How to Price a Job Properly: A Simple Guide for Tradespeople

Knowing how to price a job properly is one of the most important skills you can develop when running a trade business.

You might be an excellent electrician, plumber, builder, carpenter, decorator, heating engineer, landscaper or other skilled tradesperson, but technical ability alone does not guarantee a profitable business.

You also need to know what your work really costs.

Many self-employed tradespeople start by using a simple calculation:

Labour + Materials = Job Price

Unfortunately, that can leave out a substantial proportion of the true cost of carrying out the work.

Your quotation may also need to recover:

• Business overheads
• Vehicle costs
• Fuel
• Tools and equipment
• Insurance
• Administration
• Time spent quoting
• Material handling
• Non-productive time
• Specialist equipment
• Subcontractors
• Waste
• Unexpected costs
• Profit

This is why pricing jobs for tradespeople needs to be based on real figures rather than simply guessing what the customer might be prepared to pay.

The objective isn’t necessarily to be the cheapest.

It is to charge a fair price that covers the true cost of completing the work and leaves a reasonable profit for the business.

Why Getting Your Job Price Right Matters

It is easy to be busy without being particularly profitable.

You might have a full diary, plenty of customers and money regularly arriving in your bank account.

But that doesn’t automatically mean the business is performing well.

Every job should ideally achieve three things:

• Recover the direct cost of doing the work.
• Contribute towards your business overheads.
• Generate profit.

If your prices consistently fail to achieve one of those objectives, your business can become increasingly difficult to sustain.

For example, imagine you underprice the average job by £75.

If you complete four jobs per week:

£75 × 4 = £300 per week

If you work for 46 weeks:

£300 × 46 = £13,800

That is potentially £13,800 lost in a single year because your prices were slightly wrong.

Small estimating errors become big numbers when repeated throughout the year.

Step 1: Estimate the Labour Required

The first step when learning how to price trade jobs is to estimate how much labour will be required.

This needs to be realistic.

Suppose you expect a job to require:

• 2 tradespeople
• 2 days
• 8 hours per day

The labour requirement is:

2 × 2 × 8 = 32 labour hours

You then need to apply an appropriate labour rate.

However, simply choosing a figure such as £30, £40 or £50 per hour because it “sounds about right” isn’t an accurate way to run a business.

You need to understand what every working hour actually costs you.

How to Calculate Labour Costs

Understanding how to calculate labour costs means looking beyond the amount you personally want to earn.

If you want to earn £25 per hour, that does not necessarily mean you should charge customers £25 per hour.

Your business has other costs that also need to be recovered.

These could include:

• Public liability insurance
• Van insurance
• Vehicle servicing
• Fuel
• Tools
• Tool replacement
• Mobile phone
• Software subscriptions
• Accountancy
• Advertising
• Website costs
• Workwear
• PPE
• Training
• Professional memberships
• Banking charges
• Administration
• Time spent quoting

The labour rate charged to customers therefore needs to support the whole business — not just your personal wage.

Step 2: Calculate Your Business Overheads

Before setting your labour rate, you need to calculate business overheads.

Overheads are the costs of running your business that cannot always be charged directly to one specific job.

For example:

The actual figures will obviously be different for every business.

The important point is this:

Those costs have to be paid from the money generated by your jobs.

If you don’t include them in your pricing system, they will effectively be taken from what you thought was your profit.

Step 3: Work Out Your Billable Hours

One of the biggest mistakes in trade business pricing is assuming that every hour you work can be charged to a customer.

It can’t.

During a normal week, you may spend time:

• Visiting potential jobs
• Preparing quotations
• Answering enquiries
• Ordering materials
• Collecting materials
• Returning materials
• Completing paperwork
• Updating accounts
• Maintaining tools
• Cleaning your van
• Attending training
• Dealing with suppliers

You might work 40 hours but only invoice customers for 30.

That difference matters.

When setting your hourly rate, your overhead costs need to be recovered through the hours that actually generate income.

Step 4: Calculate Your True Hourly Rate

Suppose your business has annual overheads of:

£18,000

And after allowing for holidays, administration, quoting and other non-billable work, you estimate that you have:

1,600 billable hours per year

Your overhead cost per billable hour is:

£18,000 ÷ 1,600 = £11.25 per hour

Suppose you also want to earn:

£25 per hour

Your starting labour cost becomes:

£25 + £11.25 = £36.25 per hour

That is before considering any additional profit allowance.

This is why there is no universal tradesman hourly rate that suits every business.

One electrician may need to charge £45 per hour while another needs £55 or £65.

Their businesses may have completely different overheads, working patterns and income requirements.

Your rate should be based on your figures.

Step 5: Price Materials Properly

Materials are another area where tradespeople can unintentionally lose money.

Suppose you buy £1,000 worth of materials and charge the customer exactly £1,000.

You have recovered the purchase price.

