Most tradies set their rate once. They look at what the bloke down the road charges, add a bit, and leave it there for years. Meanwhile wages go up, super goes up, the ute payment goes up and insurance goes up. The rate doesn't move, and the gap comes straight out of your pocket.
Here's how to work out the rate your business actually needs, from your own numbers, in about ten minutes.
The four numbers that set your rate
- What your crew really cost. Not their hourly wage: their wage times an on-cost of about 1.37, which covers super, workers comp, leave and the hours you pay for but can't charge, like public holidays and wet days.
- What you pay yourself. Decide what you want a year, super included. If you leave yourself out, your rate only works while you work for free.
- Your overheads. Utes, fuel and rego, insurance, tools and consumables you don't charge for, phones and software, the accountant, advertising, licences and the shed.
- The hours you can actually charge. Not 52 weeks: take out holidays, sick days and rain, and most crews land around 44 working weeks. Then take out travel, quoting, pick ups and fixing your own mistakes. About 85% of the hours on the tools end up on an invoice.
The sum
Add the crew's real cost, your own pay and your overheads. Divide by the hours you can charge. That's your break-even: charge less and every hour costs you money. Then divide break-even by one less your profit margin. At 15% profit that's break-even divided by 0.85. That's your charge-out rate.
A worked example
An owner on the tools 30 hours a week, two workers on $38 an hour doing 38 hours each, 44 working weeks, 85% of hours charged, $90,000 a year for the owner and $46,000 of overheads. These are example figures: put in your own.
If this business charges $70 an hour, it's $8.22 under break-even before it's made a cent of profit, and $22.02 under the rate it needs. Across 3,964 charged hours that's about $87,000 a year it isn't making.
The free rate check does this sum with your numbers in two minutes. No sign up to see the answer.
Where most tradies go wrong
- Pricing off the wage, not the real cost. $38 an hour is about $52 once super, comp and leave are on it.
- Counting every hour as billable. Travel, quoting and pick ups are real hours nobody pays you for.
- Leaving their own pay out. A business that only works if the owner works for free is a job, not a business.
- Never checking again. Run the numbers every time wages, insurance or the ute change, or at least every three months.
Then check it against real jobs
Your rate is only half of it. The other half is whether your jobs take the hours you quoted. If you quote a room at 10 hours and it takes 13, your rate was right and your quote was wrong. That check is called job costing. The only way to know is to log the crew's hours against each line of the quote, then compare when the job finishes. That's what TradieXai does after every job: it tells you which rates to move.