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Job costing for small trades

Price a job from labor with burden, materials, equipment hours, overhead and margin, and see why a 15 % markup is not a 15 % margin.

Practical guide

By Steven Michael Barber · Published October 10, 2026 · Updated October 29, 2026 · 6 min read

Job costing means adding up what a particular job actually costs you, line by line, so you can price the next one with confidence and see afterward whether this one made money. For a small excavation, grading, concrete, landscaping or remodeling outfit, the work is in being complete: the labor costs more than the wage, the machine costs more than its fuel, and the office, truck and phone have to be paid for by some job. This guide builds a price for one small job from five parts: labor, materials, equipment, overhead and margin.

1. Labor, with burden

An hour of an employee's time costs more than their hourly wage. On top of the wage, an employer pays its share of Social Security and Medicare (7.65 percent combined, IRS Publication 15), federal and state unemployment taxes, workers' compensation insurance, which can be a large share for field trades, and any benefits it provides. Together these are called labor burden; our labor-burden guide builds the figure line by line.

Add those up for a year and divide by the year's wages to get a burden percentage. Your accountant or payroll provider can give you the real figures; the 28 percent used below is only an example, and it is a burden on paid hours. Burdened rate = wage × (1 + burden).

Count the hours honestly: drive time, setup, cleanup and the hour spent waiting for a delivery are all hours someone is paid for.

2. Materials

Materials are usually the easiest line to price, because they come with invoices. Include delivery charges, and allow for waste and overage the way your trade normally does: extra stone for compaction, cut-offs on lumber, a spare bag of mix. Materials you bought for the job and did not use are only free if they really go back on the shelf for the next job.

3. Equipment

Charge each machine to the job at its full cost per operating hour, not its fuel cost. Our guide to machine cost per hour works through a compact track loader: depreciation, insurance and fixed costs, interest, fuel and repairs come to about $37.02 per hour for that example, by the owning-and-operating method the Caterpillar Performance Handbook and the Corps of Engineers' equipment schedule describe. If the operator is already counted in the labor line, use the machine-only rate here so the operator's time is not counted twice.

Count the machine's metered hours on the job, and decide in advance how you handle hauling it to the site, either as a flat mobilization charge or as truck and trailer hours.

4. Overhead

Overhead is everything you pay to stay in business that is not tied to one job: the work truck's insurance, the phone, software, accounting, advertising, office or shop rent, licensing and your own time spent estimating and invoicing. Every job has to carry a share of it, or the year ends short even when every job "made money."

A simple way to spread it is per billable labor hour:

overhead rate = yearly overhead ÷ yearly billable labor hours

Billable hours are the hours actually spent on jobs, not hours paid. If two people are paid for 4,000 hours a year but only 2,400 of those hours land on jobs, use 2,400. The other 1,600 paid hours still cost money: either carry their burdened wages in the overhead figure, or charge labor at the cost per productive hour as the labor-burden guide does, so they are recovered once and not twice. Other businesses spread overhead as a percentage of direct cost instead. Either works if you apply it consistently and check it against your books once a year.

5. Margin, not just markup

Profit is what is left after all the costs above, and it pays for slow months, equipment replacement beyond depreciation, mistakes and growth. Two words get mixed up here:

• Markup is profit as a percentage of cost.
• Margin is profit as a percentage of price.

They are not the same number. To earn a target margin m, price = cost ÷ (1 − m). Adding a markup of the same percentage to cost gives a lower price and a lower margin than intended.

Worked example: regrading and graveling a driveway

Here is a small job with illustrative figures: a two-person crew regrades a driveway, lays fabric and spreads crushed stone with a compact track loader.

Labor. Two workers at 14 hours each is 28 labor hours. At a $24.00 wage with 28 percent burden, the burdened rate is $24.00 × 1.28 = $30.72 per hour. Labor = 28 × $30.72 = $860.16.

Materials. 22 tons of crushed stone at $34 per ton is $748, plus $175 delivery and $120 of geotextile fabric. Materials = $1,043.00.

Equipment. The loader runs 12 metered hours at the $37.02 machine-only rate, since the operator is already in the labor line. Equipment = 12 × $37.02 = $444.24.

Direct cost = $860.16 + $1,043.00 + $444.24 = $2,347.40.

Overhead. Yearly overhead is $48,000, spread over 2,400 billable labor hours, which gives $20.00 per labor hour. This job's 28 labor hours carry 28 × $20.00 = $560.00.

Full cost = $2,347.40 + $560.00 = $2,907.40.

Price at a 15 percent margin = $2,907.40 ÷ (1 − 0.15) = $2,907.40 ÷ 0.85 ≈ $3,420.47. Profit is $3,420.47 − $2,907.40 = $513.07, which is 15 percent of the price and about 17.6 percent of cost.

Compare a 15 percent markup: $2,907.40 × 1.15 ≈ $3,343.51. That leaves $436.11 of profit, which is only about 13.0 percent of the price. On this one job the difference is about $77. Across a year of jobs it adds up.

In practice you would round the bid. What matters is knowing which number the rounding came from.

Close the loop with actuals

An estimate is a prediction. Job costing pays off when you compare it with what actually happened. After the job, record actual labor hours, actual material invoices and actual machine hours next to the estimate. If the crew took 34 hours instead of 28, that is 6 × ($30.72 + $20.00) = $304.32 of the $513.07 profit gone, and the next estimate for similar work should allow for it.

Over a season, the pattern matters more than any one job. Jobs that keep running over in the same line tell you where your estimates are off. Overhead that comes in higher than the rate you have been charging tells you to raise it.

Keeping the records

A notebook works, but a spreadsheet makes the estimate-against-actual comparison easy. Our Sheets templates for small trades include a Job-Cost Tracker that compares estimate and actual for labor, fuel, materials and equipment hours on every job, and an Equipment Hours & Service Log for cost per hour. They are on sale now as one-time purchases, and our free equipment cost per hour calculator gives you the machine rate for the equipment line.

The workbooks and this guide are record-keeping and estimating tools. They are not tax or accounting advice; for payroll taxes and how to treat equipment on your tax return, ask a tax professional.