Pricing & Profitability
Build a price from costs, distinguish margin from markup and test whether sales can cover overhead.
topicStart with the decision
A price can cover the materials on a job and still leave too little to pay for the business. Start by deciding which costs belong in the calculation, then check the margin, sales volume and payment timing separately.
Build the price
Define the work, include delivery costs and allow for overhead.
Check the percentage
Margin uses selling price; markup uses cost. The percentages are not interchangeable.
Test the economics
Check what remains for fixed costs and what remains after them.
Apply it to your work
Follow a complete cost-to-price example, then test an overrun.
Questions this topic covers
How should I allocate overhead?How much extra work offsets a discount?How do I price a small plumbing callout?How do I allow for support in a retainer?How do I quote extra scope?How does the service mix change break-even?Should I use fixed-price or hourly billing?Examples use hypothetical figures with checked arithmetic. Read the methods and limits.
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Questions and worked answers
Guides and examples
How to allocate overhead to service jobs without counting it twice
Choose an overhead cost pool and allocation base, calculate a recovery rate and test what happens when fewer hours are billed.
How AskToBot checks business calculations
Understand the scope of our business formulas, hypothetical examples, arithmetic checks, references and corrections process.
HVAC installation pricing: a worked quote and overrun example
Build a hypothetical installation quote from equipment, crew hours, consumables and overhead, then test extra labour and the deposit gap.
How to calculate break-even when you sell several services
Use weighted contribution to calculate break-even across a service mix, then test a shift in demand and available capacity.
Plumbing callout pricing: account for travel, diagnosis and repair time
Work through the cost of a short plumbing visit and see why billing only hands-on repair time can understate the cost of the booking.
How to price a scope change without losing the original margin
Cost extra work, check its effect on the original quote and account for delays, revisions and approval before starting.
How to price a service job: costs, margin and cash timing
Build a service quote from delivery costs and overhead, calculate a target margin, and test an overrun before checking payment timing.
Software agency retainers: price delivery, support and scope changes
Calculate a monthly retainer from delivery time, support, licences and overhead, then test extra requests and a client-specific software fee.
Key concepts
Contribution margin vs profit: what a sale actually covers
See how contribution covers fixed costs, calculate break-even volume and understand why a profitable-looking job does not guarantee a profitable month.
Fixed price versus hourly billing: compare risk and revenue
Compare fixed and hourly billing using the same scope, actual hours and cost base, with examples of how an overrun changes margin.
Margin vs markup: the same profit, different percentages
Compare margin and markup using one cost-and-price example, a conversion table and the formulas for finding a selling price.
