🟦 Business After 60 Conversation
Sometimes you are just good at something and you can’t really explain why. This conversation is relevant at any age if you run or manage a contractor business.
Over the last few years, some of the questions I’ve been asked most often by contractors are:
“How can I price my electrical jobs without leaving money on the table?”
“Why aren’t I getting enough leads?”
“I’m doing loads of quotes, but I’m not winning any work.”
Change electrician to plumber, builder, carpenter, window installer, heating engineer or another trade and the questions are remarkably similar.
Every trade has its own technical requirements, regulations and certification, but when it comes to running a profitable contracting business, there are some fundamentals that don’t change.
And one of the biggest is pricing.
I’ve spent many years advising and running contracting businesses, and one thing has become very clear to me:
You can be the best electrician, plumber or carpenter in your area, but if you consistently get your pricing wrong, you won’t have a successful business.
Price too high and you don’t win the work.
Price too low and you win the work — but lose money doing it.
Neither is a particularly good business model.
So, how do you get it right?
This isn’t intended to be a complicated estimating manual. It is an overview of the areas I believe every contractor should have under control if they want their quoting to consistently produce a profit.
Why accurate pricing matters
It sounds obvious, but inaccurate estimating can have a surprisingly damaging effect on a contracting business.
A small mistake on one job might not matter.
Make the same mistake on twenty jobs and you have a problem.
And I’ve seen businesses make money on paper while losing money in reality because their pricing system didn’t properly account for labour, overheads, wasted time, materials or variations.
A structured, consistent and transparent pricing system does three important things.
It protects your cash flow
You shouldn’t be relying on the deposit from the next job to cover the materials or costs from the last one.
It protects your margin
Every cost needs to be accounted for — including the ones that are easy to forget.
Fuel, vehicles, administration, supervision, travelling, tools, insurance, software and all the other costs involved in running the business don’t disappear simply because they aren’t visible on the quote.
It builds client confidence
A professional quote that clearly explains what is included, what isn’t included and how changes will be dealt with gives the client confidence.
It gives you something to learn from
Perhaps most importantly, you should be able to compare what you estimated with what actually happened.
If you estimated 20 hours and the job took 30, that’s information.
Ignore it and you will probably make the same mistake again.
Use it and your future pricing becomes better.
So how do you price a contracting job accurately?
In my experience, pricing is one of the most valuable skills a tradesman can develop.
You don’t need to become an accountant.
But you do need to understand what the job is going to cost you, what your business needs to recover and what profit you need to make.
I would break it down into several key areas.
1. Understand the job before putting a price on it
This sounds straightforward, but too many pricing problems start before the calculator or spreadsheet is even opened.
Make sure you understand exactly what the client wants and what you are actually being asked to deliver.
Purpose and deliverables
Be specific.
What exactly are you supplying?
What exactly are you installing?
What does the client expect to receive at the end?
The clearer the scope, the less chance there is of misunderstanding later.
Technical documentation
Where appropriate, review drawings, take-offs and client-supplied information carefully.
Look for missing information, clashes or anything that could turn into an additional cost later.
Site conditions
Whenever possible, understand the site rather than relying entirely on paper.
Access, ceiling heights, existing installations, restricted areas, occupied buildings and difficult working conditions can all add time.
And time costs money.
Regulatory and compliance requirements
Identify permits, testing, certification and other compliance requirements before you price the work.
Don’t discover them after you’ve won the job.
Dependencies
Consider other trades, deliveries and scheduling.
You can price eight hours of work perfectly and still lose money if your eight hours become three separate visits because another contractor wasn’t ready.
Assumptions and exclusions
This is one of the areas I think contractors sometimes overlook.
Be clear about what isn’t included.
For example, asbestos removal, plastering, making good, specialist access equipment or work by another trade may sit outside your price.
Don’t leave it for an argument later.
Risks and contingencies
Think about what could reasonably go wrong.
Fragile ceilings.
Restricted access.
Night work.
Difficult working environments.
Existing installations that aren’t as straightforward as they appeared.
You don’t need to add an enormous contingency to every job, but you do need to understand the risks you are taking.
2. Calculate your material costs properly
Material prices move constantly.
If you are pricing today’s job using a price you remember from six months ago, you may already be losing money.
Build a proper materials list
List everything.
Cables, fittings, fixings and consumables for an electrical contractor.
The equivalent materials for whatever your particular trade requires.
The little things are easily forgotten — and little things multiplied across hundreds of jobs aren’t little anymore.
Use current supplier pricing
Use up-to-date supplier catalogues, price books or online pricing wherever possible.
Don’t rely on memory.
Allow for waste
Cut-offs, breakages, damaged materials and unexpected changes happen.
A sensible allowance can protect you from having to absorb those costs.
Don’t forget delivery
Delivery charges, small-order fees and handling costs can all eat into margin.
Create standard assemblies
For repetitive work, standard assemblies can save a huge amount of time.
For an electrician, that might be a standard price for a double socket installation, lighting point or consumer unit.
Other trades can do exactly the same thing with their own repetitive work.
