Working out appliance repair prices from the bottom up

How should a washer repair invoice add up?

In this washer example, the invoice comes to $268 after a diagnostic credit, and estimated gross profit is $129.76, about 48 percent. The point is to show how each charge and cost fits together, not to prescribe a fee for your market.

The diagnostic fee is credited toward the repair, so it appears twice on the invoice and the customer pays it once. The figures below include a flat diagnostic visit, one billed labor hour, a drain pump, supplies and tax handling, then subtract the diagnostic credit.

On the cost side, the job uses 1.5 paid hours at $28.16, or $42.24. Add the $72 pump, $20 overhead for the billed hour and $4 in supplies, and total cost is $138.24. Subtracting that from the invoice leaves $129.76 in gross profit.

What rate should each billed hour support?

A billed-hour rate should cover labor after payroll burden and non-billable time, overhead allocated to productive hours, and the gross margin the shop needs. These planning ranges describe a small US operation, but they are not a quote for any specific market.

A small shop may face about $56 to $70 in total cost for each billable hour, while charging $105 to $150. The right figure depends on local wages, how much time is actually billable, the shop's fixed costs and the target gross margin.

Treat these numbers as a starting point and check your own books before changing prices. This is general business information, not legal, tax, electrical or gas advice. The appliance repair licensing rules in your jurisdiction also determine which work you are allowed to charge for.

How do I calculate labor for one billed hour?

Start with the technician's wage, add the cost of employing that person, then account for paid time that does not become billable work. Add overhead afterward, and divide the resulting cost by one minus the gross margin target to find the labor rate.

For example, a $22 wage with a 28 percent burden costs $28.16 for each paid hour. Multiplying by 1.3 puts labor cost at $36.61 per billed hour before adding fuel, insurance or other overhead. Keep hours worked and non-billable time visible in your records.

Which expenses should go into overhead?

Overhead includes expenses the shop pays whether or not a customer books a job. Add rent or storage, van payments, fuel, liability insurance, dispatch software, phone, tools and marketing, then divide the monthly total by realistic billable hours rather than paid hours.

For example, $5,000 in monthly costs divided across 250 billable hours adds $20 to each hour. A shop with $11,000 in overhead and 550 billable hours reaches the same result. A useful planning range is $15 to $35 per billable hour, including vehicle expenses where they belong.

Tools also have a cost over time. The IRS explains how business expenses and depreciation can turn a meter or recovery machine into a yearly cost line. Estimate tool purchases among your startup costs, using an equipment checklist, before settling on a rate card.

How should I price a replacement part?

Price a part from its landed cost, not just the supplier's invoice. Include the purchase price, freight, reserves for returns and breakage, warranty exposure, and the cost of keeping slow-moving stock on the shelf.

For planning, allow 5 to 8 percent for returns and breakage, 3 to 5 percent for warranty claims, and carrying cost on slow stock. A $60 pump with $8 freight and a combined 10 percent reserve lands near $74. Parts margins of 40 to 50 percent are common planning targets, not spare profit without a cost behind them.

A written warranty on parts or workmanship can create disclosure duties. The FTC warranty guide explains those obligations, which is why a warranty reserve belongs in the cost calculation. How parts and labor are packaged for customers can also affect whether the margin holds in the final quote.

What margin should the rate card protect?

Use separate targets for labor, parts and the whole operation. A healthy-looking job margin does not by itself show whether monthly fixed costs are covered, so compare the job's contribution with the shop's broader profit and loss figures.

At $56.61 of labor cost per billed hour and a $125 rate, contribution is $68.39. With $8,000 in monthly fixed costs, break-even is about 117 billed hours, or roughly 30 hours a week. Compare the result with your profit and break-even figures, not another shop's advertised prices.

What can I change if customers will not pay the rate?

If the local market will not accept your target price, inspect the cost base before cutting the rate. Check whether paid time is turning into billed work, whether overhead is allocated realistically, and whether the job mix is carrying enough contribution to cover fixed costs.

Review the billable-time ratio first. Moving from 28 to 32 billed hours a week can lower cost per billed hour more than a price increase. A diagnostic charge of $79 to $129 can cover drive and test time when a customer declines the repair; crediting it toward completed work can keep the repair quote competitive.

A labor warranty should affect the margin decision because callbacks use time and resources. Callback exposure belongs in the target, and a 45 percent gross margin on jobs with frequent callbacks is thinner than it may appear. Track the cost of that return work rather than treating it as invisible labor.

When should I revise the prices?

Review the rate card twice a year, and revisit it sooner whenever wage or parts costs change by more than 5 percent. Regular checks help keep older prices from quietly reducing the margin as the shop's expenses move.

When updating the figures, recalculate labor cost, overhead per billable hour and landed parts cost rather than applying one blanket increase. Then compare the resulting targets with actual job results and monthly fixed costs before publishing the revised prices.

What should I do first?

Start with the numbers your own shop can verify: actual wages and payroll burden, realistic billable hours, monthly overhead, and the complete cost of commonly used parts. Use those inputs to check the sample approach before making a price change.