At its most basic level, Service Pricing in Aspire is based on:

Your company might be using a desired gross margin percentage to figure out how to price a job or an item. While this can work, somewhat, we often find that companies don’t fully consider their overhead costs, or even net profit, when creating those desired gross margins.

This is why Aspire uses the Multiple Overhead Recovery System (MORS), instead. If your company has targeted margin percentages for your estimates, it may take time at first to reconsider how this looks. Find out how below!

Pricing in Aspire is driven by the concept of Multiple Overhead Recovery System (MORS). MORS is the idea that prices charged for services are based on cost plus appropriate markup percentages on that cost. Markups, instead of gross margins, are used to recover overhead expenses.

⭐ Using the MORS approach, you’ll need to determine appropriate markups for each item type to recover your overhead. To do this, let’s take an Aspire-specific look at pricing!

In understanding Aspire, we want to continue the concepts discussed at the beginning of this series by explaining how these are applied in Aspire.

As an overview:

Let’s discuss the first building block: cost. As we mentioned before, cost, or more specifically, direct cost, is the dollar amount your company is spending to buy something to complete a job you are bidding for.

Your item costs are set up on your item records within the Item Catalog in Administration. To view how items are created and costs are entered, review the different item types in our article, Adding Items to the Item Catalog.

Next, let’s talk about the second building block: markups. A markup is an additional factor applied to the cost of goods to recover overhead that impacts the price you are selling an item. These are shown as a percentage. Going back to our equation, markups really look like this:

Pricing markups are used to cover overhead expenses. Overhead, also called overhead expenses or indirect costs, are expenses that don't relate directly to the services you provide but still help keep your operations running.

To review so far:

💡 So, creating your markups are an essential part of building your pricing to help recover overhead costs! Let’s put these two ideas together to talk about the next building block: Price!

Price is the dollar amount your company sells an item or service to your customer to complete a job you are bidding for.

To put it all together, see the example below for calculating the price of a single item!

For one hour of labor, the calculated price would be:

So far, we’ve explained these concepts with only one item type: labor. However, we know that in Aspire there are 5 item types used for pricing. That’s exactly what Aspire considers when calculating your total service price!

For the labor item type, we said the equation was:

Now, let’s apply this equation to each of the 5 item types to understand the total price for a service!

So if:

This means that:

💡 While you don’t need to remember this equation, it’s important to understand where your pricing comes from as you build estimates in Aspire! However, we’re not done just yet. Let’s take a look at one more concept: net profit.

​Often, your company knows the cost of your item types and the price you are selling them to the customer. However, you might not know the reason behind the price or cost.

Normally, the gross profit difference between the price you are selling an item and the cost of the item is used for overhead expenses and, hopefully, for your net profit at the end of the year.

💡Tip: Adding a desired net profit percentage is not something you need to do right now if you are working on moving your gross margins to markups. Consider removing desired net profit dollars from your markups and into the net profit field when the next pricing review comes instead!

Net Profit is applied after all markups and costs have been calculated. However, the net profit field in Aspire should really be considered as the desired net profit.

Labor Price + Material Price + Equip Price + Sub Price + Other Price = Total Service Price

Labor Price + Material Price + Equip Price + Sub Price + Other Price = Total Service Price

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(1 - Net Profit %)

Notice how the calculation is similar, but we have added an extra part!
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As an example, if we want our company’s desired net profit to be 10% after our revenue and costs are recognized, the calculation would look like the below:

Labor Price + Material Price + Equip Price + Sub Price + Other Price = Total Service Price

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(1 - .10)

As your company looks to scale, bidding with overhead expenses and net profit in mind is key to unlocking the power of Aspire. 🔑 However, focus on moving your gross margin percentages to markups first! (We'll show you how to do this in another section.)

Now that we’ve discussed how markups work and affect your service level pricing in general, let’s look at why services, even on the same estimate, can be priced differently from each other in our next article, The Pricing Hierarchy in Pricing Markups!
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