If you’ve been running a field service business for a while, you’ve probably written more estimates than you can count. And let’s be honest—sometimes it feels like a bit of a guessing game. For smaller jobs, especially ones under $100K, many companies fall into one of two traps when estimating:
- They use flat-rate pricing templates they found online or in some industry guidebook.
- They base their pricing on what competitors are charging, hoping that if everyone else is doing it, it must be right.
But here’s the problem: flat-rate pricing doesn’t reflect your actual costs. And your competitors’ costs aren’t your costs either. Every business has a unique structure—different labor rates, vehicle expenses, material suppliers, and overhead.
If you want every job to be profitable, you need to start with your costs. Every single time.
Understanding the Pitfalls of Flat-Rate Pricing in Small Job Estimates
Flat-rate pricing seems simple: take the type of job, match it to a predetermined price, and call it a day. It feels efficient and predictable, and it’s easy to explain to customers.
But here’s the catch:
- Flat-rate pricing doesn’t account for your unique costs.
- It applies the same markup across all cost categories, which is rarely accurate.
- It assumes every company operates with the same overhead and efficiencies.
Let me break it down: Materials usually have a lower markup because customers can often check the retail cost themselves. Labor, on the other hand, should have a higher markup because it includes not just wages but also insurance, taxes, and downtime between jobs. Vehicles, subcontractors, and equipment each have their own cost structures and risks.
If you’re applying a flat 25% markup across all categories, you’re leaving money on the table in some areas while overcharging in others—and neither of those scenarios is good for business.
How Incorrect Markups Can Lose You Bids
Let me share a quick story from my own experience. For years, we applied a single, flat markup across all cost categories—labor, materials, equipment, everything. On most jobs, it worked well enough, or at least we thought it did.
Then we started bidding on larger water heaters called boilers. These units can cost 10 times more than a standard water heater, and the material cost makes up the majority of the total job cost.
Here’s what happened: Because we were applying the same markup percentage to every cost category, we were overpricing the materials by a huge margin.
For example:
- On a $2,000 water heater, our flat markup strategy might add a reasonable margin.
- On a $20,000 boiler, applying that same percentage markup to the materials made our bid skyrocket.
We were consistently losing every single boiler bid because our price was far above everyone else’s. At first, we thought we were being undercut by lowball competitors, but eventually, we realized the problem was our pricing strategy—not our competitors.
When we adjusted our estimating strategy to break down costs into categories—labor, materials, equipment, etc.—and applied unique markups to each category, everything changed.
- Materials: Lower markup to keep the total material cost competitive.
- Labor: Higher markup to account for the complexity and expertise required.
Suddenly, our estimates were competitive. We started winning bids for boilers, and not because we were cutting margins to the bone—but because our pricing strategy finally reflected the real costs of each category.
It was an expensive lesson, but one that completely changed how we approached estimating from that point forward.
Accurate Cost Breakdown
The best way to build a profitable estimate is to start with your actual costs and break them into clear categories. Every job you estimate should include:- Labor: Wages, taxes, insurance, and any downtime between jobs.
- Materials: The cost of parts and supplies, plus any markup for handling and procurement.
- Vehicles: Fuel, maintenance, and wear and tear per job.
- Equipment: Rental fees, maintenance, or depreciation of tools and machinery.
- Subcontractors: Any outside help hired for specialty tasks.
- Other Costs: Permits, fees, or other unique job-related expenses.
Start Streamlining Your Small Job Estimating with Swivl
This approach—starting with your costs, breaking them down by category, and applying unique markups—is exactly how Swivl is designed to work.Here’s how Swivl simplifies smart estimating:
- Pre-Built for Smart Cost Categories: Swivl’s estimating system is formatted to handle labor, materials, vehicles, equipment, subcontractors, and other costs as separate categories, each with its own markup structure.
- Track Actual Costs After Approval: Once an estimate is approved, Swivl doesn’t stop working. It tracks actual costs as the job progresses, giving you a clear comparison between estimated and actual costs.
- Analytics to Refine Future Estimates: Swivl generates analytics reports to show you where your estimates are spot-on and where you might need to make adjustments.
- AI-Enhanced Estimating (Coming Soon): While many AI estimating tools pull generic flat-rate pricing from a database, Swivl’s upcoming AI feature will format estimates based on your unique cost structure.
- You’ll be able to ask Swivl’s AI to generate an estimate based on your costs.
- You can then “look under the hood” and tweak individual cost categories to fine-tune the numbers.
- Once everything looks good, you’ll generate a polished quote to send to the customer.
Why This Approach Sets You Apart
When you build your estimates based on your unique cost structure, you’re not guessing—you’re building from a solid foundation. This approach has a few major advantages:
- You Know Your Minimum Price: You can confidently say, “This is what it costs me to do this job profitably.”
- You Can Adjust for Different Types of Customers: You’ll know exactly how low you can go for high-volume commercial accounts without losing money.
- You’re Building a Strategy, Not Just Pricing a Job: Estimating based on your costs allows you to price strategically.
Build Estimates That Build Your Business
Every estimate you send out is a reflection of your company. It’s not just a number—it’s a strategy.
- Start with your costs.
- Break them down into categories.
- Apply markups that make sense for each one.
- Know your minimum profitable price.
When you price jobs this way, you’re not just reacting to the market—you’re controlling your business. You’re setting yourself up to take on bigger opportunities, attract better customers, and build a company that’s profitable, predictable, and—if you ever decide to sell it—valuable.
Stop guessing. Start building estimates that work for you.
