How to Price Electrical Work

Your wage is not your billing rate

A tech who earns an hourly wage costs you more than that wage, and a truck that spends the day driving, loading and doing paperwork bills far fewer hours than it is paid for. Pricing at the wage, or at the wage plus a guess, is how a shop stays busy and still loses money.

Three things sit between the wage and the rate. Labor burden is what an employee costs on top of the wage: employer payroll taxes, workers' compensation, insurance, benefits and paid time off. Overhead is what the business costs whether or not anyone is on a job: insurance, vehicle, tools, license, office, phone, marketing, accounting. Unbillable time is everything else: travel, supply runs, estimating, callbacks. Overhead is spread over the hours you can actually bill, not the hours on the clock.

From wage to break-even rate

The electrician rate calculator does this arithmetic with four steps. Use your own payroll and insurance numbers; the ones below are example inputs only.

wage with burden = wage x (100 + burden %) / 100
overhead per hour = yearly overhead / (billable days x hours per day x billable techs)
break-even rate = wage with burden + overhead per hour
target rate = break-even rate / (1 - target margin)

Break-even pays every cost and leaves nothing for you. The target rate is higher because the profit margin is a share of the price, so the break-even rate is divided by one minus the margin, not multiplied by one plus it. The example has $76,489.00 of overhead over 4 items; yours has more lines, and the overhead rows start empty in the calculator for that reason. A second billable tech spreads the same overhead over twice the hours.

The burden percentage is the number most worth checking. Pull last year's payroll taxes, workers' comp and benefits and divide by wages paid. The 50% default is a forum sample.

Markup versus margin on materials

Markup is a percentage of your cost. Margin is a percentage of the price. They are not the same number: a 50% markup on a $100.00 cost sells at $150.00, which is a one-third margin. If you want a given margin, divide cost by one minus the margin; if you quote a markup, know the margin it produces.

Materials are usually priced as cost plus a markup that gets smaller as the cost goes up, because a percentage that suits a $5 fitting is too much on a $3,000 service gear order. The quote engine uses four tiers by default and applies the tier the line's cost falls in to the whole line.

Copper moves. When a line is mostly wire, price it from an index instead of a stale supplier sheet: the unit cost is the base cost times the current index divided by the base index. With example indices of 100 and 110, a $200.00 unit goes to $220.00. Reprice before you send the quote, and state how long the price holds.

From an assembly to a line price

An assembly is a job unit with its materials and labor minutes defined once, such as "two 20 amp circuits". Pricing it is mechanical: mark up the materials, add contingency on the materials price, price the labor minutes at the target rate, add the trip if you charge one, add any flat fee, then add permits at cost. If the subtotal is under your minimum charge, the minimum charge applies.

Here is the example job: materials costing $142.00, 180 minutes of labor, a $95.00 permit passed through at cost, and a trip. The rate is the target rate from above, and the markup settings are the engine defaults (10% contingency on materials, a $15.00 misc fee, a 30-minute trip).

Now a small one: replace one switch, $12.00 of material, 20 minutes, no trip. The parts add up to less than the $576.53 minimum charge, so the engine adds $487.09 and the quote comes to $576.53. Set a minimum for this reason: on a small call, driving and setup take much of the time, and the minutes on the job do not capture them.

labor price = minutes x hourly rate / 60
total = materials sell + contingency + labor + trip + misc fee + top-up to minimum + permits

What a written quote should say

A number alone invites an argument later. A quote that works for both sides states:

• Scope: what you will do, where, and to what standard, in plain words the customer can check.
• Price: the total, and whether it is fixed or time and materials. Show line items if the customer will compare quotes.
• Exclusions: what is not included, such as drywall repair, painting, trenching, panel upgrades the inspector may require, or hidden conditions.
• Permits and inspections: who pulls them and whether the fee is in the price.
• Validity: how many days the price holds, especially when materials move.
• Payment terms and acceptance: deposit, when the balance is due, and how the customer says yes (signature or reply).
• Change orders: how added work is priced and approved before you do it.

Check the price against the rate before you send it. If a quote total comes out under what the cost basis plus your target margin requires, you are discounting, so make that a decision and not an accident.