The benefit isn’t just speed.
It creates consistency.
Remember markup and warranty
If you supply materials, your price needs to reflect more than the cost of buying them.
There is administration involved.
There may be warranty obligations.
There is time involved in sourcing and supplying them.
Make sure your pricing reflects the complete cost of providing them.
3. Work out what your labour really costs
This is where I believe many contractors get themselves into trouble.
They know what they want to earn per hour.
That isn’t necessarily the same thing as what their labour actually costs the business.
Break the job into stages
For example:
First fix.
Second fix.
Testing.
Handover.
Breaking a job down makes it easier to identify where time might be lost.
Use real information
If you have completed similar jobs before, use that information.
If a particular installation normally takes you six hours, don’t automatically estimate four because you want the quote to look competitive.
Your historical job data is one of the most valuable pricing tools you have.
Consider the working environment
Access, cramped spaces, other trades, occupied buildings and difficult conditions all affect productivity.
Include supervision
If you have apprentices, labourers or junior staff, remember that somebody has to manage and supervise them.
Their time still costs the business money.
Include travel and setup
Travel.
Loading and unloading.
Setting up.
Clearing away.
Testing.
Certification.
These are all part of the job even though they may not be the part the client sees.
Know your charge-out rate
Your charge-out rate needs to recover the actual cost of employing that person and the overheads associated with the business.
Wages are only part of it.
Insurance, vehicles, tools, administration, premises and other operating costs all need to be recovered.
4. Understand your overheads
Overheads are the hidden costs of running a contracting business.
And if you don’t recover them through your pricing, you are effectively working for free for part of the time.
Think about:
- Insurance
- Vehicles
- Fuel
- Tools and equipment
- Phones
- Software
- Premises
- Accounting
- Administration
- Marketing
- Training
- Management time
The exact list will depend on the business.
The important thing is to know what yours actually are.
Then decide how you are going to recover them.
You might build them into your labour rate.
You might recover some as a percentage of costs.
There isn’t necessarily one magic formula.
Consistency is more important than complexity.
And review your overheads regularly.
Costs change.
Fuel goes up.
Software subscriptions increase.
Insurance changes.
Vehicles need replacing.
If your pricing stays exactly the same while your costs continue rising, your margin is quietly disappearing.
5. Set your profit margin deliberately
This is probably the biggest difference between pricing a job and building a profitable business.
Don’t simply add something to your costs and hope there is enough left at the end.
Decide what return the business needs.
Different types of work may justify different margins.
Routine service work, complex projects and emergency work don’t necessarily carry the same risk or require the same pricing approach.
And there is an important distinction every contractor should understand:
Markup isn’t margin
If your job costs £1,000 and you add a 25% markup:
£1,000 + £250 = £1,250
Your profit is £250.
But £250 isn’t 25% of the selling price.
Your margin is 20%.
If you want a 20% margin on a job costing £1,000:
£1,000 ÷ 0.80 = £1,250
That’s a simple distinction, but confusing markup and margin can cost a business a lot of money over time.
The formula is:
Price = Cost ÷ (1 – Target Margin)
So if your cost is £1,000 and your target margin is 20%:
£1,000 ÷ 0.80 = £1,250
Know which number you are working with.
6. Choose the right pricing model
There isn’t one pricing method that works for every job.
The right approach depends on the type of work.
Time and materials
Useful where the scope is uncertain or investigative.
Fault finding is a good example.
You don’t always know what you are going to find before you start.
Flat-rate or per-point pricing
Useful for standardised work.
It can make pricing faster and more consistent while rewarding efficiency.
I’ve seen electricians use this approach successfully for repetitive work where the scope is well understood.
Fixed or lump-sum pricing
Useful when the work is clearly defined, particularly where drawings, specifications and deadlines are available.
The advantage for the client is cost certainty.
The risk for the contractor is that you have to get your preparation right.
Tiered pricing
Good / Better / Best can be an effective way of giving clients a choice.
For example, an electrical contractor might offer different kitchen rewiring packages with different levels of fittings, lighting and technology.
The client gets a choice rather than simply seeing one number.
And you create an opportunity to increase the average value of the job without simply trying to “sell harder”.
Maintenance plans
Don’t overlook recurring revenue.
Testing, inspection, emergency lighting or equipment maintenance agreements can create more predictable income and stronger long-term customer relationships.
For many contracting businesses, building some recurring revenue into the business can make a significant difference to cash flow and stability.
7. Use technology where it genuinely helps
You don’t need complicated software simply because everyone else appears to be using it.
But the right estimating system can make a big difference.
Modern estimating software can help contractors:
- Complete digital take-offs from plans
- Build bills of materials
- Create reusable assemblies
- Maintain current material pricing
- Apply consistent markups and margins
- Produce professional quotes
- Offer Good / Better / Best options
- Compare estimated and actual hours
- Capture time
- Manage variations and change orders
- Convert accepted quotes into jobs
- Raise purchase orders
- Track work in progress
- Keep testing certificates and job records together
The important word is system.
Technology doesn’t fix poor pricing.
