Most quotes cover labour and materials and quietly ignore everything else. Here is the full list of what belongs in a price, and the arithmetic that turns it into an hourly rate you can defend.
A price that works has four parts: what the work costs you directly, what the business costs you while the work happens, the hours that disappear without producing anything, and the profit you intend to keep.
Most people price the first part and the fourth part, and hope the middle two look after themselves. They do not. They are the reason a quote that felt generous turns into a job that paid for itself and nothing more.
This applies whether you are one person with a van or twenty people across four sites. The list gets longer as you grow. The method does not change.
Everything below is written in multiples rather than money, because wages, taxes and rents differ everywhere and copying someone else's numbers across a border is how people get this wrong.
You cannot price a job until you know what an hour costs you, and almost nobody does.
Take a person you pay 1.00 an hour. Add employer taxes and contributions, pension, insurance, tools, protective equipment, workwear, phone, vehicle and fuel, training and certification. For most hands-on roles that comes to roughly 0.30 on top — so 1.30.
Now divide by the hours that actually produce. Not the 2,080 hours in a paid year: the hours left after holiday, sickness, training, travel between sites, setting up, packing down, waiting for materials and redoing what went wrong. For most trades that is around seventy per cent of the paid year.
1.30 divided by 0.72 is 1.81.
Before a single unit of overhead, before a single unit of profit, the person you think costs 1.00 costs you 1.81 for every hour of work that reaches an invoice.
That is the number the quote has to clear.
Here is where most quotes leak, and the list is longer than people expect. Every item below is real, is paid in money, and is usually left out because it cannot be attributed to one job neatly.
The people who never touch the work. The person answering the phone. The one chasing invoices and paying suppliers. The supervisor who walks the site but lays nothing. The storekeeper. The estimator. Your own hours spent quoting instead of producing. Every one of them is paid out of the hours the productive people sell.
Moving things. Loading, unloading, handling, double handling because the delivery came to the wrong entrance. Hire of anything that lifts. This is real work, it takes real hours, and no client has ever agreed to pay for it as a line item.
Transport. Vehicles, fuel, servicing, tyres, insurance, the day a van is off the road. Travel time between sites, which is time you pay for at full rate and bill at nothing.
Premises. Rent, rates, utilities, security, the yard, the storage you took because you had nowhere to put materials between jobs.
Depreciation. Tools wear out, machines lose value, vehicles reach the end of their lives. If your prices do not quietly replace your equipment, you are consuming the business to fund the work.
Trips and subsistence. Site visits before the job. Meetings to agree a variation. Accommodation and meals when work is out of town. The second trip because something was missed on the first.
The things you provide because it is decent, or because it keeps people. Lunch. Coffee. Transport to a remote site. Protective gear better than the minimum. These are real costs and they belong in the price, not in a vague sense of goodwill.
Money that arrives late. The gap between paying wages every week and being paid ninety days after completion is financed by you, and financing is not free even when no bank is involved.
Add all of it up across a year and divide by the number of people who produce revenue. For a small business the result often lands near 0.38 for every 1.00 of wage — bringing the fully loaded cost of that hour to 2.33.
With a real hourly cost, the rest is simple.
Estimate the hours honestly. Not the hours the work would take if everything went right — the hours it will take including the drive, the setting up, the client changing their mind once, and the cleaning at the end. If your estimates are consistently under, they are not estimates, they are hopes.
Multiply hours by your fully loaded rate. That is your labour cost.
Add materials at what they will actually cost, including waste, offcuts, delivery and the ten to fifteen per cent that gets damaged, mismeasured or stolen.
Add anything specific to this job that is not in your overhead: scaffolding, skips, permits, specialist hire, a subcontractor.
Add your profit on top of that total. Profit is not what is left over. It is a line you decide before you send the quote.
A job you estimate at 100 hours, using someone you pay 1.00 an hour.
Priced against the payslip, labour looks like 100. Add a third for "taxes and things" and you get 130, add a bit of profit, and you quote 160 and feel comfortable.
Priced properly, those 100 hours cost 233. Your quote of 160 loses you 73 before materials are counted — and you will not find out for three months, by which time you have taken two more jobs on the same basis.
The uncomfortable part: the correct price here is not slightly higher than the one you were going to give. It is nearly double. That is why this arithmetic feels wrong the first time you do it, and why almost everyone abandons it and goes back to guessing.
It will, sometimes. That is information, not failure.
If a competitor is consistently well below your real cost, one of three things is true. They have lower costs than you — worth finding out how. They are pricing against their payslip figure and do not yet know they are losing money. Or they are quoting one job and recovering the difference through variations later.
The first is something to learn from. The second and third are things to wait out. Neither is a reason to price below what work costs you, because the reward for winning that job is doing it at a loss.
There is one honest exception: taking work below full cost to keep a team together through a quiet period can be a deliberate decision, if you know exactly what it is costing and for how long. That is different from not knowing.
Should I price by the hour or by the job?
Quote the job, cost the hour. Clients want a number for the work; you need to know what the work costs before you can name one. The two are not alternatives.
What markup should I use?
Markup is the wrong lever if the base cost is wrong. A generous markup on a cost that is half the truth still loses money. Get the cost right first, then choose profit deliberately.
How do I handle jobs that overrun?
Decide in advance what a variation is and put it in writing before the extra work starts. The most expensive words in this trade are "don't worry, we'll sort it out at the end."
I'm on my own with no employees. Does this apply?
Completely. You still have a productive share below one hundred per cent, you still have a vehicle, tools, insurance, admin evenings and unpaid quoting time. The only difference is that your overhead is carried by one person instead of eight, which makes the number higher, not lower.
Cost one hour properly, then price one job against it. If the answer surprises you, it is working.
The Employee ROI Calculator does this for a whole team at once — real cost per productive hour, three team scenarios with the margin on each before you commit, and live tracking of what a job is doing while you can still change it. A free licence gives you the full application for one job every thirty days. No card.
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