How to Price a Service Call: A Guide for Home Services Businesses
A homeowner calls. Their kitchen faucet is leaking. You send a tech. He drives 25 minutes, diagnoses the problem in 10 minutes, replaces a cartridge in 20 minutes, and drives back. The whole thing takes about 90 minutes including travel.
What do you charge?
If you're guessing, you're probably wrong. And "wrong" in this context means one of two things: you're leaving money on the table, or you're losing money on the call and don't realize it.
Pricing a service call isn't about what feels fair or what your competitor charges. It's about what the call actually costs you, plus a margin that makes the work worth doing.
The True Cost of Rolling a Truck
Before you can set a price, you need to know what it costs to have a technician show up at a customer's door. This is your "truck roll" cost, and it's higher than most owners think.
Let's walk through it for a plumbing company with one service tech.
Technician's loaded labor cost:
Start with the tech's hourly wage. Let's say $32/hour. Now add the costs your customer never sees:
- Payroll taxes (Social Security, Medicare, unemployment): ~$2.45/hour
- Workers' compensation insurance: ~$3.20/hour (varies significantly by state and trade)
- Health insurance contribution: ~$3.50/hour (based on $600/month employer portion at 170 hours/month)
- Paid time off accrual: ~$1.85/hour
- Training and continuing education: ~$0.75/hour
- Uniforms and safety equipment: ~$0.40/hour
Loaded labor rate: approximately $44.15/hour
That $32/hour tech actually costs you $44.15/hour. Many owners use the base wage when pricing and wonder why their margins are thin. That $12 gap per hour adds up to over $24,000 a year per technician.
Vehicle costs:
- Truck payment or depreciation: ~$650/month
- Insurance: ~$250/month
- Fuel: ~$400/month (varies by market and drive patterns)
- Maintenance and repairs: ~$200/month
- Tools and equipment replenishment: ~$150/month
Monthly vehicle cost: approximately $1,650, or roughly $9.70/hour (based on 170 billable hours per month)
Overhead allocation:
Your general overhead (office rent, dispatcher, software, phones, insurance, marketing, owner's salary) needs to be covered by service calls too. Take your total monthly overhead and divide by total technician hours.
If your overhead is $12,000/month and you have two techs working 170 hours each (340 total hours), your overhead allocation is $35.30/hour.
Total cost per billable hour: $44.15 + $9.70 + $35.30 = $89.15/hour
That's your cost. Not your price. Your cost. If you charge $89/hour, you break even. You make nothing. The business survives but doesn't grow, can't hire, can't invest, and can't absorb a bad month.
Setting Your Service Call Minimum
With a fully loaded cost of roughly $89/hour, you need to add profit margin. For a healthy home services business, target 15-20% net margin on service work.
At 20% margin: $89.15 / (1 - 0.20) = $111.44/hour
Round that to $115/hour. That's your target billing rate.
Now, your minimum service call fee. Even if a job takes 30 minutes, you've invested drive time, dispatch time, and vehicle costs. Most calls have a minimum time investment of 1-1.5 hours when you include travel.
Minimum service call fee: $115 x 1.5 hours = $172.50
Round to $175 or $179 (psychological pricing that stays under $180).
Is that too high for your market? Maybe. But that's what the math says it costs. If competitors charge $99 for a service call, either they're losing money, their overhead is dramatically lower, or they're making it up on parts markup and upsells.
Flat Rate vs. Time and Materials
This is the pricing model decision that defines how your company operates.
Time and Materials (T&M)
You charge an hourly rate plus the cost of parts with a markup. The customer pays for however long the job takes.
Pros: Simple to implement. Transparent to customers who ask "why did it cost that much?" Low risk that you'll underprice a complex job.
Cons: Punishes efficiency. Your best tech who finishes in 45 minutes earns less than a slower tech who takes 90 minutes. Customers don't know the final price until the work is done, which creates anxiety and sometimes disputes.
Flat Rate
You quote a fixed price for each type of repair, regardless of how long it takes. Replace a kitchen faucet? $385. Install a new toilet? $475. Clear a main line? $295.
Pros: Customers know the price before you start. Fast techs earn the same as slow techs (which rewards skill). You can standardize pricing across your team. It's easier to build a profitable business because you're pricing the job, not the hour.
