How SetSale Calculates Pricing

SetSale builds every customer price from one formula: your costs, divided by what's left after margin, commission, and the financing fee. Everything else on this page is a detail of that one calculation.

This article walks through how a quote gets from your costs to the number the homeowner sees. If your prices aren't coming out where you expect, the cause is almost always a setting covered here — usually overhead mode or rule order.

The one formula

Every price starts here:

TGM is your target gross margin, CP is your commission rate, and DF is the financing (dealer) fee. All three come out of the same denominator, which is why they all sit inside one calculation instead of being added on in stages.

Worked example. A job with $6,000 in equipment and materials and 20 hours of labor at $75/hr, priced at 42% margin, 8% commission, and a 6.9% financing fee:

The margin lands exactly where it was set because commission and financing were priced in from the start, not absorbed at the end.

Direct costs

Direct costs are everything the job physically consumes — equipment, materials, and labor.

Equipment cost is the sum of primary equipment, additional equipment, supplies, and thermostats. This is what you pay your distributor, not what you charge.

True labor cost is the wage plus the burden — payroll taxes, insurance, benefits, vehicle. A common estimate is base wage plus 25–30%. Total labor is install hours × (lead installer rate + helper rate).

Enter your cost, not your price. Everything above cost is handled by the margin rules.

Overhead

Overhead can be set as a percentage or a fixed dollar amount, and the two behave very differently. This is the most common misconfiguration in SetSale.

Percentage mode. Overhead is calculated as your rate × (equipment + labor), and those dollars sit inside the gross-up numerator. Revenue grows to cover them automatically.

Fixed dollar mode. The flat amount is treated as a cost, but it is not carried into the gross-up. Revenue does not grow to cover it, so your realized margin comes out lower than the number you set — on small jobs it can go negative.

If you price with a flat day rate for overhead, the cleaner setup is to fold it into your labor rate:

1. Add daily labor and daily overhead together.
2. Divide by hours in a day.
3. Set overhead to 0% in percentage mode.

For example, $1,010/day labor plus $3,400/day overhead is $4,410 ÷ 8 hours = $551.25/hr. Both are fixed daily costs, so combining them produces the same customer price on every job size, with one labor line and no separate overhead line.

If your margin already covers overhead — most gross-margin contractors — leave overhead at zero. Entering it twice prices you out of jobs.

Margin rules and rule order

SetSale walks your margin rules top to bottom for each line item and stops at the first match. A line can satisfy three rules; only the first one applies.

This is the single most common reason a price looks wrong. A broad rule near the top — "all equipment at 45%" — will catch items you meant to price with a specific rule further down, and the specific rule never fires.

Use the Matches count beside each rule to check. A rule showing "1 match" when you expected 40, or "258 matches" when you expected a handful, tells you the order is wrong. Move the specific rules above the general ones.

Rules can also set a different margin for a category (warranties at 20%, say) or exclude items from margin entirely so they pass through at cost.

Margin is not markup

Markup multiplies. Margin divides. They are not interchangeable, and the gap is large:

SetSale works in margin throughout.

Commission and the financing fee

Both are costs of the job, and both sit inside the pricing formula rather than being added at the end.

Commission is a percentage of the job, so it comes out of the same denominator as margin. Rates can differ by quote tier — Platinum, Gold, Silver — and the price adjusts accordingly.

The financing fee is what the lender charges you to offer the plan. Because it is a percentage of the total price, and the total price is what you're solving for, it has to be inside the formula. SetSale resolves that circularity in one step.

This is the part most contractors question, because the more familiar approach is a buy-down: set the price, then absorb the lender's fee out of the margin you already calculated. That works, but it means every financed job quietly earns less than the margin on the quote. Pricing the fee in up front produces a higher sticker and leaves the margin intact.

If you would rather not apply margin over commission or the financing fee, there is a rule to exclude them. Expect the displayed net margin to drop when you do — the cost is still there, it just isn't priced for.

Cash pricing

The financing fee stays in the price regardless of how the customer pays. The cash discount is what gives it back. Two modes:

• Fixed percentage — a flat discount such as 3%. Predictable, and the same on every quote.
• Actual fee — discounts by the difference between the financing fee and your card-processing fee, so it varies by loan tier.

