The Undercharging Epidemic
Most tradespeople undercharge. They know their hourly rate but forget:
- Travel time and fuel
- Admin and quotes
- Materials and wastage
- Insurance and certifications
- Tools and vehicles
- Holiday and sick pay
- Pension contributions
- Profit margin
Calculating Your True Hourly Rate
Step 1: Total annual costs
Add everything:
- Your desired salary: £40,000
- Employer's NI: £4,000
- Pension contribution: £3,200
- Holiday cover: £3,600
- Sick pay allowance: £1,000
- Training/CPD: £1,000
- Tools replacement: £2,000
- Vehicle (tax, insurance, fuel, depreciation): £8,000
- Business insurance: £1,500
- Certifications: £500
- Accounting: £1,200
- Phone/admin: £1,200
- Marketing: £2,000
- Rent/storage: £2,400
Total: £71,600
Step 2: Billable hours
52 weeks minus:
- 4 weeks holiday
- 1 week sick
- 1 week training
= 46 working weeks
45 hours per week × 46 weeks = 2,070 total hours
But only 60% is billable (rest is travel, quotes, admin)
= 1,242 billable hours
Step 3: Calculate base rate
£71,600 ÷ 1,242 = £57.65/hour just to break even
Step 4: Add profit margin
20% margin minimum: £57.65 × 1.2 = £69/hour
Your minimum rate: £69/hour
Job Pricing vs Hourly
Hourly works when:
- Job scope is uncertain
- You want less risk
- Customer prefers transparency
Fixed price works when:
- Job is predictable
- You're efficient (keep savings)
- Customer wants certainty
Fixed pricing usually yields better margins for experienced tradespeople.
Material Markup
Standard practice: 15-25% markup on materials
This covers:
- Time sourcing
- Delivery costs
- Wastage
- Storage
- Warranty support
Price Positioning
Premium pricing requires:
- Professional image
- Excellent reviews
- Clear communication
- Quality guarantees
- Reliability reputation
Budget pricing means:
- Racing to bottom
- Lower-quality customers
- Thinner margins
- Higher volume needed
- More stress
Middle ground rarely works—you're either premium or budget.
Raising Prices
When to raise:
- Annual cost increases
- Improved skills/certifications
- Consistently booked
- Customers don't negotiate
How to raise:
- New customers: new prices immediately
- Existing customers: 30-60 days notice
- Regular customers: consider loyalty pricing
Price Communication
Don't apologise for pricing. Present confidently:
Not: "It's £800, but I could maybe do it for less..."
Better: "The investment is £800, which includes [value, value, value]."
Professional pricing attracts professional customers.
