Job Costing Masterclass: From Generics, Pricing, Purchasing, to Inventory

Job costing is essential for sustainable business growth, and no one explains it better than Tim McGuire, owner of High Winds Success. In a recent episode of the Mastering ServiceTitan podcast, McGuire breaks down the fundamentals of job costing and how to implement it inside ServiceTitan. 

From the importance of burdened labor rates to starting with generic Pricebook items, McGuire shares a pragmatic path to more profitable operations. He also discusses how tools like Pricebook Pro and dynamic pricing can elevate your costing accuracy over time.

In the following podcast recap, you’ll learn:

• Job costing basics and finding opportunities for improvement

• How to calculate tech labor costs beyond hourly rates

• How to link materials in dynamic pricing and inventory tracking

• Change management issues with job-related purchasing

Over Two Decades in the Trades

McGuire got his start in the residential home services space nearly 25 years ago, where he worked for SuccessWare, one of the first software tools built for the trades.  

“My job was to interface with the customers. We did a lot of work with best practice organizations at that time, and my job was really to help our customers deploy those best practices that they were learning within the software,” McGuire says.

He eventually joined another company, which ServiceTitan later acquired. At ServiceTitan, he spent three years helping customers optimize the platform and roll out features like Dispatch Pro and adjustable capacity planning. 

“I had the absolute pleasure of being able to build the ServiceTitan Certified Administrator program, and I say pleasure because it gave an opportunity to actually create a certification program for office users,” McGuire says. “There's all sorts of certifications for technicians and folks like that, but here was something for these real champions of the business, the people that can control the operations from day to day.”

A few years later, McGuire opened High Wind Success, a consulting firm that helps contractors get the most out of ServiceTitan.

“It gives me a chance to get back to my roots and work with contractors of all sizes to really help them maximize their investment in software and make sure they're getting everything they can out of it,” McGuire says.

“Cost is the Single Most Important Driver of Price”

McGuire explains that job costing means actively tracking every aspect of a job—not just the revenue, but also the related expenses like labor, materials, and equipment. It’s about calculating the gross margin by comparing revenue against those costs.

“Job costing is a process within the business of making sure that you're capturing that cost data on a job-to-job basis, so you can run reports to make evaluations as to where your business stands and where you can improve,” McGuire says.

But do most service businesses do an adequate job of job costing, podcast host Josh Lu asks?

“Most are certainly tracking their accounting in a way where they know what their gross margins are,” McGuire says. “They know what their equipment expenses and materials expenses are. 

“But there's a really great opportunity to start building this into their daily operations, so that they can be running the reporting on a job-to-job basis, and then even looking at that departmentally by types of jobs, so they can better understand where opportunities for improvement exist,” he adds.

One of the opportunities involves making sure you’re pricing everything from labor to materials to ensure you actually make money. 

“Cost is the single most important driver of price within a business,” McGuire says. “If I'm simply making up a price without having a strong understanding of what the cost of doing that work is, there's every chance in the world that I'm not making money.”

By breaking down his material costs as a percentage of total sales, McGuire applies precise calculations to ensure his pricing strategy truly supports his business. And not just covering direct costs, but costs for administrative staff, office operations, and sales teams.

When it comes to job costing in ServiceTitan, McGuire says it all starts with setting up your pricebook, which he warns can be intimidating at first.

“It can become overwhelming to look at the thousands of materials, let's say, that I purchased from a supplier, or the hundreds of different pieces of equipment that we manage across different lines of business,” McGuire says. “You can't start until you've got all of that into the pricebook and that can be overwhelming as a starting point for a lot of companies.”

McGuire says onboarding ServiceTitan involves many moving parts, but warns that companies shouldn’t overlook the importance of their pricebook.

“There's a real easy opportunity there for the pricebook to fall to the side in terms of setup,” McGuire says. “But pricebook is the most important piece of the system. It drives where things go in accounting, it drives the work that we do. It drives what we buy.”

Calculating Technician Labor Costs

McGuire says it's just as important to understand how labor costs factor into a job as it is to track materials and equipment.

“As we look at service work that's performed by different lines of business and we look at installation work that's being done, there's different ideal percentages of cost as a percentage of total sale that we should be looking for,” he says. “And if I'm not tracking labor as a function of the work that I do, then I'm really not able to make those determinations.”

McGuire says there are two approaches you can take within ServiceTitan to calculate labor costs, with the first being the Payroll feature. 

You can use the software to calculate commissions and hourly pay, along with other payroll elements. You can set it up to track individual taxes, and as employees log hours on the jobs they’re running—through dispatch and on-site check-ins—those hours are automatically applied at their set rates. 