Fixed percentage is the safer default unless a contractor specifically wants the cash price to track the fee.

Upgrades

Upgrades are the one place in SetSale where you enter the customer price, not your cost.

They are flat-rated: a UV light is +$750, a surge protector is +$300. SetSale works backward from that price through the applicable rule to derive the underlying cost and margin.

Because they're flat-rated, adding or removing an upgrade doesn't move the margin on the rest of the quote. It adds its price and its own profit.

Discounts, rebates, and tax

Discounts

Discounts apply to revenue before tax, not to the tax-inclusive total the customer sees. A 3% discount on $17,069 of revenue is $512 — not 3% of the $18,073 on the bottom of the proposal. The difference is the sales tax, which isn't yours to discount.

Stacked discounts compound rather than add. A 10% discount followed by a 3% cash discount is 12.7% off, not 13%, because the second one applies to what's left after the first.

Each discount also shrinks the revenue your margin is measured against while your costs stay fixed, so stacking pulls the net margin down even though the target margin setting hasn't changed.

Rebates vs. discounts — don't mix them up

A rebate is money coming back to you from a manufacturer or lender. It lowers what the job actually cost you, so it reduces your total cost.

A discount is money you gave away. It lowers your revenue.

Entering a discount as a rebate makes the job look more profitable than it was and keeps the margin health indicator green when it should be red. If reps have the ability to enter rebates, spot-check a few quotes at your weekly meeting.

Sales tax

Sales tax is added at the end and is never marked up. Whether it applies to equipment only or to the entire ticket is controlled in company settings — check that it matches how your state taxes installed equipment, because it changes the final number.

Net margin and the health indicator

The margin shown at the bottom of a quote is a net margin. It reflects every rule and exception on the job, not the target margin you set in settings.

So if your global target is 45% and the quote shows 41%, that usually isn't an error. Warranties priced at 20%, upgrades at flat rates, and anything excluded from margin all pull the blended number down. The green figure is the true margin on that specific job.

The health indicator — the green-to-red bar — is a floor for your sales reps. It does not affect pricing at all; it's visibility only. Set it after your pricing is stable, two to three points below your actual blended margin. That gives a rep room to discount without tripping it, and turns it red when a discount goes too far.

Check any line yourself: ÷ (1 − margin)

You don't need to open the pricing engine to know what a line item adds to the customer's price. Take the cost and divide by one minus your margin.

At 45% margin, divide by 0.55:

At 40% margin, divide by 0.60. At 42.5%, divide by 0.575.

This works for anything not excluded from margin and not an upgrade. Order doesn't matter either — eight hours at $250 and one hour at $2,000 produce the same price, because everything sits in the same numerator.

Common questions

My prices are higher than they were in my old system.

Usually because the old system didn't apply margin over the financing fee and commission. If you ran 45% there, the true margin on the job was closer to 37%. Setting 37% in SetSale reproduces your old prices. Your pricing wasn't wrong — it's a different methodology.

My spreadsheet uses a different profit percentage than the margin I entered.

Most spreadsheets gross up in two steps: profit and commission first, then financing on top. SetSale does it in one. The customer price is the same; the percentage is organized differently. To convert, use:

At 10% profit, 10% commission, and 12% financing, that's a 7.60% TGM. Check it by confirming 1 − 0.076 − 0.10 − 0.12 = 0.7040, the same denominator your sheet produces.

I raised the target margin and the whole price moved, not just the profit.

Raising the margin says your costs should be a smaller share of the total, so the total has to grow to make room. Commission and financing dollars grow with it, since both are percentages of a larger number — the rates themselves haven't changed.

I added hours but my margin didn't go up.

Hours are priced at a fixed margin, so more hours raise the gross profit, not the margin percentage. The reverse is where it pays off: finishing a 20-hour job in 16 drops those four hours of budgeted cost straight to the bottom line.

Where is my overhead line?

If you price on gross margin, overhead is already covered by the margin. Adding a separate overhead entry charges for it twice.

My customer is paying cash — why is a financing fee in the price?

The price is built the same way regardless of payment method. The cash discount is what hands the fee back. If you want it to track the fee exactly, switch the cash discount to actual-fee mode.