Your job inputs

Labor hours

hrs

Loaded labor rate

Loaded rate = wage + payroll taxes + workers’ comp + benefits. For a $30/hr employee, loaded is typically $42-55/hr.

Materials cost

Total materials before any markup. Some trades mark materials up separately (see Materials Markup section below).

Materials markup

Standard residential is 15-25% on top of materials cost. Specialty / hard-to-source items can warrant 50%+.

Overhead percent

Office, vehicles, insurance, software, marketing — spread over your direct costs. Most small trades run 15-25%.

Target profit margin

Profit ON TOP of all costs — this is what goes into your bank account, not what pays the bills. Target 10-20% for sustainable growth.

Quote price

$1,684

All-in price to put on the customer’s estimate.

Total cost to you

$1,464

Profit on this job

$220

Effective hourly rate

$105/hr

Margin

13.1%

How it adds up

Labor cost$880

Materials (with markup)$540

+ Overhead allocation$284

+ Target profit$220

Quote price$1,924

Job costing in 4 buckets

Every job has the same four cost buckets. Most small trades remember the first two and forget the second two — which is why they wonder why they're "busy but broke."

1. Direct labor — loaded hourly rate × hours. Loaded means wage + payroll taxes + workers’ comp + benefits, not just the take-home wage.
2. Materials — cost + markup. The markup pays for sourcing time, returns, breakage, and inventory carrying cost.
3. Overhead — office rent, vehicles, insurance, software, marketing, owner’s admin time. Spread over every job as a percentage of direct costs.
4. Profit — what the business needs to keep growing. NOT what pays the owner’s salary (that’s in labor or overhead). Profit is reinvestment, savings, and bonuses.

Loaded labor rate — what it actually is

If you pay a tech $30/hour cash, your real cost is closer to $45-55/hour. Add:

Payroll taxes (employer portion of FICA, FUTA, SUTA): ~10% of wage
Workers’ comp insurance: 5-15% depending on trade (roofing & HVAC are the high end)
Liability + auto insurance allocation: 3-8%
Benefits (if any — health, retirement match, vacation): 10-25%
Vehicles, fuel, tools allocated to that tech: 5-15%

For a typical $30/hr W-2 tech: loaded cost is $42-55/hr. For a $50/hr tech: loaded cost is $70-90/hr. Always quote off loaded cost, never wage.

Overhead allocation

Overhead is "the stuff you pay for whether or not the job happens." Easiest way to allocate it: total annual overhead ÷ total annual revenue = overhead percent. Apply that percent to direct costs on each job.

Example: $80,000 annual overhead, $400,000 annual revenue = 20% overhead rate. A job with $1,000 in direct costs gets $200 added for overhead allocation.

The full formula

direct_cost = (labor_hrs × labor_rate) + (materials × (1 + material_markup))
overhead_amt = direct_cost × overhead_pct
total_cost = direct_cost + overhead_amt
profit_amt = total_cost × profit_margin ÷ (1 − profit_margin)
quote_price = total_cost + profit_amt

Why your quotes have been too low

Most small trades quote (labor × rate) + (materials × markup) and call it done. That covers buckets 1 and 2 but not 3 and 4. On a $1,000 direct-cost job, you’ve undercut yourself by $400+ in overhead and profit — that’s the money you needed to pay the office staff, fuel the truck, and keep the lights on.

Use this calculator before sending every estimate. Want to send the polished doc with line items? See our free invoice generator or Operaite’s proposal feature.

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