Short answer: your rate isn’t a number you pick, it’s a number you build. Copying what the bloke down the road charges is how tradies end up flat-out busy and broke at the same time. He might be undercharging too. The right hourly rate covers your true cost of being on the tools, your overheads, your downtime, and a real profit margin on top. Here’s how to build it properly.
Why most tradies undercharge
Most rates in the trades are inherited. You charged what your old boss charged, or what you heard someone quote at the pub, and you’ve nudged it up a little since. The problem is that number was never connected to your costs: your ute, your insurances, your tools, your super, your quoting time, your sick days. So every year your costs creep up and your margin quietly shrinks, and you make it up by working longer hours. That’s not a pricing strategy. That’s a treadmill.
The four layers your rate has to cover
- Your wage. What you’d have to pay a qualified person to do your job on the tools, including super and leave. You are not free labour in your own business.
- Overheads. Vehicle, fuel, tools, phone, software, insurances, licences, accounting, workshop or storage. Add up a full year of it. It’s always more than you think.
- Unbillable time. Quoting, invoicing, driving between jobs, chasing payments, holidays, rain days. If you bill 30 hours out of a 45-hour week, your billable hours have to carry the lot.
- Profit. On top of your wage. Profit is what pays down the slow months, replaces the ute, and makes the business worth owning. A business that only pays you a wage is a job with extra stress.
A worked example (illustrative only)
Say you want to pay yourself a solid wage, your true overheads run to several hundred dollars a week once you add everything honestly, and you genuinely bill 30 hours a week after quoting, driving and admin. Divide the total of wage plus overheads by 30, then add your profit margin on top. For most tradies who do this exercise for the first time, the number that comes out is well above what they’re currently charging. That gap is money they’ve been quietly donating to their clients.
“But clients will walk if I put my rate up”
Some will. Usually the ones who haggle every invoice and pay late. Here’s what we see over and over with the tradies we coach: when you price properly, you lose the bottom slice of work and nothing else changes, except you make more from fewer jobs, your quality goes up because you’re not rushing, and the referrals that come in are from clients who value the work. The market for cheap tradies is crowded. The market for reliable, professional ones isn’t.
Where to start this week
- Add up twelve months of real overheads from your bank statements, not from memory.
- Track one normal week and count your genuinely billable hours.
- Build your rate from the four layers above and compare it with what you charge now.
- Put the new rate on the next quote you send. Not the one after. The next one.
This is exactly the work we do together in a strategy session: your real numbers, on the table, turned into a rate you can defend without flinching. The first session is free, and you keep the numbers either way.
Founder of Tradie 1. Qualified builder and industry trainer who has built, sold and rebuilt trade businesses in Australia and abroad. Read Jason’s story or book a free strategy session.
