Pricing a job
so it actually pays.

What does an hour of your time actually cost?

Start with the hours, because this is where most pricing goes wrong. A working year is around 260 weekdays. Take off holiday, bank holidays, a fortnight of illness and slow weeks and you have perhaps 230 working days. Then take off the days spent quoting, chasing, buying materials and doing paperwork — for most trades that is a day a week, which leaves roughly 180 genuinely billable days.

Now the overheads: van, fuel, insurance, tools, phone, accountant, software, the pitches you did not win, training and certifications. Total them for the year.

Overheads divided by billable hours is what an hour costs you before you have earned anything at all. For most one-person trades that number is considerably higher than the figure they have been quoting from, which is why a busy year can end with nothing in the bank.

How do you build the number?

1. 1

   Estimate the labour honestly

   In hours, including setting up, clearing up and travel. Then add the contingency you know from experience you will need — the ceiling that wants a second coat, the fitting that is not standard.

2. 2

   Multiply by your true hourly cost

   The one you worked out above, not the one you would like to be able to charge.

3. 3

   Add materials at cost

   At current prices, not last quarter's. Material prices have moved fast enough recently that a quote written from memory can be wrong before it is sent.

4. 4

   Add a handling margin on materials

   You are carrying the cost, sourcing them, collecting them and guaranteeing them. Ten to twenty percent is normal and defensible.

5. 5

   Add profit

   Profit is not your wage — your wage is in the hourly cost. Profit is what pays for the next van and absorbs the job that goes wrong. A job priced at exactly cost plus wage has no margin for anything to be harder than expected.

6. 6

   Sanity-check against the market

   Not to copy it, but to know where you sit. If your honest number is well above the going rate, the problem is usually efficiency or the type of work you are chasing, not the arithmetic.

Quote or estimate — which are you giving?

A quote is a fixed price. Accepted, it forms a contract, and you carry the risk if the job takes longer than you thought. An estimate is a considered best guess that can move — but only within reason, and you have to tell the customer promptly when it is going to.

Use a quote when the scope is genuinely knowable: a known number of sockets, a measured area, a specified fitting. Use an estimate when you cannot see what is behind the wall.

Whichever you give, write down what is included, what is excluded, what assumptions it rests on and how long it stands for. Almost every payment dispute traces back to a scope that was clear in one head and not in the other.

Why cheap work loses money twice

• —An underpriced job costs you the margin, and then it costs you the slot — you cannot take the properly priced job that comes in on Tuesday because you are still on Monday's.
• —Customers who choose purely on price are the ones who query the invoice, pay late and rarely come back. Winning on price selects for exactly the customers you want least.
• —A low win rate is not a failure. Winning every job you quote for usually means you are the cheapest, which means you are subsidising the market.
• —Raising prices loses some customers and almost always raises total profit, because the work you lose is the work that was earning least.
• —Track what jobs actually took against what you priced. Two months of that will tell you more about your pricing than any formula.