The anatomy of a price

Ask ten independent pros what a job "costs" and most will add up materials and labor. That answer is why so many busy businesses lose money: it counts what the job consumes and forgets what the business consumes.

Four layers, one price

Every honest price has four layers:

• Materials — what you buy for this job.
• Labor — the hours this job takes, priced at what those hours cost you (wages or your own pay, plus taxes and insurance riding on them).
• Overhead — this job's share of the costs that exist whether or not you work today: rent, the truck, insurance, tools wearing out.
• Profit — what the business keeps after everything is paid. Not your salary — that was labor. Profit is the reward for risk, the fund for slow months, the money that lets the business grow.

The two everyone forgets

Materials and labor are visible — you write checks for them per job. The last two layers are invisible on any single job, and that is exactly why they get skipped. A price that covers only materials and labor isn't a price; it's a donation with extra steps.

If markup and margin are new words to you, take the ten-minute detour through Markup vs. margin first — this course assumes that lesson and builds up from it. The one-line recap: margin is profit as a share of the price, and to hit a target margin you divide by (1 − margin), never multiply by it.

Cost is a fact, price is a decision

The bottom three layers of the bar are facts you can compute — and the next two lessons compute the sneaky one, overhead, down to the hour. The top layer is a decision you make on purpose. The whole course is about making that decision with the facts in view, and its finale — the Estimate & Invoice Studio — is where the layers become a document a client signs.

What's ahead

Module by module: what a job really costs (this one), how profit responds to pricing moves, why cash and profit live on different calendars, and what money itself costs when time gets involved. Real numbers all the way — the same small shop, so the figures carry from lesson to lesson.