What to charge for a callout

The most common pricing mistake in a service business is working out an hourly rate from what you want to earn a year, divided by the hours in a year. It produces a number that looks reasonable and leaves you working constantly for less than you would make employed.

Billable hours are not working hours

A full-time year is about 2,000 hours. You will not bill 2,000.

Quoting, invoicing, chasing payment, buying materials, driving between jobs, answering the phone, bookkeeping, and the hours nobody booked all come out of that. For most one-person service businesses, actual billable hours land between 1,000 and 1,300 a year. Somewhere around 60% is a realistic planning figure, and being new pushes it lower.

So the divisor is not 2,000. It is closer to 1,200.

The costs before you earn anything

Then there is what the business spends whether or not you work.

Vehicle: payment or depreciation, fuel, insurance, maintenance
Tools: replacement and repair, which is a real annual number even in a year you buy nothing big
Insurance: public liability and whatever your trade requires
Phone, software, accountant
Licences, certifications and the training to keep them
Unpaid time: quotes that went nowhere, jobs that overran, the customer who never paid

For a single-van operation, 15,000 to 25,000 a year is a normal range before you have earned a penny.

Working it backwards

Say you want 60,000 to live on, and overheads are 20,000.

The business needs to bring in 80,000. At 1,200 billable hours, that is about 67 an hour.

Now add tax - self-employment tax and income tax together take a substantial bite, and the 60,000 figure was what you wanted to keep. Grossing up for that puts the rate closer to 85 or 90 an hour.

That number tends to surprise people who were charging 45 and wondering why the year felt hard.

Callout fees

A callout fee covers getting there. Travelling to a job, diagnosing it and travelling back is most of a chargeable hour even if the fix takes ten minutes, and if you only charge for the ten minutes you have worked an hour for a fraction of your rate.

A callout fee that covers the first hour, with time after that charged at the hourly rate, is the standard structure and customers understand it. What causes complaints is not the fee - it is finding out about the fee after the visit. Say it when they book.

Fixed prices beat hourly on known work

For work you have done many times, a fixed price is better for both sides. The customer knows what they are paying. You get paid for your efficiency instead of penalised for it - if experience means you do in two hours what takes somebody else four, hourly billing pays you half as much for being better at your job.

Price fixed work from your own records of how long it actually takes, including the parts you forget: getting the tools out, cleaning up, and the drive.

Raising your rate

Most people underprice for years and then try to fix it in one jump. Raise it on new quotes, not on existing customers mid-job. You will lose some price-sensitive enquiries, which is the intended outcome - the ones you lose were the least profitable work you had.

Assume 1,200 billable hours, not 2,000
Add real overheads before dividing
Gross up for tax, because your target is what you keep
Charge for the journey, and say so at booking
Fixed-price known work so efficiency pays you