#How to Price Your Trade Work Competitively Without Underselling

Pricing your work correctly is one of the most challenging aspects of running a trade business. Price too high and you'll lose jobs to competitors. Price too low and you'll work yourself into the ground without making a profit. This guide will help you develop a pricing strategy that's both competitive and profitable.

#Understanding Your Costs

Before you can price your work, you need to understand your costs. Your total cost includes:

#Direct Costs

• Materials: All materials needed for the job
• Labour: Your time (or your team's time) at your hourly rate
• Subcontractors: If you need to hire specialists
• Equipment hire: Tools or machinery you need to rent

#Indirect Costs (Overheads)

These are costs that apply to your business as a whole, not just one job:

• Vehicle costs: Fuel, insurance, maintenance, depreciation
• Tools and equipment: Depreciation and replacement costs
• Insurance: Public liability, professional indemnity
• Marketing: Website, advertising, business cards
• Office/admin: Phone, internet, accounting software
• Training: Keeping skills up to date
• Tax and National Insurance: Your tax obligations

#Calculating Your Hourly Rate

To calculate your minimum hourly rate:

1. Add up all annual overheads (insurance, vehicle, tools, marketing, etc.)
2. Add your desired annual salary
3. Add profit margin (typically 10-20%)
4. Divide by billable hours (not total hours - account for admin, travel, etc.)

Example:

• Annual overheads: £15,000
• Desired salary: £40,000
• Profit margin (15%): £8,250
• Total: £63,250
• Billable hours (40 hours/week × 48 weeks): 1,920 hours
• Minimum hourly rate: £32.94

Round up to £35/hour to give yourself a buffer.

#Pricing Methods

#1. Time and Materials (T&M)

Charge for actual time spent plus materials, with a markup on materials (typically 10-20%).

Pros:

• Fair for both you and the customer
• Covers unexpected issues
• Transparent pricing

Cons:

• Can be unpredictable for customers
• Requires accurate time tracking

#2. Fixed Price

Quote a fixed price for the entire job.

Pros:

• Customer knows exact cost upfront
• You can build in profit margin
• Professional appearance

Cons:

• You bear the risk of unexpected issues
• Requires accurate cost estimation

#3. Day Rate

Charge a fixed daily rate regardless of hours worked.

Pros:

• Simple to quote
• Good for longer jobs
• Predictable income

Cons:

• May not reflect actual work value
• Can be inefficient for quick jobs

#Adding Markup to Materials

Always add markup to materials to cover:

• Handling time: Ordering, collecting, storing materials
• Risk: Materials that get damaged or wasted
• Cash flow: You pay for materials before getting paid
• Profit: Materials are part of your service

Typical markup is 10-20%, but can be higher for specialty items.

#Factors That Affect Pricing

#1. Job Complexity

Complex jobs require more skill, time, and risk. Charge accordingly.

#2. Urgency

Emergency or rush jobs should command a premium (typically 25-50% more).

#3. Location

Consider travel time and costs. Jobs far from your base should include travel charges.

#4. Customer Type

• Domestic: Standard rates
• Commercial: Often higher rates, but may require longer payment terms
• Repeat customers: Consider loyalty discounts

#5. Market Rates

Research what competitors charge, but don't just match the lowest price. Consider:

• Your experience and expertise
• Quality of work
• Customer service
• Reliability

#Common Pricing Mistakes

#1. Not Including All Costs

Forgetting to include overheads, travel time, or material markup will eat into your profits.

#2. Competing on Price Alone

Don't race to the bottom. Compete on quality, reliability, and service instead.

#3. Underestimating Time

Always add a buffer for unexpected issues. It's better to quote slightly high than to lose money.

#4. Not Reviewing Prices Regularly

Costs increase over time. Review and adjust your prices annually (at minimum).

#5. Discounting Too Easily

Discounts should be strategic (e.g., for large jobs or repeat customers), not automatic.

#How to Present Your Quote

A professional quote should include:

• Clear breakdown: Materials, labour, and any other costs
• Timeline: When work will start and finish
• Payment terms: Deposit required, payment schedule
• What's included: Exactly what work you'll do
• What's not included: Any exclusions clearly stated
• Validity period: How long the quote is valid

#Negotiating Price

If a customer asks for a discount:

1. Understand why: Are they comparing to a lower quote? Budget constraints?
2. Offer alternatives: Can you reduce scope instead of price?
3. Stand firm on quality: Explain why your price reflects quality
4. Know your minimum: Don't go below your break-even point

#When to Walk Away

Sometimes, it's better to decline a job:

• Price is below your minimum profitable rate
• Customer seems difficult or unrealistic
• Job scope is unclear or risky
• Payment terms are unacceptable

Your time is valuable - don't waste it on unprofitable or problematic jobs.

#Reviewing and Adjusting Prices

Regularly review your pricing:

• Quarterly: Check if costs have changed
• Annually: Comprehensive review of all rates
• After each job: Did you make the expected profit?

If you're consistently busy, you're probably underpricing. If you're losing too many quotes, you might be overpricing.

#Conclusion

Pricing is both an art and a science. Start with accurate cost calculations, understand your market, and don't be afraid to charge what you're worth. Remember, the cheapest quote isn't always the best - customers value quality, reliability, and professionalism.

Take time to develop your pricing strategy, and don't be afraid to adjust as you learn and grow your business.

TradePlanr helps tradesmen create professional quotes, track job costs, and manage pricing. Try it free and see how it can help your business.