How to price a job so you actually make money
A lot of tradies set their rate by looking at what everyone else charges and coming in a little under. It feels safe. It is also how good tradies end up working flat out and still feeling broke. Your price has to cover what your business actually costs to run, then pay you, then leave something over.
Here is a simple way to work it out. Grab last year's numbers, or your best guess if you are new.
Step 1: add up what the business costs to run
List everything you pay over a year just to be able to work. For example:
- Vehicle: repayments, fuel, rego, insurance, servicing, tyres
- Tools and equipment, including replacing the ones that wear out
- Insurance: public liability, income protection, tools
- Phone, software and subscriptions
- Licences, tickets and training
- Accountant and bookkeeping
- Advertising and marketing
- Your own super. As a sole trader nobody else is paying it for you.
Add it all up. That is your yearly running cost before you have paid yourself a cent.
Step 2: decide what you want to earn
Pick the income you want to take home for the year, before tax. Be honest. If you would earn it as an employee, you should be earning at least that on your own, because you are carrying all the risk.
Step 3: work out your real billable hours
This is where most people get it wrong. You are not billing 40 hours a week, 52 weeks a year. Take out:
- Holidays, public holidays and sick days
- Rain days and quiet weeks
- Quoting, travel, picking up materials, paperwork and phone calls
Plenty of sole traders find they can bill far fewer hours than they are actually working. Use your real number, not the hopeful one.
Step 4: do the sum
Running costs plus the income you want, divided by your real billable hours. That is the minimum you need to charge per hour just to break even on your goals.
Then add a margin on top. The margin is what pays for the slow month, the broken tool, the customer who pays late, and growing the business. Without it, one bad month wipes you out.
Materials
Do not supply materials at cost. Your time picking them up, the risk of returns and the money you have tied up until the customer pays are all real costs. Most trades add a markup on materials. Whatever you decide, be consistent and make it part of how you price.
Want to see how a quote, invoice and payment look in a real app? Run a whole job on our website. Free, no sign up.
Hourly or fixed price?
Hourly suits work where you cannot see the full job until you start: repairs, maintenance, fault finding. It protects you from surprises.
Fixed price suits work you know well. Customers like knowing the total, and if you are fast and good at what you do, a fixed price rewards you for it instead of punishing you for being quick.
Plenty of tradies do both: a fixed price for the known work, and an hourly rate written into the quote for anything extra. "Any work behind the wall charged at our hourly rate plus parts" is fair to everyone.
Pricing crew work
If you send more than one person, price it so the customer can see it: number of workers x hours x rate. Make sure your rate for each worker covers what that worker costs you, including wages, super and insurance, not just their hourly wage.
Do not race to the bottom
There will always be someone cheaper. Usually they are cheaper because they have not done the sums above, and they will not be around for long. You win on being reliable, clear and quick, not on being the lowest number. A customer who only cares about price is rarely the customer who refers you to their friends.
If you are losing every quote on price, look at how the quote is presented and how fast it goes out before you drop your rate. Often the problem is not the number.
Review your prices every year
Fuel, insurance and materials go up every year. If your prices do not, you are taking a pay cut without noticing. Look at your numbers once a year and adjust. Let regular customers know a few weeks ahead. Most will not blink.
How Its All Sorted helps
In Its All Sorted you put your usual rates in once, per hour, per day or per metre, and they fill in automatically when you quote. Crew work goes on one line as workers x hours x rate, so every quote is priced the way you worked it out.