True Cost
You think the project cost $5k. You didn't count your 20 hours. True cost is the actual full cost of delivering your service—including your time, overhead, and tools. Many domain experts underestimate it. When you don't know true cost, you can't know margin, and you can't know if an investment (hire, tool, new offer) will pay off. Job costing and cost analysis are how you get there.
Same project, true cost vs. guess. Guess: "We had a contractor for $2k and some tools, so maybe $2.5k." True cost: your 15 hours at $250 = $3.75k, contractor $2k, tools $300, overhead share $600 = $6.65k. If you charged $8k, margin is $1.35k—not the $5.5k you might have assumed. True cost is the basis for pricing and for ROI. You need it to set value pricing that actually leaves margin, and to evaluate whether a hire or tool pays for itself.
Actual full cost: your time, labor, overhead, tools. Know it so you know margin and can make decisions.
How to get it
-
Your time at opportunity cost. What's an hour of your time worth? Use that (or your effective rate) when you count hours on a project. Don't leave your time out.
-
Direct costs. Contractor, materials, any tool or cost that attaches to that job. Track per project so you see variation.
-
Overhead allocation. Rent, software, admin—allocate a share to each job. Total overhead ÷ total revenue or hours gives you a rate. Add it to each job's cost.