Setting water restoration prices that cover costs and leave a margin, explained

What to take away

This article gives illustrative builds, not a universal rate. Cost structures differ by state, payroll and service mix, and tax treatment is a question for an accountant.

Step one: the fully burdened hour

Start with the hourly wage for a role. Then add everything that follows the person rather than the hour worked.

Take a $25 hourly wage. Add payroll taxes at 10 percent ($2.50), workers compensation at $2.00 per hour, and PPE and training at $1.00 per hour. That subtotal is $30.50, a 22 percent burden above wage.

If the role bills 65 percent of paid hours, the burdened billable hour is $30.50 divided by 0.65, or $46.92. Use your own payroll, workers compensation and billable proportion.

Billable proportion is the item people leave out, and it is large. A technician is paid for a full shift and bills for a fraction of it, so a rate built on a full shift of billable hours is a rate that never happens. Work out your own realistic billable proportion by role and use that.

Step two: recover the equipment

Worked example

Assume an illustrative dehumidifier costs $2,800, lasts 5 years, and needs $400 of maintenance over that life. Total cost is $3,200. If it earns on 150 days a year, it earns 750 days over its life. Cost per earning day is $3,200 divided by 750, or $4.27.

Assume an illustrative air mover costs $400, lasts 3 years, and needs $60 of maintenance. Total cost is $460. If it earns on 250 days a year, it earns 750 days. Cost per earning day is $460 divided by 750, or $0.61.

These figures are illustrative. Substitute your invoice, expected life and utilization.

Cost per earning day is the total divided by earning days. It sets the floor under your equipment day rate.

Do this for a dehumidifier and an air mover separately. Their utilization patterns differ sharply: air movers go out in quantity on nearly every job, and dehumidifiers limit how many jobs you can run at once.

If the resulting number is uncomfortable, the answer is usually utilization rather than price. The air mover and dehumidifier guide covers sizing and placement, and the equipment checklist for a first truck covers what is worth owning in the first place.

Step three: travel and the monitoring visit

A monitoring visit is a drive, a set of readings, a few adjustments and a note. It is short on site and long on road, and it happens every day a job is open.

Sample monitoring visit: 20 minutes drive each way at the $46.92 burdened hour equals $31.28. Round-trip mileage of 18 miles at a typical $0.70 per mile equals $12.60. On-site time of 25 minutes at $46.92 equals $19.55. Total is $63.43 before overhead.

A wide service area multiplies that cost across every open job at once. Companies that grow their service radius without repricing the monitoring visit lose margin, and no single job looks wrong.

Step four: overhead and the wait

Add the costs that exist whether or not a job runs: insurance, registrations, storage, software, phone and answering coverage, administration, and the hours spent producing documentation. Divide by a realistic number of jobs per month rather than an optimistic one.

Then account for the wait. Work performed in one month and collected two months later has a financing cost, and on insurance work that gap is normal rather than exceptional. Whether you price for it explicitly or absorb it, know what it is.

Step five: check it against reality

The rate is a hypothesis until you test it.

Take ten finished jobs. For each, record actual labor hours by role, actual equipment days by unit, actual monitoring visits, materials, disposal, travel, and what was actually collected rather than invoiced. Compare against what your model predicted.

The gaps will be consistent and specific: monitoring visits underestimated, disposal forgotten, one service line carried by another. That is the whole exercise, and it needs nothing more than the job records the Internal Revenue Service: What kind of records should I keep? guidance expects you to be keeping anyway.

Sanity-checking the labor assumption

A rate built on a wage you cannot hire at creates staffing problems.

Compare the roles you need against area estimates in the U.S. Bureau of Labor Statistics: Occupational Employment and Wage Statistics Tables, and treat that as one input, not your pay scale. Local competition for technicians usually matters more than a national figure.

What you can say about the number

No universal margin exists for water restoration. A defensible method is to set a target from your own ten-job test: add your required net profit to measured cost, then divide by collected revenue. An illustrative target of 15 percent net on collected revenue is a starting hypothesis, not a benchmark.

Whatever pricing you publish has to be supportable, and a starting-from figure that no real job has ever matched is exactly the kind of claim the Federal Trade Commission: Advertising FAQs: A Guide for Small Business guidance addresses. The safer approach in this trade is to publish the structure, explain what it moves, and quote after the inspection.

Where the rate meets the service menu

A single blended rate hides the differences between service lines. Price the contaminated work for the containment, protective equipment and disposal it genuinely needs, and price specialty drying for the skill and the equipment it requires rather than by the hour.

Which lines are worth the effort is a separate analysis, set out in the water restoration services breakdown, and the wider architecture the rates sit inside is in the pricing and profit guide. If you are still at the launch stage, the order to do all this in is in the restoration business sequence.

Common questions

Is there a standard markup for materials?

There is a common practice and no standard, and copying one without knowing your handling cost is guessing. Price materials to cover procurement, storage, waste and the time spent sourcing them.

Should we discount for a repeat property manager?

Discount for what actually reduces your cost: predictable access, a single point of contact, faster approval and reliable payment. Discounting for loyalty alone gives away margin without changing the work.

How do we handle a job that runs longer than expected?

By documenting why, daily, as it happens. A drying job that takes nine days with a reading log showing adjustments is a finding. The same job with a flat log is an argument.

What margin is realistic?

Nobody can tell you that from a page, and anyone quoting a figure is describing a different business. Measure your own on ten jobs, by line, after collection, and compare it to itself next quarter.