Pricing jobs as a tradesperson
Reading time: 7 minutes
Coming up with a price for jobs is somewhere between an art and a science, but mastering it will mean you satisfy your customers, and make a profit...
Basic pricing concepts
Pricing = Quantifying + Costing
One way to look at pricing is to see it as how much of something you need, and what that something then costs. You can break it up into two parts:
Stage 1: Quantifying - This is what you do on your initial site visit when you are quoting. As the name implies, your mission is to figure out the quantities of everything needed for the job, normally broken down into labour, materials, waste etc.
Stage 2: Costing - This is normally done at home when you’re writing up your quote. You can call suppliers, look online and use your own experience to make your calculations for what the quantities work out to in real money terms.
Labour, materials and waste
There are many different ways in which you can structure your pricing. Invariably the numbers change as it's entirely up to you how much you charge for your services and materials. At their core though, your charges always relate to labour, materials and waste. They are a great way to break down a job when it comes to pricing. If you can account for those, and add a margin on the top, you’re on your way to a winner.
There is a difference between earning money, for example, your day rate, and making money - your profit. Every business (and that includes sole traders), should be aiming to make a profit.
Margin is also used as a buffer to protect yourself against making a loss.
Margin should take into account:
- Business profit
- Time taken to organise materials and subcontractors
- Any potential shortfall in materials and subcontractor costs
- Possible unforeseen circumstances and additional works (within reason)
Quantifying on site
Pricing a job starts when you are on your initial site visit quoting. You don't want to waste time going back there because you missed something, so be thorough - as the old saying goes, measure twice, cut once.
Each job you price will be made up of smaller parts, so methodically work your way through the whole job starting at the beginning going through by its component parts. At this point your goal is to quantify each component of work for the labour, materials and waste.
Labour - How many days will it take 1 person to do this work?
Materials - What materials are required and how much of them ?
Waste - Is a skip required, if yes what size. If not, how many bags of waste will there be? How will the waste be removed?
Pro tip - take photos: Taking photos at this stage is also a great idea, they may help you later if you forget something.
Using formulas and m2
Depending on the job or the trade there may be an opportunity to price using a standard formula or a by square meterage, which could save you time.
For example, you may use a formula for the basic shell of an extension, but with a high finishing spec with unusual features, you would have to adjust the price up to cover it.
Pricing using a m2 formula for trades like plastering and flooring are very common, as the methodology of the work is invariably the same. After a couple of jobs you will soon start to understand how many m2 you can achieve in a day, and therefore work out your price per m2 for future jobs. It’s still best practice to scrutinise each job individually though, in case there are any outstanding differences.
Pro tip - go with your gut: Use your experience and your instinct. They are the ultimate intrinsic pricing guide, and will help you to further hone your price to ensure its right for each job.
Quantifying and costing - labour, materials and waste
The basic formula for pricing labour costs the number of people who will be working on the job, multiplied by how many days it will take them.
- Figure out who will be on the job, yourself and any other sub-contractors (whom you are responsible for).
- Map out the entire job by breaking it down into smaller components from start to finish
For example, installing a new stud wall might be made up of the following components:
- Set up
- Remove existing wall
- Install new timber studs
- Install plasterboard
- Fit skirting
- Clean up
Once you know all the components, you can begin to price it up:
- Work through each component in your mind and note down how long it will take for one person - one hour, half a day, a day? Make sure you don’t underestimate how long things might take.
- Multiply the number of hours/days by your day rate - this is your basic labour cost
- If you have subcontractors working for you, add their total cost
- Then add an additional margin, normally around 20%.
- Add it all together and you have your total labour cost
- Five days (your labour time) x £180 (day rate) = £900
- Subcontactor (fixed price) = £450
- Add 20% margin
- Equation: 900 + 450 +20% = £1620
Organising, collecting, and unloading of materials take time and should be priced into the job:
- Figure out what materials you think you need
- Add an additional monetary value of 10-20% to cover any possible shortfall
- If it's a job like tiling or laminate flooring with unavoidable wastage, add an additional 5 -10% of materials to your order
- Add on your margin for organising, collecting and unloading it all, typically something like 10-20%
- Laminate and underlay = £250
- +15% (monetary value to cover shortfall)
- + 5% (material wastage value)
- + 20% (margin)
- Equation: £250 + (15% + 5% = 300) + 20% = £360
If it's a bigger job, it's likely you'll need to price in at least one skip load of waste. If it's a smaller job, you might price in a waste collection service or remove the waste yourself. As ever, you need to cover the cost of the disposal, and your time for organising it all:
- Figure out the rough total waste
- Cost method of removal (skip, collection service etc)
- Add 10 - 20% margin
- One x two-yard skip = £150
- + 20% margin
- Equation: £150 + 20% = £180
Costing in other factors
- How busy are you - If you’re super busy, you might think about charging more to make it worth your while...and visa versa. When you’re in demand, your time becomes more valuable.
- Access - How easy is it to get to and from your work area on site from the van? If it’s a 10 minute roundtrip to get materials and tools, it will soon add up.
- Unknowns - When you come to quote, you might be able to foresee some potential issues down the line, so it’s sensible to make allowances for this in your price at the start
- Final sense check - if your gut tells you the price is too high or low, perhaps go through it one more time and sense check and adjust accordingly.
Things to keep in mind
- Be prepared to do the work - Make sure you are happy with your price when you hand it to your clients. You want to be sure that you haven't undersold your services - you can’t afford to work for nothing.
- Cheap quotes doesn't mean winning work - In fact, it’s quite the opposite sometimes. Customers will likely be getting multiple quotes and if you are substantially cheaper than your competitors, it might leave doubt as to the quality of your services. It's also basic human psychology to think more expensive means more valuable (within reason).
- Take your time, think methodically - Take your time to really go through the job step by step, to try and try to account for everything. Even if you do this, you'll still likely miss things.
- Generous quantifying - People always underestimate how long a job will take or how many materials they will need. Be generous when quantifying, as you will surely not think of everything.
- Add your margins - Make sure you give yourself the chance to make a decent profit. If you feel like you’re not earning any money on a job, you are more likely to rush or cut corners, which is no use to anyone.
- Labour, materials and waste - These are your three pillars which all your costing should come back to. They’re a great reference point to break down all the components of any job.