A service call should be priced from what one billable hour of your time actually costs, not from what the shop down the road charges. Work out that cost, decide which kind of call fee you are charging and why, and give the customer a price on the phone that says what it buys. Everything below is how to do those three things.
Find your real hourly cost first
Most undercharging starts with one division done wrong: dividing what you need in a year by the hours you are paid for, instead of the hours a customer actually pays for.
A 40 hour week is not 40 billable hours. Driving between calls, picking up parts, writing quotes, returning calls, fixing a callback for free and doing the books all come out of the same week. None of it lands on an invoice, and all of it has to be paid for by the hours that do.
Example: one owner, one truck
These are example numbers. Use your own.
- Pay you want to take home in a year: $70,000
- What the business costs to run in a year (truck, fuel, insurance, tools, phone, software, accountant): $30,000
- Weeks you work: 50
- Hours you are on the clock each week: 40, so 2,000 paid hours a year
- Hours a customer pays for each week: 25, so 1,250 billable hours a year
Total that has to be covered: $70,000 + $30,000 = $100,000.
Divided by paid hours: $100,000 / 2,000 = $50 an hour.
Divided by billable hours: $100,000 / 1,250 = $80 an hour.
The $50 number feels right because it matches a normal week. It is $30 short on every hour you bill. Charge $50 and the year ends $37,500 short of the plan, because 1,250 hours times the $30 gap is $37,500.
$80 is break even. Add the profit you want the business to keep. At 15 percent, $80 times 1.15 is $92 an hour. The hourly rate calculator does this with your own numbers in one screen, and it is worth running twice: once with the billable hours you hope for and once with the ones you really get.
Example: a tech on payroll
The same idea applies to an employee, with one extra step. You pay for every hour they are on the clock, and you also pay costs on top of the wage.
- Wage: $30 an hour for 2,080 hours = $62,400
- What your books show on top of the wage for this tech (payroll taxes, workers comp, benefits, paid time off): say $12,000
- Billable hours this tech produces in a year: 1,400
Labor cost per billable hour: ($62,400 + $12,000) / 1,400 = $53.14.
That is before this tech’s share of the truck, the fuel and your overhead. A $30 tech is not a $30 hour, and not a $45 hour either.
Trip charge, diagnostic fee or minimum charge
These three get used as if they were the same fee. They are not, and each tells the customer something different about what they are paying for.
| Fee | What it covers | What the customer hears |
|---|---|---|
| Trip charge | Getting a truck and a person to the door | “You are paying for me to show up.” |
| Diagnostic fee | Finding out what is wrong and what it will cost to fix | “You are paying for an answer.” |
| Minimum charge | A floor on any visit, often the first hour of work | “Small jobs still cost at least this much.” |
A trip charge is honest about travel, but it is the easiest fee to resent, because the customer sees money for driving and no work. It fits best where distance varies a lot, such as a zone based charge for customers far outside your normal area.
A diagnostic fee is the easiest to defend when the skill is in the finding. A furnace that will not light, a breaker that trips at random, a leak you cannot see. The customer is buying a diagnosis and a price for the repair, and they get both even if they say no.
A minimum charge protects you from the ten minute job that still costs you an hour of the day. Hanging one picture, swapping one outlet cover. It works best when you say what it includes, such as “the first hour on site, and small parts.”
Pick one as your main call fee and describe it the same way every time. Stacking all three on one invoice reads like nickel and diming even when each line is fair.
Price the fee from your hourly cost
Using the owner example above at $92 an hour, suppose a typical call takes 40 minutes of driving round trip, 45 minutes on site to find the problem, and 15 minutes to write it up and talk it through. That is 100 minutes, or 1.67 hours.
1.67 x $92 = $153.64.
A $69 diagnostic fee on that call covers less than half of what the time costs. That gap is either made up in the repair price, on purpose, or it is lost.
Flat rate or time and materials
Flat rate means one price for a defined job, agreed before you start: replace this water heater, install this panel. Time and materials means the customer pays your hourly rate for the time spent plus the parts at your selling price.
Flat rate protects you when you know the work well. If you are fast, you keep the difference, and the customer knows the price before saying yes. The risk is yours: if the job runs long, you eat it. So flat rates need a written scope and a rule for what happens when you open the wall and find something else.
Time and materials protects you when you cannot see the job yet: old houses, intermittent problems, work behind finished surfaces. The risk moves to the customer, which is fair when nobody can know the outcome. The cost is trust, because customers watch the clock.
A practical split for a lot of small shops: flat rate for the repairs you do every week, time and materials for troubleshooting and anything you have not done enough times to price with confidence. Once a time and materials job repeats often enough that you know how long it takes, turn it into a flat price.
Markup and margin on parts
Markup is your profit as a share of what the part cost you. Margin is the same profit as a share of what the customer paid. They are different numbers for the same sale, and mixing them up is a quiet way to lose money.
Example: a $200 part
Mark it up 40 percent:
- Price: $200 x 1.40 = $280
- Profit: $280 minus $200 = $80
- Margin: $80 / $280 = 28.6 percent
Now suppose you wanted a 40 percent margin, meaning you keep 40 cents of every dollar the customer pays for that part:
- Price: $200 / (1 minus 0.40) = $200 / 0.60 = $333.33
- Profit: $333.33 minus $200 = $133.33
- Markup: $133.33 / $200 = 66.7 percent
If your plan says “40 percent on parts” and you meant margin, a 40 percent markup leaves you $53.33 short on this one part. The markup and margin calculator shows both numbers side by side so the one you quote is the one you meant.
What to say when someone asks “how much to come out”
The caller wants a number, and a vague answer sounds like a trap. Give the number, say what it buys, and say what happens next.
For a diagnostic fee:
“Our diagnostic visit is $150. That covers the tech coming out, finding the problem and giving you a price for the repair before any work starts. If you go ahead with the repair today, the $150 comes off the repair price.”
For a minimum charge:
“Our minimum is $140, which covers the first hour on site. Most small jobs like that are done inside the hour. If it runs longer, it is $92 an hour after that, and the tech tells you before going past it.”
If the caller pushes for a repair price over the phone, say you would rather not guess at a number you might have to change, and that the visit is how they get a real one.
When to credit the diagnostic fee toward the repair
Crediting the fee helps close a repair on the same visit. It also costs money, so build it in.
Example: crediting a $150 diagnostic fee
The flat price for a common repair is $640. The diagnosis on that call took the time the $150 was set to cover.
- If you credit the fee, the customer pays $640 in total. You were paid for the diagnosis time out of the repair price, so your $640 has to be high enough to carry it.
- If you do not credit the fee, the customer pays $150 + $640 = $790.
One way to keep the credit honest is to set flat repair prices with the diagnosis already in them, then credit the fee only when the repair is approved on the same visit. The customer who says yes pays one clean number. The customer who says no still pays for the answer they got.
Credit it when the repair is booked on the spot, when the diagnosis was quick because the problem was common, or when you want to win a repair against a competitor who does the same. Do not credit it when the customer takes your diagnosis and price away to shop it, when the approval comes days later and needs a second trip, or when the diagnosis itself took hours. In all of those cases the fee paid for real work that the repair price does not cover.
Write the rule down and use it every time. “Credited toward a repair approved during the same visit” is a sentence your techs can repeat.
