How Do You Calculate the Direct Cost of Each Job or Sale?

The short answer

Direct delivery cost is what you spend to deliver one job or order: labor, materials, subcontractors, travel, and payment fees. Subtract it from your average sale to see what each sale actually leaves you to cover rent, software, and profit. If that amount is too small, the business won’t work at that price.

What this tells Google and AI

This is a Foundation step. Search engines and AI tools don’t read your costs. But your costs decide which services you can afford to push on your website and profile and how far you can travel, which shapes your service area. A business that underprices and runs out of cash can’t keep its profile, website, and reviews active.

What this means

Direct costs go up and down with each job. Fixed costs, like rent and software, don’t (see 7.8.10 Fixed Costs). The outline breaks direct cost into five parts.

7.8.2 Direct labor

The time it takes to do the work, at what that time costs. For employees, include the wage plus payroll taxes and benefits. For yourself, use what you’d pay someone else to do it. A common mistake is counting your own time as free.

7.8.3 Materials

Parts, supplies, inventory used up, and packaging. A painter counts paint, tape, and drop cloths. A bakery counts flour, boxes, and labels. A common mistake is forgetting small supplies that add up across every job.

7.8.4 Subcontractors

Outside people you pay to do part of the work, like an electrician on a remodel or a freelance designer on a website. A common mistake is quoting before you have the subcontractor’s price in writing.

7.8.5 Travel

Fuel, mileage, lodging, parking, and travel time. The Internal Revenue Service (IRS) sets a business standard mileage rate each year, and for 2026 it’s 72.5 cents per mile. That rate is for tax purposes, but many owners use it as a quick check on vehicle cost. Count drive time as labor too. A common mistake is pricing a job across town the same as one next door.

7.8.6 Payment fees

What card processors, payment apps, and financing companies charge when a customer pays. Check your provider’s current fee schedule (see 10.7.1 Payment Methods). A common mistake is forgetting the fee comes out of every card payment.

Example: a mobile dog groomer charges $90. Direct labor is 1.5 hours at $25 an hour, or $37.50. Shampoo and supplies are $6. Travel is 12 miles round trip at 72.5 cents, about $8.70, plus 30 minutes of drive time at $25 an hour, $12.50. If the card fee were $3, the direct cost would be about $67.70. That leaves about $22.30 per visit to cover the van payment, insurance, software, and profit.

Why it matters

• Busy isn’t the same as profitable. You can work full time and still lose money on every job.
• Travel quietly eats margin. It’s one of the main reasons to keep a service area tight (see 7.7 Define the Service Area).
• It shows which services to grow. Some services leave much more per job than others.
• You need it for break-even. Without it, you can’t tell how many sales you need (see 7.8.11 Break-Even Point).

Who this applies to

Every business that sells a product or service. Product businesses add shipping and packaging to materials.

How to do it

1. Pick one typical job or order.
2. Write down every hour of work, including setup, cleanup, and drive time.
3. Multiply hours by the full cost of that labor.
4. List every material and supply used, with its cost.
5. Add any subcontractor costs, from written quotes.
6. Add travel: miles times your vehicle cost per mile, plus parking, tolls, or lodging.
7. Add payment fees based on how most customers pay.
8. Total the five lines. That’s your direct delivery cost.
9. Subtract it from your average sale (see 7.1.7 Average Sale). That’s what each sale leaves to cover fixed costs and profit.
10. Repeat for each main service, and update when prices, wages, or fuel change.

What proof to keep

• A job cost sheet for each main service, dated
• Quotes from subcontractors and suppliers
• Your current payment processor fee schedule
• Monthly job cost reviews once you’re open (see 24.4 Job Margin Review)

Common mistakes

• Counting your own time as free. You’ll need to pay someone eventually.
• Leaving out drive time. It’s labor, even if no work gets done.
• Using old material prices. Recheck often when prices move.
• Forgetting payment fees. They come off the top of every card sale.
• Averaging everything into one number. Cost each main service separately.

When to get help from a pro

CPA or bookkeeper: to set up your books so you can see direct costs by job or service. Ask:

• How should I set up my chart of accounts so direct costs are separate from fixed costs?
• How should I value my own labor in these numbers?

Bill’s note

[Bill: add a short story or opinion here. For example, a service business that found out a far-away part of its service area was losing money once drive time was counted.]

How I did this for SiteSmarty

• [Date I did this:]
• [What I actually did, step by step: how I costed one typical SiteSmarty job]
• [What it cost and how long it took:]
• [What surprised me or what I’d do differently: which cost line was bigger than expected]
• [Screenshot or photo to add, with private info blurred: the job cost sheet]
• [Result so far:]

Questions people ask

What counts as a direct cost? Costs that come with each job or order: labor, materials, subcontractors, travel, and payment fees.

Should I include travel time? Yes. Count it as labor and add vehicle costs on top.

What’s the difference between direct and fixed costs? Direct costs rise with each sale. Fixed costs, like rent and software, stay about the same no matter how many sales you make.

How often should I update my direct costs? Whenever wages, fuel, materials, or fees change, and at least once a year.

Audit check

• Question: Does each main service have a written job cost that includes labor, materials, subcontractors, travel, and payment fees?
• Pass looks like: A dated cost sheet per service with all five lines. Owner time and drive time counted. Updated in the last year.
• Fail looks like: No job costing. Owner time left out. Travel ignored. Payment fees missing.
• Evidence to collect: The cost sheets, supplier and subcontractor quotes, and the processor fee schedule.

Where this fits

Do this first: 7.1.7 Average Sale

Do this next: 7.1.9 Capacity

Related pages: 7.7 Define the Service Area, 7.8.7 Warranty, Refund, and Bad Debt Costs, 7.8.10 Fixed Costs, 7.8.11 Break-Even Point, 10.7.1 Payment Methods

Sources

• Internal Revenue Service, "IRS sets 2026 business standard mileage rate at 72.5 cents per mile, up 2.5 cents" (checked October 16, 2026)
• Internal Revenue Service, "Standard mileage rates" (checked October 16, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.