Pricing & Margin

Cost-plus is a floor. Value-based is the ceiling.

Most home service shops cost-plus everything. They leave 30 to 50% margin on the table every time a job has real stakes.

Two methods

Two ways to set a price.

Cost-plus

Add up labor, materials, equipment, overhead. Tack on a target margin. That’s your price. Predictable. Defensible. Repeatable.

Value-based

Price the outcome the customer is buying. The dollar value of the problem you’re solving, not the dollar cost of solving it.

Example one

Routine pruning. Cost-plus wins.

A $400 tree pruning costs you $180 to deliver. Cost-plus at 50% margin gets you to $360. The customer is shopping three quotes. Outcome value is low. Trying to charge $700 just loses the job to a competitor who priced it like a normal pruning.

When scope is routine and the customer is comparing apples to apples, cost-plus is the right tool.

Example two

60-ft pine, 8 ft from the roof, storm warning. Value wins.

Cost to deliver: $1,400. Cost-plus at 50% margin: $2,800. Value to the homeowner: roughly $30k of roof damage avoided. A $4,500 price is still a no-brainer for them, and it nearly doubles your gross margin on the job. Same crew, same truck, same day, twice the profit.

The bottom line

Use cost-plus by default. Use value-based when the stakes earn it.

Every emergency, every high-stakes outcome job, every job with no real comparison. Price the value, not the hours.