How to price electrical work: labor, markup and profit

Ask ten electricians how they set a price and most will give some version of the same answer: "I charge about what everybody else around here charges." That is not pricing. That is copying, and it is the single biggest reason skilled electrical shops stay busy for years and still never build any real money. This guide is for the owner of a 1 to 15 tech electrical business who wants to price from cost and margin instead of from the guy down the road. No code lookups, no exam material, just the money math that decides whether your season ends in the black.

Why most electricians underprice

Underpricing rarely comes from greed's opposite. It comes from three habits that feel responsible in the moment:

• Charging the market rate. The market rate is a rumor. It floats around trade groups and customer complaints, and it is almost always quoted by people who do not actually know their own cost per hour. Matching it guarantees nothing about your profit.
• Pricing off the wage, not the true cost. A tech you pay $32 an hour does not cost you $32 an hour. Once you add payroll taxes, workers comp, insurance, the truck, fuel, phone, and every hour that tech is on the clock but not billing, the real number is a lot higher. Price off the wage and you lose money on every hour you sell.
• Forgetting overhead entirely. Rent, software, licensing, the office phone, the bookkeeper, advertising, and the shop van do not appear on any one invoice, so they get left out of pricing. They still have to be paid. If they are not in your price, they come straight out of your profit.

The fix is not to guess higher. It is to build the price from the parts you can actually measure, then check the market only as a sanity check at the end.

The pricing formula chain

Every profitable electrical price is assembled from four things in order: a burdened labor rate, material cost plus markup, overhead recovery, and a target net margin. Build them one at a time.

1. Burdened (loaded) labor rate

Your burdened labor rate is what one field hour actually costs you before you have made a dime. Start with the wage, then add everything that rides on top of employing that person:

• Base wage
• Payroll taxes (the employer side of Social Security, Medicare, unemployment)
• Workers compensation insurance, which for electrical trades is commonly cited as a meaningful percentage of payroll and varies widely by state and experience rating
• Benefits you pay: health contribution, paid time off, any retirement match
• Vehicle, fuel, phone, and tools tied to that tech

Now the step almost everyone skips. Divide that fully loaded annual cost by billable hours, not paid hours. A tech is paid for roughly 2,080 hours a year, but a large share of those hours are drive time, shop time, callbacks, training, vacation, and slow days. Many small shops find that only somewhere in the ballpark of 60 to 70 percent of paid hours actually get billed, though this varies widely by how you schedule and dispatch. If you divide by paid hours instead of billable hours, your rate is understated from the first line, and every job inherits the gap.

That $70 is not your price. It is the cost you must clear before overhead and profit are even in the room. Every figure here is illustrative and varies widely by market, so run it on your own books.

2. Material cost plus markup

Wire, breakers, panels, devices, fittings, and fixtures cost you money, and moving them is not free either. You stock them, front the cash, warranty them, and drive to get them. Marking material up is not gouging, it is recovering the real cost of supplying parts and carrying risk. Marking material up two times cost (or more on small, high-handling items) is a commonly cited range for the trades, but the right number is the one that covers your handling and shrink, not a figure copied from a forum.

3. Overhead recovery

Overhead is every cost that keeps the doors open but does not attach to a single job: office rent, software, insurance, licensing, advertising, admin wages, the shop van. Total it for the year, then spread it across your billable hours the same way you spread labor. That per hour overhead number gets added on top of your burdened labor cost so that each hour you sell carries its fair share of running the business.

4. Target net margin

Once cost and overhead are covered, profit is what is left, and it should be a number you chose on purpose, not an accident. Decide the net margin you want the business to earn and add it deliberately as the last step. Profit is a line you plan, not the leftovers you hope for.

Markup vs margin: the mistake that quietly bleeds you

This trips up more owners than any other single number. Markup and margin are not the same thing, and confusing them means you think you are making more than you are. Marking a job up 30 percent does not give you a 30 percent margin, it gives you a margin closer to 23 percent, because markup is figured on cost while margin is figured on the price. Apply a 20 percent markup thinking it is your profit and your real margin is only about 17 percent. Over a year of jobs, that gap is the difference between a healthy shop and a stressed one.

Do not do this in your head on a driveway. We built a markup and margin calculator that converts between the two so you set the price that actually delivers the profit you intended.

Flat rate vs hourly for electrical work

Once you know your cost per hour, you still have to decide how to present the price. Hourly billing charges actual time plus marked-up material, which fits open-ended diagnostic and troubleshooting work where the scope is genuinely unknown. Flat rate gives the customer one fixed price per task built from your averages, which most residential electrical customers strongly prefer because it removes the anxiety of a running meter, and it stops rewarding your slowest tech and penalizing your fastest. The deeper tradeoff, plus how to price each task, is in our flat rate vs hourly electrical breakdown. For most shops the answer is a blend: flat rate for standard tasks, hourly for true unknowns.

Build a flat-rate price book so pricing stops being a guess

The reason flat rate feels risky is that most shops never write theirs down. They reprice every panel swap and every recessed can from scratch, in the driveway, under pressure, and the numbers drift all over the place depending on the tech and the mood. A flat-rate price book fixes that. You calculate each common task once, carefully, using the formula chain above: burdened labor for the typical hours, material plus markup, overhead, and your target margin baked in. From then on that task has a known, profitable price that every tech quotes the same way.

A price book does three things at once. It makes pricing consistent from job to job and tech to tech. It moves the hard math off the driveway and into a calm moment at the desk. And it lets you raise prices deliberately across the board instead of one nervous quote at a time. This is the backbone of a shop that prices for profit instead of by feel. For the mechanics of assembling and maintaining one, our electrical invoice guide covers how the line items flow from book to bill.