How to price a job
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Work out exactly what the job is, then cost your time and materials. Add a fair share of what it costs to run the business, something for the unknowns, your profit and any VAT. Then read the price back against what you've promised. And remember that markup and margin aren't the same sum.
Work out what's in and what's out
Before you put a number on anything, write down what you're doing and what you're not. Measure up. Look at the access (is there room for the van, or is it a barrow through the house?). List the prep, the strip-out, the fitting, the finishing and getting rid of the waste. Note who's buying the materials, and anything you haven't been able to check yet.
If you couldn't see everything on the survey, don't price it as if you had. Say what you've assumed, or give an estimate for the part you can't see. Tell the customer how extras will be priced and agreed, so a surprise doesn't turn up as a mystery line on the final bill.
Your time and materials
Go through it task by task and put a time on each one, including setting up and clearing away at the end. Count travel, loading the van, parking and carrying if this job really costs you them. Keep two numbers apart: what your time costs you, and what you'll charge for it.
Use today's merchant prices, delivery charges and proper quantities. Allow for waste and consumables because this job needs them, not because someone online said add 10%. Check lead times too. Cheap tiles that turn up in six weeks don't help if you've promised to start Monday.
Running costs and the unknowns
Every job has to pay its share of the insurance, tools, van, phone and the evenings spent on paperwork. Pick a way of sharing that out and stick to it. Just don't count it twice, once inside your day rate and again as a separate line.
Then think about what could go wrong on this particular job: rot behind the plaster, a tight loft, a floor you can't lift until you're in. Decide which you'll carry in the fixed price and which you'll price as an agreed extra if you find them. A bit of slack for risk doesn't let you change the price after the customer's said yes.
£500 cost and a 20% target margin
Say labour is £240, plus materials £180, overhead £60 and £20 for risk. That's £500 cost. A 20% target margin means cost ÷ (1 − 0.20): £500 ÷ 0.80 = £625 net selling price. Profit is £125, which is 20% of £625.
Adding a 20% markup instead gives £600, with £100 profit: £100 ÷ £600 = 16.67% margin. That's why the two get muddled. If you're VAT registered and ordinary 20% VAT applies, £625 net + £125 VAT = £750 total.
Where VAT comes in
Charging VAT comes down to your registration and the type of work. It has nothing to do with wanting a round number. If you're not entitled to charge it, don't. Reduced rate, zero rate, exempt work and reverse charge all have their own conditions, so check the guidance or ask your accountant rather than going by the trade.
For a homeowner, make the full price clear, or how it's worked out. If VAT applies, show the price before VAT and the total they'll actually pay. And never count the VAT you collect as profit. It's HMRC's money.
From your sums to the quote
Read it back. Does the price cover all the work? Would the customer understand your assumptions? Keep your costing sheet to yourself; the quote needs the work and the price, not your workings. Hang on to the sheet, though, so you can check it against what the job really cost.
Bojit won't make up a day rate or a margin for you. Do your own sums, then use the quote-writing guide to describe the work and send the price. If the job genuinely changes, reprice it openly and keep the original accepted quote as the record of what you agreed.
Sources
- Invest Northern Ireland: prepare a written quotation
- Business Companion: providing price information
- HMRC: VAT Notice 700, invoice particulars and rounding
General guidance for UK tradespeople, not legal or tax advice. The examples use made-up businesses and prices.
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