Cons: Requires a comprehensive price book. You eat the cost when a "simple" job turns complicated. Takes time to build accurate pricing.
My recommendation for any home services business doing more than $500,000 in revenue: flat rate. The upfront work of building a price book pays for itself within the first year through more consistent margins and fewer pricing disputes.
For companies under $500,000, time and materials is fine as long as you're using a fully loaded hourly rate, not just your tech's wage plus a little markup.
The Diagnostic Fee Question
Should you charge a diagnostic fee? How much?
A diagnostic fee (sometimes called a trip charge or service fee) is a fixed amount the customer pays just for you to show up and figure out what's wrong. The repair is quoted separately.
The case for diagnostic fees:
You have real costs associated with arriving at a home. Drive time, fuel, insurance, the tech's time to assess the problem. If the customer decides not to proceed with the repair, you've spent an hour and earned nothing without a diagnostic fee.
Typical diagnostic fees range from $49 to $149 depending on the trade and market. Many companies waive the diagnostic fee if the customer proceeds with the repair.
The "waive with repair" model:
This is the most common approach and the one I recommend. Charge $89-$129 as a diagnostic fee. If the customer approves the repair, apply the diagnostic fee as a credit toward the repair price.
This accomplishes two things. First, it filters out tire-kickers who want free estimates with no intention of hiring you. Second, it creates a psychological incentive for the customer to proceed with the repair ("I've already paid $89, might as well get it fixed").
Track your conversion rate on diagnostic calls. If your techs are diagnosing the problem and only converting 30-40% of calls to repairs, either the pricing is too high or the techs need training on presenting options.
Parts Markup
Parts markup is where a lot of margin lives in home services, and it's where pricing gets the most uncomfortable for owners who worry about being "unfair."
Let me reframe it: you're not just selling a part. You're selling the right part, identified correctly, carried on the truck, installed properly, and guaranteed. That has value beyond the wholesale cost of the component.
Standard parts markups in home services:
- Small parts (under $20 wholesale): 200-300% markup. A $5 valve becomes $15-$20. These are high-frequency, low-dollar items where the handling and inventory cost often exceeds the part cost itself.
- Medium parts ($20-$200 wholesale): 100-150% markup. A $75 water heater element becomes $150-$190.
- Large parts/equipment ($200+ wholesale): 30-60% markup. A $2,500 furnace becomes $3,250-$4,000. The percentage drops, but the dollar margin is substantial.
These markups are industry standard. Your customers aren't comparing your part price to Amazon. They're paying for same-day availability, expert selection, proper installation, and warranty backing.
If you're marking up parts less than 50% on anything, you're probably subsidizing parts with labor, which means your hourly rate looks high while your parts look cheap. That's backwards. Customers are more sensitive to hourly rates than parts prices.
Putting It All Together: A Sample Call
Let's price out that leaking kitchen faucet from the opening.
The call:
- Customer reports leaking faucet
- Dispatch sends tech
- Drive time: 25 minutes each way (50 minutes total)
- Diagnosis: 10 minutes (bad cartridge)
- Repair: 20 minutes
- Total tech time: 80 minutes
Flat rate approach: Your price book says "faucet cartridge replacement" is $245. This was built from: 1.5 hours of loaded labor ($172.50), parts at retail ($35 for the cartridge), plus 20% margin.
The tech completes the job in 80 minutes instead of the estimated 90. The customer pays $245. You make more margin because the tech was efficient. That's the flat rate model rewarding skill.
T&M approach: 1.5 hours at $115/hour = $172.50 + $35 parts = $207.50.
The customer pays less, but you earn less margin. And if the job had taken 2 hours? $230 + parts = $265. The customer might feel nickeled.
Same call. Different pricing model. Different outcome for you and the customer.
Price With Confidence
The biggest pricing mistake in home services isn't charging too much. It's charging too little because you haven't calculated your real costs. When you know your loaded labor rate, your truck roll cost, your overhead allocation, and your target margin, pricing becomes math, not guesswork.
Use our Markup vs. Margin Calculator for Home Services to build your pricing from your actual numbers. Input your costs, set your target margin, and see what your service call fees and parts markup need to be.
Your prices should make you slightly uncomfortable. If they don't, they're probably too low.