The single most expensive mistake a new tradie makes is pricing off what the other bloke charges instead of what it actually costs to run your business. Here is how to build a charge-out rate from the ground up, the day-rate reality most people get wrong, and how to price materials so you are not working for free. (Every figure here is indicative — your business, your numbers.)
Build the rate from your costs, not the competition
Your charge-out rate has to cover three things over your realistic billable hours: your labour cost (including on-costs), your share of overhead, and a profit margin. The core formula:
(annual wages + on-costs + overheads) ÷ billable hours ÷ (1 − profit margin)
- Labour cost: your wage (award or above) plus on-costs of 20–30% — super, workers' comp, leave, training, uniforms.
- Overheads: vehicles, fuel, rego, insurance, public liability, phone, tools and replacement, software, accounting, marketing — totalled and allocated per worker.
- Profit margin: 15–20% on top, so there is something left to reinvest.
In practice this means a sustainable charge-out rate is usually 1.6–2.2× your base wage. Someone on a modest base wage easily costs $80–90 per billable hour once on-costs and overhead are loaded — pushing the charge-out rate north of $100/hr.
The day-rate reality (do this maths)
"$500 a day sounds good" is where a lot of businesses quietly go broke. Run the numbers on a metro solo operator (indicative 2025–26):
| Cost (annual) | ~ |
|---|---|
| Ute + fuel | $20,000 |
| Insurance (PL + income protection) | $6,000 |
| Tools + replacement | $7,000 |
| Licensing, accountant, BAS | $4,500 |
| Software (Xero, ServiceM8) | $3,500 |
| Marketing + directories | $4,000 |
| Bad debts | $4,000 |
| Total overhead | ~$49,000 |
At $500/day × 220 billable days = $110,000 gross, minus $49,000 overhead = $61,000 before tax, super or any real wage. So $500/day is roughly the floor just to pay yourself — a business with a 10% net margin needs closer to $600–650/day.
The billable-hours trap
The number that wrecks the maths is billable hours. People assume 2,080 (52 weeks × 5 days × 8 hours), but the reality after leave, sick days, public holidays, quoting, materials runs, travel and admin is around 1,760 hours — and first-years often hit only 60–70% billability, or 1,200–1,400 actual billable hours. At 1,400 hours, that $500 "day rate" ($62.50/hr) grosses just $87,500 — minus $49k overhead leaves $38,500 before tax and super, below the minimum hourly wage. Count travel, quoting and admin as the non-billable time it is, and set your rate on billable hours — not on the hours you are awake.
Materials: charge a margin, not a markup
Charging materials at cost (or a token 10–15%) donates your sourcing, collection, handling and warranty time. Two things tradies confuse:
- A markup is added to cost (a 30% markup on $200 = $260).
- A gross margin is a share of the final price (a 30% margin on $200 cost = $286).
Target a gross profit margin of 30–40% on materials for most trades (20–30% for builders) — and that difference ($286 vs $260) compounds across every job. Be upfront that the price includes a margin for handling and warranty risk; itemised "supply and install" quotes do this without disclosing your trade price.
Indicative rate bands (a starting point only)
These are market heuristics, not gospel — they date and vary by region, and the right rate is the one your cost structure demands:
- Electricians ~$90–130/hr (metro callouts $120–150); plumbers/gasfitters ~$80–140/hr standard (emergency $100–200+); carpenters ~$80–110/hr; painters/landscapers ~$70–100/hr; concreters/tilers often per-m² (or ~$80–120/hr).
- By state: NSW/ACT and inner Melbourne sit at the top; QLD/SA a touch lower; regional cheaper nominally but with travel charges.
- Commercial work runs 10–30% higher than residential (compliance, documentation); builder-managed work carries a 15–35% premium once the builder's overheads and margin are baked in.
Use the bands as a sanity check, then trust your own cost-built number over them.
The five pricing traps
- Pricing off competitors, not costs — their overheads are not yours.
- Ignoring non-billable hours — undercharges you 15–25%.
- Not recovering overheads — vehicles and insurance come out of your pocket.
- Confusing markup and margin — a "20% markup" is not a 20% margin.
- Fear of raising prices — review rates as costs rise, give notice, do not silently absorb inflation.
Common mistakes
- Setting a day rate without the overhead and billable-hours maths behind it.
- Charging materials at cost to "win" the job.
- Never reviewing the rate as fuel, insurance and wages climb.
- Forgetting call-out and travel (with fuel, that is $3,000–6,000/yr absorbed).
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