Pricing is one of the hardest parts of running a trade business. Too high and you lose work. Too low and you don't make money. Here's a framework for pricing your work profitably.
Know Your Costs
Before you can price a job, you need to understand your costs:
- Direct costs: Materials, equipment hire, subcontractors
- Labour: How long will the job take?
- Overheads: Van, tools, insurance, phone, accounting
Many tradespeople forget to factor in their overheads when pricing jobs. This means they're not actually making as much as they think.
Calculate Your Day Rate
Work out what you need to earn per day to cover your costs and make a decent profit. Consider:
- Your target annual income
- How many billable days you'll work (remember holidays, sick days, admin time)
- Your overhead costs
Divide your target income plus overheads by your billable days – that's your minimum day rate.
Fixed Price vs. Day Rate
For straightforward jobs where you know exactly what's involved, fixed prices work well. Customers like knowing the total cost upfront.
For jobs with unknowns or ongoing work, a day rate (or hourly rate) might be more appropriate. Be clear with customers about which you're using and why.
Factor in Complexity
Not all jobs are equal. A job in a cramped space, at height, or with difficult access takes longer and is harder work. Price accordingly. Emergency callouts or weekend work should command a premium.
Research the Market
Know what other tradespeople in your area charge for similar work. You don't have to be the cheapest, but you need to be competitive. If you're significantly more expensive, be prepared to justify why (experience, quality, guarantees).
Don't Race to the Bottom
Competing purely on price is a losing game. There will always be someone cheaper. Focus on being good value – quality work at a fair price – rather than being the cheapest option.
Review Regularly
Costs go up over time – materials, fuel, insurance. Review your prices at least once a year to make sure you're still profitable. Don't be afraid to increase your rates.