Good/Better/Best Pricing Worksheet

How to use the worksheet (good-better-best-pricing-worksheet.csv), with a worked example. Template from Tradewright.

What the worksheet does

It turns your real job costs into three selling prices that all hit the same overhead recovery and net margin target. You enter costs; the sheet calculates labor cost, direct cost, price, overhead dollars, net profit and gross margin for each tier.

The columns

Column	What to enter
Equipment cost	Your cost (not list) for the matched outdoor unit, indoor unit, coil and thermostat.
Materials	Line set, pad, disconnect, whip, plenum and duct transitions, condensate, fittings, refrigerant.
Labor hours × Labor rate	Total crew hours for the job times your fully burdened hourly labor cost (wages, payroll tax, workers' comp, benefits).
Subcontractors	Electrician, crane, insulation or other subs.
Permits and fees	Permit, inspection, disposal and any program fees.
Overhead (% of price)	Your annual overhead (rent, trucks, office, insurance, sales) divided by annual revenue. Use your own books.
Target net margin (% of price)	The profit you want left after all costs, as a share of the selling price.

The formulas

Labor cost = Labor hours × Labor rate
Direct cost = Equipment + Materials + Labor cost + Subcontractors + Permits
Price = Direct cost ÷ (1 − Overhead % − Net margin %)
Overhead $ = Price × Overhead %
Net profit $ = Price − Direct cost − Overhead $
Gross margin % = (Price − Direct cost) ÷ Price

Margin is not markup. Overhead and margin are shares of the selling price. A 40% gross margin means multiplying direct cost by 1 ÷ 0.60 = 1.667, not by 1.40. Multiplying by 1.40 gives only a 28.6% gross margin.

Worked example

Example numbers only. They are not market prices or a recommendation. Overhead 25% and target net margin 15% for all three tiers, labor at $95/hr.

	Good	Better	Best
Equipment	$5,200	$8,400	$11,800
Materials	$900	$1,200	$1,500
Labor (hours × $95)	16 × 95 = $1,520	20 × 95 = $1,900	24 × 95 = $2,280
Subcontractors	$0	$600	$900
Permits and fees	$250	$250	$250
Direct cost	$7,870	$12,350	$16,730
Divisor (1 − 0.25 − 0.15)	0.60	0.60	0.60
Price (rounded)	7,870 ÷ 0.60 = $13,117	12,350 ÷ 0.60 = $20,583	16,730 ÷ 0.60 = $27,883
Overhead $ (25% of price)	$3,279.25	$5,145.75	$6,970.75
Net profit $	13,117 − 7,870 − 3,279.25 = $1,967.75	20,583 − 12,350 − 5,145.75 = $3,087.25	27,883 − 16,730 − 6,970.75 = $4,182.25
Gross margin	5,247 ÷ 13,117 = 40.0%	8,233 ÷ 20,583 = 40.0%	11,153 ÷ 27,883 = 40.0%

Check: for Good, $7,870 + $3,279.25 + $1,967.75 = $13,117. Every dollar of the price is accounted for.

How to use it

1. Open the CSV in Excel, Numbers or Google Sheets. The first four rows are notes; rows 6 to 8 are the three tiers.
2. Replace the example costs with your own for one real job. Use the equipment the load calculation actually supports at each tier.
3. Set overhead % from last year's books. Set a net margin target you can defend.
4. Read the price column. Round to your own pricing convention if you like, then check that net profit is still where you want it.
5. Make the tiers different in outcome, not just in brand: efficiency, comfort (variable speed, zoning), warranty length and maintenance.
6. Copy the three prices into your proposal template, add estimated rebates and financing, and present all three.

Common mistakes

• Using markup on cost and calling it margin (see the box above).
• Leaving out sales commission, warranty reserve or callbacks. Put them in overhead % or as a line in materials.
• Pricing Best with a thinner margin to make it "look" closer to Better. Price each tier on its own costs.
• Letting overhead % + margin % reach 100%. The divisor becomes zero or negative and the price is meaningless.

Template provided by Tradewright (tradewright.com). Not accounting or tax advice. Tradewright can price Good/Better/Best options from your own price book automatically.