You're a plumber, sparky, joiner, or builder. You know how to do the work. You do it well. You finish jobs on time. Your customers are happy.
But at the end of the month, you look at your figures and something doesn't add up. You've been busy all month. You've landed decent jobs. Yet your profit is thinner than it should be.
The problem isn't your craft. It's your pricing.
Most tradespeople price work the same way they learned it on site: you guess. You look at what competitors charge. You think about what feels right. You quote a number that sounds about fair. Then you undercut yourself because you're worried the customer will say no.
By the time you've finished the job, you realise you didn't charge enough. But you're already committed. You do the work. You get paid. And next month, the cycle repeats.
This is a trap. And the way out is simple: stop guessing and start calculating.
The Real Cost of Doing Business
Here's what most tradespeople do: they think about their daily rate and stop. "I charge £40 an hour" or "I charge £300 a day." That number is what they ask customers.
But that number isn't profit. It's revenue. And it's not even close to what you actually need to charge to run a profitable business.
Your true hourly cost includes three things that most tradespeople ignore:
1. Your wages. What you actually need to earn to live. If you want to earn £30,000 a year, work 46 weeks a year (accounting for holidays and sick leave), and work 40 billable hours a week, that's 1,840 billable hours annually. £30,000 ÷ 1,840 hours = £16.30 per hour minimum, just for wages. But most of you need more than that. If you want £50,000, it's £27.17 per hour.
2. Your overheads. This is the part most tradespeople miss. Van maintenance, insurance, fuel, tools, phone, admin software, business rates, accountant fees, marketing, equipment depreciation — it all adds up. A typical tradesperson spends 20-35% of revenue on overheads. On a £40,000 job, that could be £8,000-£14,000 going to overheads before you earn a single penny in profit.
3. Your profit margin. This is what's actually left over to reinvest in the business, cover gaps when work is slow, or put in your pocket as profit. A healthy margin for tradespeople is 15-25%. Anything less and you're not building a business; you're buying yourself a job.
Real example: A joiner says "I charge £45 an hour." After calculating true costs (£22/hour wages + £18/hour overheads + £12/hour for profit), they actually need to charge £52/hour minimum. That means every £45 job is a loss-making job — the customer thinks they're getting a discount, and the joiner is going broke.
Calculating Your True Hourly Rate
Here's the formula every tradesperson needs to use:
True Hourly Rate = (Annual Wages + Annual Overheads) ÷ Billable Hours Per Year + Profit Margin
Let's work through a real example. Say you're an electrician:
Step 1: Calculate your annual billable hours. Assume 46 working weeks (allowing for holidays, sickness, and training). Assume 7 billable hours per day (accounting for travel, admin, quoting, and unpaid time). That's 46 weeks × 5 days × 7 hours = 1,610 billable hours per year.
Step 2: Calculate your target annual wage. Let's say you want to earn £45,000 per year. That's your personal salary — what you actually take home.
Step 3: Calculate your annual overheads. Add these up honestly: van costs (fuel, maintenance, insurance), insurance (public liability, tools), phone and admin software, marketing and website, tools and equipment (amortised), accountant and business costs. For most tradespeople, this is £12,000-£25,000 per year. Let's use £18,000 as an example.
Step 4: Calculate your combined hourly cost. (£45,000 + £18,000) ÷ 1,610 hours = £39.13 per hour. This is just to cover wages and overheads — zero profit.
Step 5: Add your profit margin. If you want 20% profit, multiply by 1.20. £39.13 × 1.20 = £46.95 per hour. This is your true minimum hourly rate.
If you're currently charging £35 per hour, you're working at a loss. If you're charging £45, you're barely covering costs. You need to charge at least £47.
The breakthrough moment: Most tradespeople charge £30-45 per hour and wonder why they're not making money. Once they calculate their true cost, they realise they need to charge £50-70+ per hour depending on their setup. The good news: customers will happily pay it if you're targeting the right ones.
Markup vs Margin: The Difference That Kills Businesses
This is where most pricing goes wrong. Tradespeople confuse markup with margin. They're not the same, and using the wrong one costs you thousands.
Markup is the percentage you add to your cost. If a job costs you £1,000 and you add a 30% markup, you charge £1,300.
Margin is the percentage of revenue that's profit. If you charge £1,300 and your cost was £1,000, your margin is (£1,300 - £1,000) ÷ £1,300 = 23%. That's not 30%.
Most tradespeople think "I'll add 25% to my costs." That's markup. But a 25% markup only gives you a 20% margin. If you want a 25% margin, you need to add a 33% markup.
The reason this matters: every job you underprice using the wrong calculation is profit lost. If you land £50,000 of work and use 20% markup instead of the 30% markup you need for 25% margin, you've lost £2,000+ in profit.
Three Ways to Price Your Work
Method 1: Hourly Rate
Best for: flexible, variable-scope jobs where you can't estimate the final time accurately.
This is where you use your true hourly rate (the £47 in our example above). You track time, you charge by the hour, and every hour is profit-covered. Simple. But customers often resist hourly rates because they fear open-ended costs.
Method 2: Fixed Price by Scope
Best for: defined projects where you can estimate the scope accurately.
