I'm going to say that a majority of services such as electrical, pluming, HVAC, auto... use what's called flat rate pricing. This means that prices for services already include materials, labor, overhead, and operating costs. I will say that at least 5 times a year I get a request to breakdown the labor and materials, sometimes I will and other times I won't and hopefully in this blog I will be able to explain why that is.
Companies chose flat rate or standardized pricing because custom pricing is very time consuming and often times inaccurate. There's a lot to take into account such as taxes, accounting costs, software, computers, phones, vehicle maintenance, employee benefit programs, tools, office supplies, office staff labor for reporting and for maintaining customer communication/requests, phones and cell plans, lost/stolen products... The list goes on and on. So what most companies do is sit down with their accountants and take all their annual operating costs, divide this by the number of labor hours they assume they will have in a year and you start to develop what's called a labor burden. The last piece of that equation is figuring out what the average cost of straight labor is and add those numbers together to get your hourly labor rate. To many this number will seem insane as the average hourly labor burden in most in home services is between $100 and $300 per hour.
When a company is asked to breakdown labor, they tend to hesitate because we know that the average homeowner won't understand why that number is what it is. With that being said, it's sometimes easier to accept the fact that you won't get that job so don't waste your time breaking down the price, just be told that the labor rate is insane. For those that choose to break it down, they normally get pushback about the labor being so high in which case the contractor can choose to explain everything that goes into it and hope the client understands.
When it comes to part pricing there's also hidden elements that can be very difficult to convey especially if the client has never operated a business that sold goods/services. If a part costs $15, a service provider will have labor rolled into that part. Let's assume it will take 30 minutes to install this part and test it's operation and let's also assume this company has an average labor burden of $200, this means that at bare minimum (making no money and actually losing money which you will see in a second) that part needs to be priced at $215. Out of that the government needs roughly 30%, so we need to give uncle sam about $65. Well now they've lost money so we need to tack that $65 to the $215 and we are at $280. At $280 we are breaking even (not making money yet) but you want to pay with a card which the provider will have to pay a 3% (average) processing fee which comes out to $9, so we need $289 to break even. The company still hasn't made anything and typically speaking a company has to maintain nothing less than a 30% gross margin which will typically only net a 10% profit. To figure profit markup we take the total of goods and divide by the reciprocal, which means this service now needs to be $412.
I can understand and appreciate a client who sees a part available on online for $15, questioning why a provider is charging $412, and hopefully now it's a little more clear as to why that is. There's so much more that goes into pricing which can make it difficult to properly break down the labor and materials of a service especially since it typically takes someone several hours to develop accurate labor burden analysis. Labor burden can fluctuate too depending of area of coverage, travel times, fuel costs, and many other factors. I personally look at and adjust (if needed) my total overhead each quarter. Fuel costs are constantly changing and to be accurate and competitive, I have to adjust accordingly as does much of my competition.
My intent here is to help with understanding of why services cost what they do which is why I think some want to see a breakdown of the labor and materials for a service. I hope also that if you don't get the information you are seeking, this at least helps to understand why someone maybe wont or cant afford the time to provide that info. Often times, contractors get this request and throw some random numbers down just to appease the situation, as the accurate information can take several hours to obtain and you haven't even secured the work or payment yet. It's a struggle for all parties involved so my recommendation is to develop a good relationship with your service providers, build trust and understanding in that relationship, and as long as you are satisfied with their services and pricing, maintain that environment.
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