How to Price Electrical Work for Profit: A Guide for Professional Electricians

Knowing how to price residential electrical work can make or break an electrical business, especially in light of recent issues with supply chain shortages and finding new recruits.

Typically, electricians use one of two pricing models: time and materials (hourly rates) or flat-rate pricing. There are pros and cons for each, such as justifying hourly rates to customers, or taking longer than anticipated to complete a flat-rate-priced job. 

We’ll discuss this in depth in this post. We’ll also explain why we think switching to flat-rate pricing and equipping your techs with an easy-to-use electrical pricebook is the best way to ensure you’re charging the right amount for every electrical job and earning the full value for your electrical services so your business can thrive.

Table of Contents

• Electrical pricing models: time and materials vs. flat-rate pricing

• The 5 common challenges with electrical pricing

• The benefits of using flat-rate pricebook software

• Our step-by-step guide for pricing electrical work profitably

How to Price Electrical Work 

1. Work out your operating costs

2. Scope out the work

3. Specify materials

4. Calculate labor costs

We’ll also discuss how our flat-rate pricebook software, ServiceTitan, solves the common issues of pricing electrical work and helps electricians provide accurate estimates and invoices for every electrical project (whether that’s rewiring, replacing ceiling fans, or installing electrical wiring in a smart home).

With ServiceTitan, you can easily increase revenue and grow your business.

Electrical Pricing Models

As we mentioned above, most licensed electricians calculate their prices using one of two pricing models: 

1. Time & materials (hourly rate): Costs are based on the time spent performing the work and for the materials used in the job.

2. Flat-rate: A fixed rate for a service.

Each pricing type offers advantages and disadvantages for not only your electrical business, but also your customers:

Advantages of Hourly Rates (Time & Materials)

For the customer

• Customers understand hourly rates, or T&M pricing, and use it as a baseline for comparable work.

• Some customers appreciate an itemized list of exactly what’s included in their electrical installation (for example, specific costs for circuit breakers, light switches, and wiring costs per square foot), as well as the total cost.

• Billing hourly tends to work better for clients with long-term projects, rather than short, sporadic jobs.

For the contractor

• Allows you to track the exact number of hours working on a job, and invoice the customer on completion (or at certain phases for bigger jobs).

• Hourly rates allow you to account for changes and other variables (and charge for them) as they arise.

• Your techs, CSRs, and other employees know their average hourly rate and how many hours they need to work each week to reach a certain level of pay.

Disadvantages of Hourly Rates

For the customer

• Customers may feel compelled to stand watch over your techs to make sure they’re not wasting time.

• Techs who don’t perform at a high level may cost customers more money for less work.

• Unexpected changes and other variables may significantly increase the cost of the project.

• Customers prefer to know roughly what they’ll be paying upfront. 

For the contractor

• Charging by the hour requires keeping detailed accounts, and many contractors are too busy to do this regularly and accurately.

• Billing hourly provides no incentive for your techs to perform quickly and efficiently, which means your company may be losing out on new revenue.

• T&M pricing limits your profitability, but pricing focused on production boosts your revenue potential.

• Reminding techs to correctly invoice customers remains one of your essential duties.

Advantages of Flat-Rate Pricing

For the customer

• Answers two important questions: What’s wrong and how much will it cost?

• Closes the door on price concerns because they know the fixed cost in advance.

• Eases the pressure of a home-service call, removing the need to closely monitor the electrician’s progress.

• Eliminates repair bill surprises, even if a tech needs more time to complete the work.

• Simple and easy for customers to understand, and for your techs to sell.

For the contractor

• Rewards high performance and efficiency, allowing your electrical business to book more jobs per week and earn more revenue. Time savings = more profits.

• Allows you to set prices based on the true value of your services and scope of work.

• Eliminates the problem of unapplied labor (underperforming techs).

• Allows you to sell a service with a result, with no need to justify your hourly rate or markup on materials.

• Shortens the billing cycle, allowing customers to prepay the fixed cost or pay the tech on site for completed work.

Disadvantages of Flat-Rate Pricing

For the customer

• With less itemization for your flat-rate fee, customers may view it as a sales gimmick or upselling.

• It doesn’t allow for customers to negotiate or haggle over the price.

• The service may seem overpriced, especially if the homeowner doesn’t understand the value your company brings to the job above and beyond the installation cost.

• Creating a high-pressure environment to perform may leave your clients feeling like your techs rushed through the job.

For the contractor

• If the job takes longer than estimated as part of your flat-rate costs, you may end up earning less than your regular hourly rate.

• Clients may insist on hourly invoicing, or want to haggle over your flat-rate pricing.

• Flat rates are approximate, so you may get locked into a certain price even though the job turned out to be more complicated than you originally thought. 

