Most tradespeople price by feel. You look at the job, you think about the last one like it, you add a bit, you say a number. That works right up until the year you are flat out for twelve months and end up with nothing in the bank.
The point of doing the arithmetic once is not to price every job with a spreadsheet. It is to know your floor, so that when you price by feel you are at least feeling in the right region.
Day rate or fixed price?
A day rate is honest about uncertainty. If the job is investigative, if you cannot see the end of it, if the customer keeps changing their mind, a day rate means you get paid for what you actually do. The problem is that it puts all the risk on the customer, which makes them nervous, and it caps you: no matter how efficient you get, you earn the same.
A fixed price puts the risk on you and, done properly, pays you better. If you can do in six hours a job you priced at a day, that efficiency is yours. It is also easier to sell, because the customer knows exactly what they are exposed to.
The hybrid wins most often. Fixed price for the work you can see. Day rate, stated up front, for anything found once you open it up. That is the same structure as a provisional sum, and it is covered in quote vs estimate.
Whichever you use, the day rate is the building block. So it needs to be right.
What does an hour of your time actually cost?
Four steps. Do them with your own figures.
Step 1: how many days can you actually sell?
This is where most rates go wrong.
Start with 52 weeks at 5 days: 260 days.
Now take out what you genuinely will not be on site for:
- Holiday. Take 25 days plus 8 bank holidays, the same as an employee gets. Minus 33.
- Illness. You will lose some. Call it 5 days. Minus 5.
- Quoting, surveys, phone calls, chasing money, the accountant, the van service, the merchant. If that is one day a week you are being optimistic. Minus 44.
That leaves roughly 178 chargeable days, not 260.
And that assumes you are fully booked. If you are working at 85 per cent occupancy, which is normal and healthy, you are selling something like 150 days a year.
Sit with that for a second, because if you calculated your rate on 260 days you are about 40 per cent short before you have started.
Step 2: what does the business cost before you earn a penny?
List everything, annually. A working list:
- van finance or lease, plus depreciation if you own it
- fuel
- van insurance, public liability insurance, tools insurance
- employers’ liability insurance if you have anyone working for you, which is legally required under the Employers’ Liability (Compulsory Insurance) Act 1969, normally with a minimum of £5 million cover
- tool replacement and consumables
- accountant and bookkeeping
- phone, broadband, software
- scheme registrations and certification renewals: Gas Safe, NICEIC, NAPIT, F-Gas, waste carrier registration, whatever applies to you
- training and CPD
- workwear and PPE
- advertising, website, lead fees
- bank charges, card fees
- storage or yard rent
For a self-employed tradesperson with a van and no staff, this total commonly lands somewhere in the £12,000 to £20,000 range, and it goes up fast the moment there is a second van or an apprentice. Use your own numbers. Your accountant already has them.
Step 3: what do you actually want to earn?
Not what you scrape by on. What you want as take-home, before tax.
Be honest and add the things employment would have given you: the pension nobody is paying into, the sick pay that does not exist, the money to cover the quiet January.
Step 4: the number
(Overheads + target earnings) ÷ chargeable days = your day rate floor
Worked example, illustrative only:
- Overheads: £16,000
- Target earnings before tax: £45,000
- Chargeable days: 150
£61,000 ÷ 150 = £407 a day, or about £51 an hour on an 8-hour day.
That is a floor, not a price. It contains no profit for the business as distinct from wages for you, no allowance for a bad debt, and no cushion for a job that overruns.
If that number is higher than what you have been charging, you have just found where the year went.
Markup and margin are not the same thing
This one costs people real money and takes thirty seconds to fix.
Markup is added to your cost. Margin is measured against your selling price.
- £100 cost + 20% markup = £120 selling price. Your margin is £20 on £120, which is 16.7%.
- To make a 20% margin on that £100 you must sell at £125, a 25% markup.
If you have been “working on 20 per cent” and meaning margin, but calculating it as markup, you have been short by about a sixth on every material line for years.
The conversion is: markup % = margin % ÷ (100 − margin %) × 100.
Materials markup in the UK trades
There is no standard, and anyone who tells you there is a fixed industry figure is guessing. What is common practice for supply-and-fit work is 10 to 25 per cent on trade price, with the shape of it roughly like this:
- Small items and consumables: the higher end. Fittings, fixings, clips, sealant. The value is low and the hassle is high.
- Mid-value items: the middle. Radiators, sanitaryware, cable, timber, plasterboard.
- Large single items: the lower end. A boiler, a kitchen, a large glazing order. Twenty-five per cent on a £4,000 item is a number the customer will notice and question.
You are not marking up for the sake of it. The markup pays for sourcing it, collecting it, storing it, the breakages, the returns, and the fact that when it fails in eight months you are the one going back.
Supply-only is different. If the customer buys the materials, you lose that margin entirely, and you also lose control. Price the labour accordingly and put in writing that you are not responsible for the suitability or the warranty of goods you did not supply.
Price the job, not the hours
Once you know your floor, stop leading with it.
A customer does not want to buy eleven hours. They want to buy a working shower. Two tradespeople with the same underlying rate can present the same job as “£560, that’s two days at £280” or as “£560 to remove, replace and retile, guaranteed for two years, cleared and cleaned”. The second wins more often and gets challenged less, and it is the same money.
That is a presentation point rather than a pricing point, and there is more on it in winning more work with better quotes.
When to walk away
The jobs that ruin a year are usually visible before you start. Signals worth taking seriously:
- They are haggling before you have priced it. The negotiation will never stop.
- They have fallen out with the last two trades. Sometimes it really was the trades. Usually it was not.
- “Cash, no paperwork.” You cannot enforce a debt you have no record of, and you have tax obligations regardless of how you are paid. Speak to your accountant, and check the current position with HMRC on GOV.UK, rather than taking site-canteen advice on it.
- The scope keeps growing while you are still measuring up. It will not shrink once you are on site.
- They will not pay a deposit on a job with significant material cost. You would be funding a stranger’s bathroom.
- You do not know who decides. Pricing for one half of a couple, or for a tenant on a landlord’s property, means pricing a job that may not exist.
- It is 40 minutes away and it is half a day’s work. That is a full day, and you are being paid for half.
Walking away is a pricing decision. Every hour spent on a job that pays badly is an hour unavailable for one that pays properly, and the bad ones are disproportionately the ones that also generate the complaints.
Review the rate on a date, not on a feeling
Put a recurring note in your phone. Once a year, redo the four steps: overheads have gone up, insurance has gone up, the van is a year older, and if your rate has not moved you have taken a pay cut without noticing.
Raise it on new estimates from a set date rather than mid-relationship with an existing customer, and do not announce it. It is your rate.
Getting the arithmetic right is the hard part. Getting it consistently onto the paper, with the days shown, the materials broken out and the markup already applied, is just admin, and it is the part TradeScribe takes off you: your rough notes go in and a properly itemised estimate at your own rates comes out.