Service Pricing Calculator
Sets a service price for a target margin, shows the hourly rate you must charge and the profit each job makes.
Recent
Formula
How the calculation works
The price divides the job cost by one minus the margin, because the margin is a share of the price the client pays rather than a mark up on cost.
Dividing that price by the hours the job takes gives the hourly rate to quote, and the profit is the price minus the cost.
A job costing 8,000 taka at a 20 percent margin prices at 10,000 taka, which over 10 hours is 1,000 taka an hour and leaves 2,000 taka of profit.
Common mistakes
- Adding the margin as a percentage of cost instead of price underprices the service and shrinks the profit you planned.
- Forgetting to account for non billable hours such as admin and travel makes the hourly rate look higher than the real return.
When to use it
- Use it to quote a client price that actually contains the margin you want instead of adding it on by habit.
- Use it to work out the hourly rate to quote for a project once you know the cost and the hours involved.
Worked example
A job costing 8,000 taka at a 20 percent margin prices at 10,000 taka, which over 10 hours is 1,000 taka an hour and 2,000 taka of profit.
Common questions
Why divide the cost by one minus the margin?
Margin is a share of the selling price, so dividing the cost by one minus the margin builds the correct price, while simply adding a percentage to cost would leave the price too low.
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