• With emphasis placed on performance, slower techs may struggle to earn.

• Slow periods may require creative job reallocations to meet performance goals.

The 5 Common Challenges with Electrical Pricing

Whichever pricing method is used (we’ll explain why we recommend flat-rate pricing below), there are five common problems electricians encounter when setting their prices:

1. Basing Prices on Competitors

Some electrical service businesses set prices according to their competition. But when electricians compete on price rather than value, they get into a race to the bottom — lowering prices to a level that makes it difficult to maintain profitability.

Using competitor pricing as a yardstick for average cost can seem appealing because you don’t have to spend time figuring out what the optimal pricing is for your business, but doing this work is worth the effort. It’s what the most successful electrical businesses do. 

2. Failing to Factor Non-Billable Time or Operating Costs Into Prices

Labor rate calculations are the source of some of the most common pricing errors. Often, these mistakes come from failing to account for the time employees spend on non-billable tasks, which significantly affect the cost of doing business. 

Factoring in the time electrical contractors spend working outside of customers’ premises is crucial for setting profitable pricing. As well as holidays, vacations, and sick days, businesses also need to consider time spent training, in meetings, driving, vehicle cleaning, and more.

Your prices also need to incorporate the overhead expenses you pay for each month — including utilities, rent, inventory, insurance, marketing, gas, and equipment maintenance/repairs. 

To ensure you’re profitable and properly growing your profit margins, it’s essential to factor these types of non-billable tasks and costs into the prices your customers pay. 

3. Applying Membership Agreement Discounts Incorrectly

Many electrical contractors offer maintenance agreements with discounted services of 10–15% to homeowners to encourage loyalty and predictable income. Membership agreements make for an effective marketing tool, but they can hurt profitability if not executed correctly.

The common issue is that contractors apply their membership discounts on top of their standard prices.  While this might seem logical, it actually diminishes the work that determined profitable flat-rate prices.   

Instead, electrical contractors should incorporate their 10–15% membership discounts into their standard prices, so that their membership prices are their baseline prices. In other words, customers who do business outside the terms of a membership agreement should be charged at a premium. 

4. Failing to Keep Electrical Prices Up-to-Date

Keeping pricebooks up-to-date is practically a full-time job due to constant changes in costs of materials, supplies, and wages.

If you’re using paper documents or spreadsheet templates, these manual updates are tedious and time-consuming, taking office staff away from revenue-generating work — and potentially resulting in errors.

There’s also a delay between when changes are made and when they’re accessible by field and office staff. Every time a change is made, you need to print out the updated version and distribute that to your staff. 

5. Producing Inaccurate Estimates & Invoices

Even if prices are being kept up to date, they’re often not translated accurately onto estimates and invoices. For example, techs make miscalculations or misread pricing, which leads to inaccurate estimates; or information is entered incorrectly during invoice creation, displaying pricing that doesn’t reflect the total cost of the job.

These problems can have serious adverse affects on your bottom line.

ServiceTitan’s flat-rate pricebook software helps solve these problems. Specifically, Pricebook Pro lets you easily manage your electrical pricebook so that it's always up-to-date, allowing you to provide accurate and profitable estimates as well as timely invoices. 

We explain the benefits of a digital flat-rate pricebook in more detail below.

The Benefits of Using Flat-Rate Pricebook Software

In our experience working with dozens of electrical companies, the most successful electrical businesses use the flat-rate pricing model.

This is largely due to the drawbacks of using time and materials, specifically, justifying high hourly rates to customers who struggle to understand the numerous costs included in the rate, as well as unintentionally rewarding poor performance from techs who work slowly and run up the bill (rather than electricians who work efficiently). 

In contrast, with flat-rate pricing, there’s no room for customers to get hung up on hourly rates, which improves the overall customer experience. They know exactly what a job will cost them, regardless of how long it takes, so they don’t need to clock-watch or worry about their final bill spiraling out of control. Likewise, electricians are incentivized to execute jobs efficiently, which means they can tackle more jobs and bring in more revenue. 

A digital flat-rate pricebook gives your estimators and electricians a better tool to use when communicating with customers, as it serves to educate in simple terms and provides independent resources to explain and validate recommended services, says Master Electrician Chris Crew, who is also president of The Blue Collar Success Group.

"Using a pricebook creates consistency for the company to manage margins, and consistency for customers from a price-integrity standpoint," Crew says. 

An electrician price guide also eliminates the inefficiencies owners often face when making changes on the fly because it consistently tracks everything, from allotted time and material pricing to what goes into performing each task.

Ron Lutwiller, former COO at Roby Services in Charlotte, N.C. says he initially opposed switching to flat-rate pricing because he thought customers would find the higher (but more accurate) prices too shocking. But instead of complaints, he found benefits.

