How to Price Your Work Without Leaving Money on the Table

Pricing is where most contractors lose money. Not because they're bad at their trade - but because they don't understand their true costs. They guess at day rates, underestimate time, forget about overheads, and wonder why they're working 60-hour weeks but barely breaking even.

This guide shows you exactly how to calculate what you need to charge to actually make money. No guesswork, no "what the other guy charges" - just proper pricing based on your real costs and desired profit.

The Fatal Pricing Mistake

Most contractors price like this:

1. Work out material costs
2. Estimate how long the job will take
3. Multiply time by their day rate (usually £150-250)
4. Add materials + labour = quote price

This is wrong. Here's why:

• Your "day rate" is probably based on what others charge, not your actual costs
• You're not accounting for unbillable time (admin, travel, quotes that don't convert)
• You've forgotten about tool depreciation, vehicle costs, insurance, etc.
• There's no profit margin for growth or bad months
• Jobs always take longer than estimated

The result? You're busy, exhausted, and broke.

Calculate Your True Hourly Cost

Before you can price work, you need to know what it costs you to operate per hour. Here's how:

Step 1: Annual Business Expenses

List everything your business costs per year:

Step 2: Calculate Billable Hours

You don't work 2,080 hours per year (52 weeks × 40 hours). You have:

• Holidays: 28 days (UK statutory minimum) = 224 hours
• Bank holidays: 8 days = 64 hours
• Sick days: Average 5 days = 40 hours
• Admin time: 4 hours/week = 208 hours
• Quotes that don't convert: 2 hours/week = 104 hours
• Travel time (unbillable): 5 hours/week = 260 hours

Total unbillable time: 900 hours
Actual billable hours: 2,080 - 900 = 1,180 hours/year

Step 3: Add Profit Margin

A 20-30% profit margin is standard for sustainable contractor businesses. This covers:

• Quiet months (seasonal dips)
• Business growth (new equipment, hiring)
• Emergency repairs (van breakdown, tool replacement)
• Tax buffer (estimated tax payments)

This is your true minimum hourly rate to sustainably operate. At a 7.5-hour working day, that's a £355/day minimum day rate.

Pricing Materials

Materials aren't just "pass through" costs. You need to mark them up to cover:

• Time spent sourcing and purchasing
• Fuel to collect materials
• Storage costs
• Risk of damage/wastage
• Cash flow impact (you buy now, get paid later)

Standard Material Markup

Average markup across trades: 25-35%

Don't feel guilty about markup. Customers aren't just paying for materials - they're paying for your expertise in knowing what to buy, where to get it, and guarantee that it's the right spec for the job.

Quoting Jobs Accurately

Time Estimation (The Hardest Part)

Jobs always take longer than you think. Build in buffers:

1. Estimate the perfect-scenario time (no interruptions, all materials arrive, no surprises)
2. Add 25% for reality buffer (customer questions, minor issues, breaks)
3. Add 10% for unknowns (hidden problems, extra work discovered)

Example: Rewire estimate

• Perfect scenario: 16 hours
• + 25% reality buffer: 20 hours
• + 10% unknowns: 22 hours
• Quote for 22 hours, not 16

The Quote Formula

Day Rate vs Hourly Rate vs Fixed Price

When to Use Each

Hourly Rate (£45-65/hour typical)

• Best for: Unpredictable jobs, call-outs, repairs, diagnostics
• Pro: You're paid for actual time
• Con: Customers worry about time-wasting, prefer fixed quotes

Day Rate (£300-500/day typical)

• Best for: Ongoing work, maintenance contracts, subcontracting
• Pro: Simple, predictable for both parties
• Con: Capped earnings if efficient; lose money if job overruns

Fixed Price

• Best for: Standard jobs you've done 100 times
• Pro: Customer likes certainty; you can profit from efficiency
• Con: Risk of underquoting; scope creep eats profit

Common Pricing Mistakes

1. Pricing Based on Competition

"Everyone else charges £200/day so I do too." Your costs aren't their costs. Your desired income isn't theirs. Price for YOUR business, not theirs.

2. Forgetting Unbillable Time

You only work billable hours 60-65% of the time. The rest is admin, travel, quotes. Factor this in or you're working for free 35% of the week.

3. No Material Markup

Passing materials through at cost means you're spending 2-3 hours (sourcing, collecting, checking) for free. Markup is payment for your expertise and time.

4. Underestimating Job Time

Jobs take longer than estimated. Always. Add buffers or you'll hit your hourly rate target in perfect conditions only (i.e., never).

5. Not Reviewing Pricing Annually

Insurance goes up. Fuel goes up. Material costs go up. Your prices should too. Review and adjust every January.

Raising Your Prices

If your current prices are too low (most contractors'), here's how to fix it without losing customers:

1. Grandfather existing customers - Keep current prices for repeat customers temporarily
2. New customers at new rates - All new quotes at proper pricing
3. Transition over 6-12 months - Gradually bring existing customers up to new rates
4. Add value, not excuses - Don't apologise for proper pricing. Better service, faster turnaround, guarantees justify higher prices

You'll lose some customers. Good. They weren't profitable anyway. The right customers pay fair prices for quality work.

The Bottom Line

Pricing isn't about what feels right or what others charge. It's maths:

1. Calculate your annual overheads
2. Work out billable hours realistically
3. Add your desired salary
4. Add 25% profit margin
5. That's your minimum hourly rate

Charge less and you're not running a business - you're running a hobby that's slowly bankrupting you. Charge properly and you can build something sustainable.