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Service Price Estimator

The Service Price Estimator builds a selling price from direct delivery cost, overhead, and a target profit margin. It first calculates the full cost of the engagement, then solves for the price that leaves the selected percentage of revenue as gross profit.

The calculator is useful for project quotes, packaged services, maintenance visits, and professional engagements where cost-plus pricing alone can produce an unintended margin. It provides a disciplined starting point, but the final price may also depend on customer value, market alternatives, capacity constraints, risk, and contract terms.

Service assumptions

hours
USD
USD
%
%
Result
—
Estimated service price
Full service cost—
Target profit amount—
Equivalent markup on cost—

1. Estimate delivery labor
Enter the hours required and the loaded hourly cost of the people doing the work.

2. Add engagement-specific costs
Include subcontractors, materials, travel, or other direct costs not captured in labor.

3. Allocate overhead
Apply the percentage your business uses to recover shared operating costs.

4. Set the target margin
Enter profit as a percentage of the final selling price, not as a percentage of cost.

5. Assess the proposed price
Compare the result with customer value, competitor positioning, risk, and your available capacity.

Direct cost = Labor hours × Loaded labor rate + Other direct costs
Full cost = Direct cost × (1 + Overhead rate ÷ 100)
Price = Full cost ÷ (1 − Target margin ÷ 100)

Margin is measured against selling price. This differs from markup, which measures profit against cost.

What the result means

The result is the price required to achieve the target margin if the estimated full cost is accurate.

Scope changes, rework, payment risk, and unplanned delays may justify a contingency above the calculated price.

Given: 14 labor hours at $60 per hour, $240 in other direct costs, 18% overhead, and a 30% target margin.

Calculation: Direct cost = 14 × $60 + $240 = $1,080. Full cost = $1,080 × 1.18 = $1,274.40. Price = $1,274.40 ÷ (1 − 0.30) = $1,820.57.

Result: The estimated service price is $1,820.57, producing $546.17 of modeled profit.

The equivalent markup on the $1,274.40 cost base is about 42.9%.

Why divide by one minus the margin?

Because margin is profit divided by selling price. Dividing cost by the remaining revenue percentage solves for the required price.

Can I use wage instead of loaded labor cost?

You can, but the result may understate cost if payroll taxes, benefits, and paid nonworking time are omitted.

Should sales tax be included in the price?

Generally model the pre-tax selling price unless tax is economically borne by the business. Tax treatment depends on jurisdiction and service type.

What if my market will not accept the result?

Revisit scope, delivery method, cost structure, or target margin. Pricing below full cost may be strategic, but the trade-off should be explicit.

How is this different from the markup calculator?

This estimator starts with costs and a target margin to solve for price. The markup calculator evaluates the relationship between an existing cost and selling price.