"It takes the nit-picking out of it," Lutwiller says. "With time and materials, inevitably the customer is standing over our technician and looking at his watch. That doesn't happen with flat rates."

An electrical work pricing guide with flat-rate pricing brings value to your customers because they know the cost upfront and pay a fixed rate for the service — with time, materials, overhead, and profit margins already calculated in.

"They understand what the price is, and to a certain extent, they really don't care how long it takes you. You've already given them a price, and there's no surprise to it," Lutwiller explains.

ServiceTitan’s Pricebook Pro comes loaded with curated content, detailed descriptions, and vivid images of equipment and materials already built in. It’s a modern pricing solution that gives electricians access to the catalogs of a range of industry suppliers so they can provide accurate pricing as well as recommendations and upgrade information. 

Note: Pricebook Pro includes content for HVAC and plumbing as well as for electrical contractors. 

Step-by-Step Guide for Pricing Electrical Work Profitably

To set electrical prices accurately, we recommend electrical contractors follow a four-pronged approach:

1. Work out your company's operating costs

2. Visit the customer's home or business to determine the exact job scope

3. Specify materials and quantities needed

4. Calculate labor costs

1. Work Out Your Operating Costs

As we mentioned above, your operating costs include more than just time and materials. Start by calculating all of your overhead expenses (rent, utilities, insurance, etc.) each month. 

Then, use ServiceTitan’s Labor Rate Calculator to divide your total overhead costs by your total billable hours to determine how much you need to charge per hour to break even or grow net profits.

2. Scope Out the Work

Never bid on an electrical job without inspecting the home (or business) in person. You need to know the specifications of the building and full job scope before you can determine how much it will cost to rewire it or add new wiring and receptacles.

It’s important to focus on safety when scoping out work. For example:

• Do you ask your electricians to conduct an electrical hazard evaluation on every job?

• Do they inspect the home’s wiring and electrical panel to make sure everything is up to code? 

• Do they offer homeowners a membership agreement with periodic check-ins to give them better peace of mind about their home’s electrical safety? 

Electrical contractors who fix only the reported problem, such as a faulty light switch or non-working electrical outlet — without inspecting the entire electrical system — can leave customers at risk, and potential money on the table, says Lutwiller.

A homeowner may call to find out what your electricians charge, but it's up to your technicians to educate them about their home's electrical safety and show them the value of hiring a master electrician or journeyman electrician who's trained to spot dangerous electrical problems. Older homes with old wiring can be significant safety hazards for some customers.

“If you’ve got a 40-year-old house and your electrical panel is extremely outdated and the fuses are corroding, it’s a responsibility on our part to make sure you know that,” Lutwiller says. 

Inspecting every potential electrical job is critical, as is factoring in pricing for the time spent scoping the work. 

3. Specify Materials

Determine what materials you need by outlining the types and quantities for every electrical component, light fixture, or outlet required to complete the project. Then, figure out what needs to be ordered, and where and when you can get your supplies. 

ServiceTitan’s Pricebook Pro gives users access to the catalogs of a range of industry suppliers via its add-on service, Pricebook Connect. Supplier catalogs are linked to your pricebook so you can provide accurate quotes that reflect the actual materials that will be used for a job. You receive notifications of any changes in prices, product descriptions, or images, and these can be applied to your pricebook automatically without the need to update it manually. 

4. Calculate Labor Costs

As we mentioned above, evaluating labor costs can be tricky. 

Here’s how you do it:

• First, calculate an estimated number of hours required to complete a job, and whether you need to hire extra labor.

• Base your labor rate on a shop average method (using labor averages in past 12 months) or job average (using average wages and crew expertise).

• Multiply the per hour labor rate by the estimated labor hours to calculate the true labor costs.

• Finally, factor in the additional costs of employee benefits, such as vacation pay, pension, insurance, and payroll tax to arrive at the final labor bill.

With the easy-to-use features in ServiceTitan’s software, Operations Manager Gary Libkuman says he can calculate gross margins and total revenue per job, and quickly know whether his electrical prices are in the right range.

“We typically shoot for an average 60% gross margin, across all jobs,” explains Libkuman, who works for Mister Sparky Electric in Howell, Michigan.

And if any particular projects come in under that goal, he can look at customized business reporting to know whether the loss in revenue resulted from problems with material costs, labor costs, or something else. 

"The ability to adjust the ServiceTitan Pricebook up and down, in a very quick Excel format, makes it very, very nice to be able to isolate out specific jobs, specific materials, and make those adjustments on the fly,” says Libkuman.

