, before checking it against what other solo operators in his trade and area charge.
Materials Markup: Keep Parts and Labor Separate
Price materials as their own line, marked up over what you paid, never bundled into labor. A flat markup (25% or 30% are common starting points) is easy to apply and easy to explain. A supplier price increase then touches only the materials line.
The Service-Call Fee: Getting Paid to Show Up
New tradesmen skip this fee most often, and it costs them most in year one. A service-call fee (also called a trip charge or diagnostic fee) covers the drive time and diagnosis whether or not the customer says yes to the repair.
Published ranges cluster tightly: ServiceTitan's own guidance states "diagnostic fees vary shop to shop, but a typical range is $75 to $150" (source), and the electrical-contractor pricing guide cited above recommends the same "$75–$150" band for a flat diagnostic/trip fee before presenting flat-rate repair options (source). FieldEdge frames the same fee structurally rather than by price: charge for "the travel to the customer's house and the first 15 minutes on the job," so the clock on paid diagnosis starts the moment you arrive (source).
The common, customer-friendly practice: if the customer approves the repair, credit the service-call fee toward the job total instead of charging both in full. It softens the ask at the door and still means a diagnosis that doesn't turn into work was never unpaid.
Hourly vs. Flat Rate: Which Should a Beginner Actually Use
Neither one exclusively. Housecall Pro's HVAC pricing guide splits it by predictability: flat-rate for "standard repairs, tune-ups, and common replacements" where materials and labor are known upfront, and hourly or time-and-materials for "diagnostic and troubleshooting calls" where the issue is unclear before you look at it (source). The electrical pricing guide above describes the same split as a hybrid: "charge a flat diagnostic/trip fee ($75–$150)... then present flat rate options for the repair" (source).
For a beginner, the hybrid is the safer start. Charge the service-call fee to walk in and diagnose. Once you know what the job needs, quote it flat. Fall back to hourly or time-and-materials only where even you don't know the scope; guessing a flat number on an unknown job is how new tradesmen eat the difference.
A Worked Example: Pricing Your First Real Job
Take the labor rate from the illustration above — $75/hour — a 30% materials markup, and an $85 service-call fee. A customer calls about a dead kitchen outlet.
Illustrative only, not a recommendation: you arrive, diagnose a failed GFCI receptacle in twenty minutes, and the fix is a straightforward swap: 45 minutes of labor and a receptacle that costs you $16. Labor: 0.75 hours × $75 = $56.25. Materials: $16 × 1.30 = $20.80. Job total: $77.05. Round up to $80, and since the customer is proceeding with the repair, the $85 service-call fee is credited toward it rather than charged on top — so the number you say out loud is $80, not $165. If the diagnosis had turned up nothing repairable, or the customer had declined the fix, the $85 service-call fee is what you'd charge for the visit, full stop — not zero.
When Not to Flat-Rate a Job
Flat rate fits a job you've done enough times to know its shape. It's the wrong tool for anything new on your truck: a full rewire, a repipe, fire or water damage, anything where the scope depends on what you find once the wall is open. Quoting those flat is a guess wearing a firm number. Price them hourly or time-and-materials, with your judgment on the day. As you repeat a job type, it graduates to a flat template.
Common Pricing Mistakes New Tradesmen Make
Quoting off a competitor's number instead of your own costs. Someone else's price reflects their overhead, billable hours and market, not yours. Use competitor pricing as a sanity check, never as the starting formula.
Forgetting the service-call fee entirely. Every zero-dollar "just looking" diagnosis is real drive time and labor given away, and the jobs that do close have to quietly cover it.
Counting calendar hours as billable hours. Forty hours on your calendar is not forty billable hours. Budget for the lower end of realistic ranges until your client list is full.
Flat-rating a job you've never done before. The first time is not the time to guess a firm number. Price it hourly or time-and-materials once, learn what it actually took, then template it for next time.
The same three-number engine runs QuoteIron's 1100+ job flat-rate templates for electricians, plumbers, HVAC, handyman, and ten other trades. For the fuller derivation, see How to Build a Flat-Rate Price Book.
