How do I do simple job costing for a one-person trade business?

Simple job costing means tracking what each job actually costs you (your labor, materials, and a share of your overhead) and comparing it to what you estimated and charged. If you do that after every job, you can usually see which kinds of work make money and which quietly lose it.

Estimated versus actual

An estimate is your prediction before the work starts. The actual is what really happened. Job costing is just writing both down and looking at the gap.

For each job, keep one page or one spreadsheet row with these lines:

• Estimated labor hours and actual labor hours
• Estimated materials and actual materials
• Overhead assigned
• Price charged
• Profit (price minus total cost)

The gap is the useful part. If your estimates run short on hours again and again for a certain type of job, your quotes for that job may be too low. You can adjust the next quote based on your records instead of guessing.

Labor hours

Count every hour the job took, not just the hours on site. That generally includes driving to the job, trips to the supplier, writing the quote, ordering, cleanup, and paperwork or invoicing time tied to it.

Off-site time is easy to undercount. For example, a job that felt like six hours on site might be nine hours once everything else is added.

Pick an hourly labor rate for yourself, meaning what you want to be paid per hour for your own work. As an owner, you may not run payroll for yourself, and how your pay is treated for tax purposes depends on your business structure. Confirm that with a qualified professional. For costing, the rate is simply a number that makes sure your time is counted as a real cost.

Materials and overhead

For materials, record what you paid, including small items like fasteners, tape, and disposal fees. Keep receipts or note each purchase against the job as it happens. If you mark materials up, treat the markup as part of the price, not the cost.

Overhead is what it costs to keep the business running whether or not you have a job that day. Typical examples are insurance, vehicle costs, phone, tools and equipment wear, licenses, and software or bookkeeping. Check your own records or ask your accountant which of your expenses belong here. For how particular costs are treated on a tax return, check official sources such as the IRS (in the US) or a qualified professional.

A simple way to spread overhead across jobs is an overhead rate per billable hour:

Overhead rate = yearly overhead ÷ billable hours you expect to work in a year

Be realistic about billable hours. Time spent quoting, driving, and doing admin is often not billable in the same way, so the count is usually below a full work year.

Worked example

These are round sample numbers for illustration only, not benchmarks for any trade or region.

Setting the overhead rate

• Yearly overhead: $12,000
• Expected billable hours per year: 1,200
• Overhead rate: $12,000 ÷ 1,200 = $10 per billable hour

One job: replacing a water heater

The price quoted and charged was $1,100. Because the total cost includes your own time at the $50 labor rate, the profit below is what remains after you have “paid yourself” that rate.

• Estimated profit: $1,100 − $900 = $200
• Actual profit: $1,100 − $1,070 = $30

The job still made money on paper, but most of the expected profit disappeared because it took two more hours and slightly more materials than planned. One job is a small sample. If several similar jobs show the same overrun, you might raise your hours estimate for that type of job or add a line for problems you hadn’t anticipated, such as difficult access.

Common mistakes

• Leaving out your own time because you are not paying yourself a wage.
• Counting only on-site hours and skipping travel, supplier runs, and quoting.
• Forgetting small materials and disposal costs.
• Dividing overhead by every hour in the year instead of by realistic billable hours.
• Estimating again from memory instead of from your past actuals.
• Waiting until year end to record job details, when they are hard to recall accurately.
• Treating the costing numbers as tax figures. This guide is general education for pricing decisions, not tax, legal, or financial advice, and it is not meant for filing. Confirm tax treatment with the IRS or a qualified professional.