How ServiceTitan Helps You Price Electrical Work Profitably

ServiceTitan helps professional electricians manage their pricebooks and price electrical work profitably. With ServiceTitan, you can:

Streamline Pricebook Management

ServiceTitan’s Pricebook Pro comes with a wide range of pre-built, flat-rate electrical services to give you a head start on building out your pricebook, ensuring tasks are clearly defined and organized. 

Pricebooks can be organized by verticals and business units so there’s no need to trawl through unwieldy lists of catalogs, products, and materials. Simply click through each category to get to the specific part you’re looking for.

Advanced Editing Features

Updating and editing prices is one of the challenges of managing a pricebook, particularly when updates need to be applied across hundreds or even thousands of jobs. 

ServiceTitan has several features that help electrical contractors quickly and efficiently edit their pricebooks:

• Bulk edit: Apply edits and markups on multiple services, materials, or equipment across your entire pricebook or to select groups or categories.

• Individually edit: Edit individual services or pricebook items manually, including as many or as few details as you want.

• Dynamic price automations: ServiceTitan’s Dynamic Pricing feature lets you set up rules that automatically update your pricing when material costs and labor rates change.

Electricians can easily adjust any individual service or item (for example, a light switch or circuit breaker) for single jobs, or use global edits to automatically implement changes across their entire pricebook, such as discount or labor rate changes. This saves a huge amount of time. 

Create Estimates with Ease

When field or office staff create estimates for electrical work (whether it’s home improvement or business projects), the services they select reflect the most up-to-date pricing information. Project cost totals are calculated accurately and automatically. 

Instead of searching through a printed pricebook or spreadsheet and transferring the pricing information to other documents to create estimates, electrical contractors can simply select the services they want from within ServiceTitan, and all of this is done for them. 

Prices, photos, manufacturer videos, and product info can all be accessed in a couple of taps along with recommendations to maximize revenue, such as an open estimate that needs follow-up or an opportunity to upsell to a new membership contract. 

Good-Better-Best Proposals

Typically, electrical contractors provide three options (Good-Better-Best) for customers. This has proved to increase ticket sales as customers sense flexibility and, most often, opt for the mid-priced option. 

ServiceTitan’s estimating software makes it easy to prepare Good-Better-Best proposals, either in real-time when out in the field, or back at the office. Once a customer selects their option, ServiceTitan connects the estimate to the rest of the electrical workflow (scheduling, billing, and reporting). 

Mobile Access

ServiceTitan software can be used to price electrical work from any location. Electrical contractors can build estimates via ServiceTitan’s mobile app and present them to customers on site so they can be approved and e-signed on the spot. 

Homeowners can view high-quality images and descriptions of exactly what they’ll be purchasing via the tech’s tablet. Electricians can search for products and services by keyword or category and refer to them when educating and upselling to customers.

Integrate with Billing and Other Features

ServiceTitan tracks the entire workflow process — from estimate creation to invoicing and payments. This saves the time it would take to use different software (or processes) and reduces the likelihood of input and transfer errors. 

Once the customer has agreed to the estimate, ServiceTitan lets you:

• Generate electronic purchase orders

• Order equipment and materials

• Schedule and dispatch the work order

• Produce the electrical invoice, send it via email to the customer, and automatically file it electronically

• Accept check or credit card payments on the spot via mobile or through the ServiceTitan portal, speeding up cash flow and reducing the need for follow-up calls

• Integrate directly with accounting tools such as Intacct and QuickBooks so you don't have to change your current workflow.

Connect Your Pricebook to Data Reporting

To ensure your electrical business is operating profitably, set up your pricebook so all of your company’s business reporting feeds directly from it. 

ServiceTitan directly connects your pricebook to your reporting. The software lets you track the key components of your business, such as every job, technician, and CSR, as well as every marketing campaign.

With our technician scorecard, you can stay up-to-date on every tech’s stats, such as: number of calls per day, estimates closed, revenue generated, memberships sold, and more. Likewise, our CSR scorecard lets you monitor metrics for your customer service team, such as number of calls handled, conversions, etc. 

Setting up your electrical pricebook so that it directly feeds your reporting means you can analyze your metrics to see exactly what’s driving revenue and where there’s room for improvement.

Conclusion

Calculating your electrical prices by accounting for labor costs and materials is only the start of pricing electrical work profitably. By using modern software, like ServiceTitan, you can manage your pricebook efficiently while implementing pricing accurately across your entire workflow — including electrical estimating and invoicing.

With ServiceTitan, you can create a dynamic flat-rate pricebook that allows you and your staff to build accurate estimates that seamlessly connect to your other business processes and bring in profit. 

Want to see ServiceTitan in action? Schedule a call with us to learn more about how our electrical contractor software can streamline your pricing and help you grow your business.