You estimate the time a job will take (say, 40 hours of labour). You multiply by your true hourly rate (£47) to get £1,880. Then you add materials, and you have your fixed price. The customer knows the exact cost upfront. You're protected because you've calculated accurately.
The advantage: customers feel secure. The disadvantage: if you underestimate the time, you lose money. That's why accurate estimation is crucial.
Method 3: Value-Based Pricing
Best for: premium work where the value to the customer far exceeds your actual costs.
Instead of calculating cost + markup, you price based on the value of the outcome. A new kitchen might cost you £3,000 in labour and materials, but it adds £15,000 to the home's value. A customer renovating for resale would happily pay £7,000-£10,000 because they're getting a return on investment.
This is where the real money is. It's also why targeting the right customer matters so much. A price shopper won't pay value-based pricing. A premium homeowner will.
How to Raise Your Prices Without Losing Work
If you've been underpricing, you can't jump from £35 to £55 per hour overnight. Your customers will freak out. But you can't stay where you are either.
Strategy 1: Raise prices gradually. Increase your rate by 5-10% every three months until you reach your target. Existing customers might grumble, but most will accept it. New customers don't have a reference point.
Strategy 2: Raise prices for new customers only. Keep existing customers at their current rate. New customers get quoted at your true rate. After 12 months, your average rate will have moved up significantly.
Strategy 3: Raise prices by changing your service mix. Stop chasing the cheap jobs. Target the premium end of the market. A plumber can do emergency callouts at £80/hour and planned work at £55/hour. Focus your marketing on planned work, and your average rate climbs without a direct price increase.
Strategy 4: Raise prices with justified reasons. "Due to increased costs in materials and fuel, prices are now..." is weak. Better: "We've invested in new training and equipment to deliver even better results. That's reflected in our pricing." Customers accept price rises when they believe they're getting better value in return.
The real secret: customers don't leave because you charge more. They leave because they don't see the value. If you're targeting the right customers — the ones who already believe in paying for quality — price increases barely move the needle.
Handling Price Objections
When a customer says "That's more than I expected" or "Your competitor quoted less," you have options.
Don't drop your price immediately. This trains customers to negotiate and teaches you that your pricing is flexible. Instead, ask questions. "What were you expecting to pay?" or "Can you share what the other quote included?"
Often, the competitor's quote is missing something: insurance, guarantees, follow-up support, or timeline security. Your job is to explain the difference.
Explain your process. "My price includes a site inspection, a detailed quote, 10% contingency for unexpected issues, and a one-year guarantee on all workmanship." Suddenly, your price isn't in isolation. It's a package.
Know your walk-away point. If a customer won't pay your true cost + margin, walk away. A low-margin job is worse than no job. It ties up your time, your materials, and your van. It exhausts you. It crowds out the opportunity to land a better-paying job.
Profitable tradespeople say no. Struggling ones say yes to everything.
The Game-Changer: Targeting the Right Buyer
Here's the uncomfortable truth: you could have perfect pricing and still struggle if you're targeting the wrong customers.
A price shopper will always object to your rates. They're comparison shopping by cost. You can't convince them of value because they're not looking for it. They'll always find someone cheaper.
A premium buyer — someone who's doing a renovation, who's hired an architect, who's in a good area of town, who's coming to you through referral from someone they trust — won't even blink at your pricing. They want to know you're good, you're reliable, and you'll do the job properly. Price is almost secondary.
The same tradesperson, with the same skills, charging the same rate, will make 2-3 times more money if they're booking work from premium buyers instead of price shoppers. Same pricing. Completely different results.
That's where tools like FindMyBuyer come in. When you identify your ideal customer profile — the ones who value quality, who pay fair prices, who treat you well — your entire business changes. You're no longer competing on price. You're being sought out for expertise.
Why Accurate Pricing Matters
Pricing isn't just about money. It's about the sustainability of your business.
When you're underpriced, you run yourself ragged trying to do more volume to make the money work. You take on too many jobs. Quality slips. You burn out. Your reputation suffers because you're rushing.
When you're properly priced, you can be selective. You can do fewer jobs, do them brilliantly, and make more money. Your customers get better service because you're not stressed. You get referrals because your work is excellent. Your business becomes sustainable.
Proper pricing also protects against cash flow problems. When you build in a genuine profit margin, you have a buffer for when work is slow, for unexpected costs, for investment in your business.
The tradespeople who build lasting businesses aren't the ones grinding hardest. They're the ones who priced correctly from the start.
Your Pricing Action Plan
Don't change everything tomorrow. Do this:
This week: Calculate your true hourly cost using the formula above. Write down your annual wages target, your actual overhead costs, and your billable hours. Do the maths. You might be shocked.
Next week: Review your last 10 jobs. What did you actually charge? What should you have charged using your true hourly rate? How much money did you leave on the table?
Next month: Decide how you're going to get from your current rate to your target rate. Are you raising gradually? Targeting new customers only? Changing your service mix?
Ongoing: Start tracking actual time on jobs. This is how you refine your estimates. It's also how you catch jobs that are running over and costing you money.
Pricing is a skill like any trade skill. You get better with practice and data.