But what about your time and costs associated with:

• Ordering them
• Collecting them
• Checking deliveries
• Handling them
• Storing them
• Returning surplus items
• Dealing with damaged items
• Dealing with shortages
• Warranty responsibility

Many trade businesses therefore apply a material mark-up.

For example:

Material cost: £1,000

20% mark-up: £200

Material selling price: £1,200

There isn’t one mark-up percentage that is right for every trade or every job.

What matters is understanding why you are applying it and ensuring that your business is being properly compensated.

Step 6: Include Vehicle and Travel Costs

Your vehicle is probably one of the biggest costs in your business.

It is easy to think only about fuel.

But the true cost of running a van can include:

• Purchase price or finance
• Depreciation
• Insurance
• Vehicle tax
• MOT
• Servicing
• Repairs
• Tyres
• Breakdown cover
• Fuel
• Parking
• Cleaning

You may decide to include these costs within your general overhead calculation, charge some journeys separately, or use a combination of both methods.

The important thing is that the costs are included somewhere.

Driving 30 miles to complete a £100 job isn’t free simply because there is already diesel in the van.

Step 7: Include Equipment, Plant and Other Job Costs

When considering how to price building work or larger installation jobs, there may be costs that don’t fall neatly under labour or materials.

Examples include:

• Scaffold
• Access equipment
• Mini diggers
• Plant hire
• Waste skips
• Specialist tools
• Testing equipment
• Parking charges
• Permits
• Waste disposal
• Subcontractors

These should be identified before the quotation is submitted.

If you forget a £400 scaffold charge on a job, that £400 usually comes directly out of the money you expected to make.

Step 8: Allow for Waste and Real-World Conditions

Estimates need to reflect what actually happens on site.

Jobs rarely proceed perfectly.

There may be:

• Material waste
• Minor breakages
• Additional fixings
• Consumables
• Unexpected preparation
• Difficult access
• Small increases in labour time

That doesn’t mean simply adding a large contingency figure to every job.

It means using experience and previous job information to produce realistic estimates.

This is one reason why estimating jobs for tradespeople becomes much easier when you record what actually happened on previous jobs.

Step 9: Add Profit

A common misunderstanding is that your wage and your profit are the same thing.

They aren’t.

Your labour allowance pays you for doing the work.

Profit is the return the business makes after its costs have been covered.

Profit helps the business:

• Build cash reserves
• Replace vehicles
• Replace tools
• Invest in equipment
• Survive quieter periods
• Spend money on marketing
• Employ people
• Grow

A business that only covers its costs may keep operating, but it has very little room for unexpected problems or future investment.

How Much Profit Should You Add to a Job?

There is no single answer to how much profit to add to a job.

The appropriate level depends on factors such as:

• Type of work
• Business overheads
• Competition
• Risk
• Complexity
• Contract conditions
• Customer expectations
• Size of the project
• Market conditions

The most important thing is that profit is deliberately considered when pricing rather than simply hoping something will be left over at the end.

Mark-Up and Profit Margin Are Different

Mark-up and profit margin are often confused.

Suppose a job costs you:

£8,000

You apply a 25% mark-up:

£8,000 × 25% = £2,000

Selling price:

£10,000

Expected profit:

£2,000

But your profit margin is:

£2,000 ÷ £10,000 × 100 = 20%

Therefore:

25% mark-up = 20% profit margin

This distinction becomes increasingly important when you start monitoring the financial performance of your business.

Step 10: Build the Complete Job Price

Let’s look at a simple example.

Suppose the selling price is:

£6,250

Expected profit:

£6,250 - £5,000 = £1,250

Expected profit margin:

£1,250 ÷ £6,250 × 100 = 20%

You now have a much clearer picture of whether the job is financially worthwhile.

Using a Job Pricing Calculator

A good job pricing calculator can help remove much of the guesswork from estimating.

Instead of calculating labour, overheads, materials, mark-up and profit separately every time, a pricing system can bring the figures together.

This is particularly useful when you want to answer a very simple question:

If I take this job at this price, what am I likely to make?

Trade Profit is designed to help tradespeople answer exactly that question.

Step 11: Compare the Estimate With the Finished Job

Good estimating shouldn’t stop when the customer accepts your quotation.

When the job is finished, compare what you expected with what actually happened.

For example:

That information is extremely valuable.

Perhaps a particular type of installation consistently takes longer than expected.

Perhaps travel costs are higher than you thought.

Perhaps you regularly underestimate materials.

These are not simply problems.

They are information you can use to improve your next quotation.

Build Your Own Labour-Time Database

One of the best resources a trade business can develop is a record of how long different types of work actually take.

An electrician might record:

• Consumer unit replacements
• Additional sockets
• EV charger installations
• Lighting alterations
• Fault-finding jobs

A plumber might record:

• Radiator replacements
• Tap replacements
• Toilet installations
• Boiler servicing
• Shower installations

A decorator might record:

• Preparing a room
• Painting walls
• Painting woodwork
• Hanging wallpaper
• Removing wallpaper

Over time, you develop estimating information based on your own experience.

