How to Price a Job Correctly as a Tradie: Charge-Out Rates, Markup and Margin Explained

and does not constitute financial, tax or legal advice. Always consult a

Getting your pricing right is the single biggest lever in your trade

business. Too low and you work hard for nothing. Too high and you lose

jobs you should be winning. Most tradies land somewhere in between --

charging rates that feel right but have never actually been calculated

to make sense financially.

This guide breaks down how to set a charge-out rate that covers

everything it needs to cover, how to apply markup to materials

correctly, and how to quote jobs so that you're actually making the

margin you think you are.

Why Most Tradies Undercharge

The most common reason tradies undercharge is that they calculate their

hourly rate based only on their labour cost -- what they want to earn per

hour -- without factoring in the overhead costs of running the business.

They think: "I want to earn $60 an hour, so I'll charge $60 an hour."

But that $60 doesn't cover their ute, insurance, tools, software, phone,

accounting fees, marketing, or the hours they spend on non-billable

admin.

When you add all the real costs of running a trade business and account

for non-billable time, the break-even hourly rate is almost always

significantly higher than what tradies intuitively assume. The first

step to correct pricing is calculating your actual break-even rate.

Calculating Your Break-Even Hourly Rate

Here's a simple framework. Start with how many billable hours you can

realistically work in a year. If you work 48 weeks (allowing for

holidays and sick days), 5 days a week, 8 hours a day, that's 1,920

hours. But not all of those are billable -- quoting, admin, travel, tool

maintenance and business development take time. A realistic billable

hour percentage for a sole trader is 65-75%. So: 1,920 hours 70% =

1,344 billable hours per year.

Now calculate your annual costs:

• Your desired annual income (what you want to take home): e.g.,

$100,000

• Vehicle costs (loan repayments, fuel, insurance, registration,

maintenance): e.g., $18,000

• Tools and equipment (purchases, maintenance, replacement): e.g.,

$5,000

• Insurance (public liability, income protection, tool insurance):

e.g., $4,000

• Phone, internet, software subscriptions: e.g., $3,000

• Accounting, bookkeeping: e.g., $3,000

• Marketing and advertising: e.g., $2,000

• Other overheads: e.g., $3,000

• Superannuation (11.5% of your desired income): e.g., $11,500

Total annual cost: $149,500. Divide by 1,344 billable hours = $111 per

billable hour break-even rate. Add a profit margin of 15%: $111 0.85 =

approximately $131 per hour.

If you're currently charging $85 or $95 per hour, this exercise explains

why your bank balance doesn't reflect the amount of work you're doing.

Difference Between Markup and Margin

These two terms are constantly confused, and confusing them costs money.

Markup is the percentage you add to your cost to arrive at your selling

price. Margin is the percentage of the selling price that is your

profit.

Example: You buy materials for $500. You apply a 25% markup. You sell

them for $625. Your gross profit is $125. But your margin is $125 $625

= 20%, not 25%.

If you want a 25% gross margin on materials, you need to apply a 33%

markup: $500 1.33 = $665. Profit = $165. Margin = $165 $665 = 24.8%.

This distinction matters when you're quoting jobs. If you're targeting a

30% margin on materials and you're applying a 30% markup, you're

actually achieving only a 23% margin -- a 7-point gap that adds up

significantly on high-material-cost jobs.

Applying Markup to Materials

Most tradies should be applying a markup of 15-40% on materials supplied

to clients, depending on the trade, the materials involved, and the

market. This markup covers your procurement time, transportation,

storage, inventory risk, and the value of your expertise in specifying

the right product.

You are not a materials supplier at cost. You're a trade professional

who specifies, sources, transports and installs materials. Charge

accordingly. If a client can go and buy the same tap fitting from

Bunnings, that doesn't mean you should supply it at Bunnings price plus

zero margin.

Fixed Price vs. Hourly Rate Quoting

Both approaches have merit, and the right choice depends on the job

type. Hourly rate works well for service and maintenance work where the

scope is uncertain -- a fault-finding call-out, an emergency repair, a

maintenance check. The client pays for your time and expertise, and

you're not exposed to risk if the job takes longer than expected.

Fixed price works well for defined scope jobs -- install a hot water

system, rewire a room, replace a roof section -- where both parties want

certainty about the total cost. Fixed price requires accurate estimating

because you bear the risk of underestimation. Include a contingency of

5-10% on fixed price quotes for any job with uncertainty.

Quoting for Profit, Not Just to Win

The purpose of a quote is not to win the job. It's to win the job at a

price that makes you money. A job won at a price that loses you money is

worse than no job at all -- it takes your time, your energy, and often

your cash (materials upfront) and gives you nothing back.

Not every client is worth winning. A client who beats you up on price

will beat you up on everything else too. Price at your correct rate,

present your quote professionally, and let the ones who only care about

price go to someone cheaper. You want clients who value what you bring --

and they exist in every market.

Reviewing Your Pricing Annually

At minimum, review your charge-out rate every 12 months. Costs increase

-- fuel, insurance, materials, wages -- and if your rates don't keep pace,

your effective profit margin shrinks without you noticing. Raise your

rates by at least the rate of inflation every year. Most clients accept

modest annual increases if you deliver quality work and communicate the

change professionally.

The tradies who struggle financially are almost never the ones who

charge too much. They're almost always the ones who charge too little,

too consistently, for too long. Fix your pricing and most other

financial problems fix themselves.