It makes a good pricing process faster and more consistent.
I’ve also been looking at the estimating software regularly used by UK contractors and developing an independent Ropho checklist to help contractors compare the options against the size and type of their business.
A sole trader doesn’t necessarily need the same system as a larger limited company.
The best software is the software that solves your problems without creating another one.
8. Benchmark yourself — but don’t become obsessed with your competitor
A few years ago I gave a presentation on benchmarking at a trade conference.
It produced a lively conversation.
I suggested that trade businesses should regularly review their pricing against the market and their own performance.
The response from some people was predictable:
“I/we don’t have time for this extra work.”
I understand that.
When you’re busy running jobs, quoting, dealing with customers and managing staff, another spreadsheet doesn’t sound particularly attractive.
But there is a problem.
If you don’t know where you stand, you are pricing blind.
Rates vary enormously by region, type of work, customer, complexity and level of expertise.
A contractor in one part of the UK shouldn’t automatically copy the rate of a contractor in another.
Benchmarking should be a sense check, not a race to the bottom.
Look at:
- Local market rates
- Your actual costs
- Your productivity
- Your win rate
- Your margins
- The type of customers you want
- The type of work you want more of
Then decide where you should sit.
And review it regularly.
Don’t confuse being busy with being profitable
This is something I’ve seen repeatedly over the years.
A contractor tells me:
“We’re absolutely flat out.”
My next question is usually:
“That’s good. Are you making money?”
Being busy can be very reassuring.
The phone is ringing.
The diary is full.
There are vans everywhere.
But if your pricing is wrong, you can be incredibly busy and still have very little to show for it.
In some cases, being busy with the wrong work can actually make the situation worse.
You are tying up your people, vehicles and cash while generating insufficient return.
That’s why I believe pricing deserves much more attention than simply asking:
“Will the customer accept this price?”
The better question is:
“Does this price make sense for my business?”
Pricing creates trust — and trust creates profit
At the end of the day, a customer isn’t simply buying a cable, a socket, a window, a boiler or a few hours of labour.
They are buying expertise.
They are buying reliability.
They are buying compliance.
They are buying someone to turn up when they said they would and do the job properly.
They’re buying peace of mind.
That doesn’t mean you can charge whatever you like.
It means you shouldn’t automatically assume that being the cheapest is the best way to win work.
A professional pricing process helps communicate value.
Explain what the customer is paying for
Make the value clear.
Give customers choices
Where appropriate, offer different levels of specification or service.
Be transparent
Explain what is included, what isn’t and how unexpected work will be handled.
Keep your promises
Deliver what you quoted.
Communicate early if circumstances change.
Document variations.
Learn from every job
This is perhaps the most important one.
When the job is finished, compare:
What did I estimate?
with
What actually happened?
How many hours?
How much material?
What went wrong?
What went better than expected?
What would I price differently next time?
That information is gold.
Next week: Getting the work through the door
Getting your pricing right is one part of running a profitable contracting business.
The next question is a pretty obvious one:
How do you get enough of the right people to ask you for a quote in the first place — and then actually convert those enquiries into profitable work?
That’s what we’ll look at in next week’s Business After 60 Conversation.
I’ll be talking about getting leads and converting them for your contracting business without spending hundreds or thousands of pounds every month on aggressive email systems and complicated marketing campaigns.
Because generating enquiries is one thing.
Turning the right enquiries into customers is another.
And finally…
I’ve always believed that one of the biggest mistakes a contractor can make is assuming that being good at the trade automatically means being good at running the business.
It doesn’t.
You can be an outstanding electrician and a poor businessman.
You can be an exceptional plumber and consistently under-price your work.
You can be brilliant at building, carpentry or installation and still spend your evenings wondering where all the money has gone.
The trade gets the work through the door.
The business systems determine whether that work actually makes you money.
Pricing is one of those systems.
Get the scope right.
Know your material costs.
Understand your real labour cost.
Recover your overheads.
Set your margin deliberately.
Choose the right pricing model.
Benchmark yourself.
Use technology where it genuinely helps.
And, perhaps most importantly, learn from your actual results.
Because the objective isn’t simply to win more work.
It’s to win the right work at the right price — and still have a profitable business when you’ve finished it.
That’s the difference between being busy and building a business.
FAQs
How do I price a contracting job accurately?
Start by understanding the complete scope of the work, then calculate your material costs, labour, overheads and required profit margin. You should also consider access, site conditions, compliance, travel, waste and potential risks. Finally, compare your estimate with the actual cost after the job is complete so you can improve future pricing.
What is the difference between markup and profit margin?
Markup is the percentage you add to your cost. Margin is the percentage of the final selling price that represents profit. For example, adding 25% markup to a £1,000 cost produces a £1,250 selling price, but the resulting profit margin is 20%.
Should contractors use estimating software?
Estimating software can make pricing faster and more consistent, particularly for businesses carrying out repetitive work. It can help with take-offs, material costs, labour, assemblies, margins, quotations and comparing estimated costs with actual results. However, software won’t fix a poor pricing system — it simply makes a good process easier to manage.
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