That is far more useful than constantly guessing.

For a more detailed approach to labour estimating, materials, overheads and producing accurate quotations, see the:

See also: The Complete Guide to Estimating for Tradespeople — a more detailed look at labour estimating, materials, overheads and producing accurate quotations.

Why Tradespeople Underprice Work

There are several common reasons.

Fear of Losing the Job

You calculate that the job should cost £4,800.

Then you start wondering:

“Will the customer pay that?”

So you reduce the quotation to £4,400.

Then perhaps to £4,200.

Nothing about the cost of completing the job has changed.

You have simply sacrificed profit because you are worried about losing the work.

Winning every quotation isn’t necessarily a sign of good pricing.

Sometimes the most profitable job is the one you don’t win.

Copying Competitors’ Prices

You hear that another local tradesperson charges £250 per day.

So you charge £250.

But you don’t know their financial circumstances.

They might:

• Have much lower overheads
• Own their vehicle outright
• Have no employees
• Work from home
• Have different income requirements
• Be semi-retired
• Work longer hours

Or they might simply be undercharging.

Your prices should reflect your business, not somebody else’s.

Forgetting Non-Billable Time

You may spend an hour visiting a prospective job and another hour preparing the quotation.

If you don’t win the work, you receive nothing for those two hours.

The jobs you do win therefore need to contribute towards the cost of the jobs you don’t win.

The same applies to administration, bookkeeping and other non-chargeable activities.

These costs don’t disappear just because you can’t put them directly onto a customer’s invoice.

Confusing Turnover With Profit

Turnover can look impressive.

Suppose a customer pays you:

£10,000

But perhaps:

• £4,000 goes to material suppliers
• £2,500 covers labour
• £1,000 contributes towards overheads
• £500 covers other expenses

The amount that remains as genuine profit may be considerably smaller than the £10,000 initially arriving in your bank account.

That’s why turnover alone tells you very little about how profitable a trade business actually is.

Hourly Rate or Day Rate?

Both can work.

Suppose you calculate that your appropriate selling rate is:

£45 per hour

For an eight-hour productive day:

£45 × 8 = £360

You might therefore use:

£360 per day

when estimating some jobs.

However, labour rate is only one part of the calculation.

Materials, travel, equipment, risk and other job costs still need to be considered.

What About Fixed-Price Jobs?

Many customers prefer a fixed quotation.

Fixed-price work can also reward efficiency.

Suppose you estimate that the labour element of a job will take 20 hours:

20 hours × £50 = £1,000

If experience and efficiency allow you to complete the job in 17 hours while maintaining the required standard, the agreed labour price is still £1,000.

You have improved the profitability of the job.

But fixed-price work also places estimating risk on the contractor.

If you estimated 20 hours and the job actually requires 30, the difference can significantly reduce your profit.

That is why good estimating records are so valuable.

How Trade Profit Helps

You don’t necessarily need complicated accounting software every time you want to know whether a job is worth doing.

Trade Profit is designed specifically to help self-employed tradespeople and small trade businesses understand the financial position of individual jobs.

It can help you bring together important figures including:

• Labour
• Hourly or daily rates
• Business overheads
• Materials
• Material mark-up
• Vehicle costs
• Other job costs
• Forecast profit
• Actual profit

The principle is simple:

Before starting the work, understand what you expect the job to make.

Then compare your forecast with the actual result when the job is complete.

The more information you collect, the better informed your future pricing decisions can become.

A Simple Job Pricing Formula

A useful starting point is:

Labour + Materials + Expenses + Overheads + Profit = Selling Price

Your own calculation may be more detailed.

But each element needs to be considered somewhere within your pricing system.

Leaving a cost out doesn’t make it disappear.

It usually means the cost ends up being taken from your profit.

More Help With Running a Profitable Trade Business

Correct pricing is only one part of running a successful business.

Estimating, marketing, managing costs, winning work and controlling cash flow all have an impact on the final result.

For more practical information, tools and guides specifically created for self-employed tradespeople and small trade businesses, visit:

Trade Skills Hub Academy — more practical guides and resources for self-employed tradespeople and small trade businesses.

Final Thoughts

Knowing how to price a job isn’t about finding the highest price you think a customer will accept.

It is about understanding what the job really costs and setting a price that gives your business a reasonable return.

Before sending your next quotation, ask yourself:

• Have I allowed enough labour time?
• Is my hourly or daily rate based on real figures?
• Have I included my business overheads?
• Have I priced materials properly?
• Have I included vehicle and travel costs?
• Have I included equipment and other expenses?
• Have I allowed for the unexpected?
• Have I included a reasonable profit?
• Do I know approximately what I expect to make from the job?

If you can’t confidently answer those questions, your quotation may still contain too much guesswork.

Stop Guessing What a Job Will Make

Use Trade Profit to bring your labour, materials, overheads and other job costs together and see the expected financial result before you commit to the work.