“On its base, there's more cost than just what you pay per hour for an employee. And anyone out there who's listening and owns a business knows this,” McGuire says. “A person who earns $20 an hour doesn't cost me as an owner $20 an hour. There's a much higher rate to that because you've got to pay taxes, you've got to pay all these associated overhead expenses.”

If you don't have Payroll turned on in ServiceTitan, McGuire says you can identify an hourly rate for them and have that hourly rate actually include the burden (the total cost per employee, including overhead). 

“So again, if I make $20 an hour and I calculate by looking at all of my payroll expenses over the course of a year, their wages plus all those additional expenses divided by the number of hours they worked, I get a burdened or full hourly rate for that employee.

“I can put that into the hourly rate field. If we're using the payroll components, we're actually putting in commissions, we're putting in their hours, and running payroll reports. There's a field within the technician profile to identify their burden rate, and when you're running your job costing in ServiceTitan, it will calculate their earnings as part of the cost,” he adds.

Dynamic Pricing and Inventory Tracking

McGuire says building a proper pricebook can be challenging because it requires manually accounting for 20 to 50 different jobs, along with all the necessary equipment and materials. Not to mention, prices constantly change.

“Pricebook Pro is going to go ahead and build for me, or give me a prebuilt set of the most common work so that now that granular level of work that I would've had to put in is done,” he says. “It's taking into account national pricing, different elements like that. So, it's taking a lot of that hard work out of the hands of the contractor upfront and letting them start to realize more complete benefits of ServiceTitan moving forward.”

McGuire explains how dynamic pricing lets you create custom formulas, or use the ones already built into ServiceTitan, to control your markups. You can set different strategies based on material costs. For example, you might apply a higher markup to lower-cost items and a smaller percentage to more expensive materials, while still protecting your margins.

You can also build your labor rate into those formulas. Then, as you create tasks in your pricebook, the system automatically calculates the ideal selling price based on your inputs.

“Essentially, you're taking your services or your tasks and you're breaking them down into categories of repairs or maintenance by line of business,” McGuire says. “So, you've got your organization not just there for your office folks, but your field techs, so when they're looking at the pricebook they can easily find things.”

McGuire says one of the benefits of categorizing your pricebook is how it works with dynamic pricing. You can apply dynamic pricing to specific categories rather than the entire pricebook. For example, you might keep installations calculated manually for now, while using dynamic pricing for certain service work to test how it performs.

“It doesn’t have to be all or nothing. Like anything else, start small, learn as you go, and grow your use of the software over time,” he says.

For inventory, McGuire says when you buy materials for jobs as needed, rather than pulling from existing stock, you can still create and receive purchase orders directly against those jobs. Even without using inventory tracking, this pulls the actual material costs into your invoices.

For example, you might use generic items from your pricebook to build a PO and send it to your supplier. Once the materials arrive and you receive the bill, you can update the PO with the actual prices. Those updated amounts then flow into the job’s invoice.

He says this process helps you track material costs more accurately, giving you a clearer picture of your true job costs.

Change Management Issues with Job-Related Purchasing

McGuire explains how when you make job-related purchases, timing becomes critical. For example, if you place an order with your supplier, pick up the materials the same day, and install them right away, there's no doubt you've received the items. But to track everything properly, you need to follow a clear purchasing workflow.

It starts with creating a purchase order. No money changes hands at this stage. It's simply a formal order, and you can tie it to either a warehouse or a specific job.

Next comes receiving. This step confirms you’ve actually gotten the materials. In ServiceTitan, "receiving" is both an action (you physically receive the items) and a document (you create a receipt in the system). Once you receive the items, ServiceTitan treats it as a liability—you owe money—and also as an asset—you now own the materials.

McGuire says this step needs to happen promptly. If the materials are job-related, the system can automatically add them to the material section of the job’s invoice at the time of receipt. But if you wait until the job is already completed, batched, posted, or exported, the invoice becomes locked. The materials won't transfer over automatically, and now you're missing costs on that job.

At that point, McGuire notes you’ll need to take extra steps, like creating an adjustment invoice, to make sure your materials are properly accounted for. Again, it all comes down to timing.

“I think it's really important from a change management point of view that if we're going to implement a purchasing workflow, there has to be an understanding on the team's behalf,” McGuire says. “Of what their responsibilities are and the timeframes that exist within them.

“And again, there's great tools within the system, whether it's either called purchasing or inventory, depending upon the settings you have on. We’re able to go in there on a daily basis, know what purchase orders we have outstanding, which ones are tied to jobs, and be able to look at those job statuses, and know what's been received.”

You can find this interview and many more by subscribing to Mastering ServiceTitan on Apple Podcasts, on Spotify, or here. 

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