Are You Charging Enough for Your Trade?

Being busy doesn’t automatically mean you’re profitable.

We see it often with our trades clients: a full pipeline of work, a capable team on the tools, solid revenue coming in — yet the business still falls short of the profit its owner is actually aiming for. Usually, the root cause is that the charge-out rate was never properly calculated in the first place.

So rather than asking “what hourly rate are you charging?”, the better question is:

Is your current charge-out rate actually enough to generate the profit you want from your business?

 

Price Isn’t the Only Reason Customers Choose You

Many trades business owners keep their rates low because they’re worried that any increase will send customers running to a cheaper competitor.

In reality, customers rarely choose a tradesperson on price alone. Just as important are:

  • Reliability

  • Quality of work

  • Technical knowledge and back-up support

  • Reputation

  • Punctuality

  • Tidiness

  • Location

  • Guarantees

  • Refund policies

 

If your business is reliable, does quality work and delivers great service, you likely have more room to move on price than you think. The real starting point isn’t “what can we get away with charging” — it’s understanding what you actually need to charge to hit your financial goals.

Start With Your Profit Target

Before we can work out a charge-out rate, we need to answer one question: what profit do you want your business to generate?

That target might be a set dollar figure, or a targeted return on what your business is worth. Either way, it should be considered separately from a fair salary for your own role in the business — your pay and your profit target aren’t the same thing.

Once we’ve nailed down that target, we can work backwards to figure out exactly how much revenue the business needs to generate to get there.

 

What Actually Goes Into the Calculation

Setting the right charge-out rate takes a lot more than looking at an employee’s hourly wage and slapping a margin on top. We need to factor in:

Labour costs and on-costs — the true employment cost of each team member or role, not just their wage.

Available working hours — how many hours will that person actually be paid for across the year?

Non-chargeable time — annual leave, training, professional development, networking and other time that can’t be billed to a customer.

Productivity — of the hours left, what percentage can realistically be invoiced? This is the number most businesses get wrong. Just because someone’s paid for a 38-hour week doesn’t mean 38 hours end up on a customer’s invoice.

Overheads — your business needs to recover every dollar of overhead too, which means having a proper annual overhead budget that’s reviewed regularly.

Markups on customer purchases — if you’re buying materials or products on your clients’ behalf, the markup you earn on those purchases also feeds into your overall profitability and can help cover overheads and hit your profit target.

Trades Charge‑Out Rate Calculator

Work out the hourly rate your business actually needs to charge to hit your profit target — not just a guess based on wages plus a margin.

1 Your Profit Target

The profit you want the business to generate — separate from a fair salary for your own role.

2 Business Overheads

Your total annual overhead budget — rent, vehicles, insurance, admin wages, marketing, and everything else not directly billed as labour.

3 Markup on Materials & Purchases

If you buy materials or products on behalf of customers, the markup you earn contributes to overheads and profit too.

4 Team Members & Roles

Add each employee or category of employee. Different roles can have different wages, hours, and productivity — so each gets its own rate.

The Numbers Need to Prove Themselves

Once we’ve calculated your charge-out rates, we don’t stop there. We build a proof summary that shows:

Projected Revenue
less Labour and Labour On-Costs
less Overhead Expenses
plus/minus Treatment of Markups on Client Purchases
equals Projected Profit

This gives you a clear line of sight from your recommended rate all the way through to your bottom line. Instead of just being told “you should charge $X per hour,” you can see exactly why that number is right for your business — which turns the conversation from price-setting into genuine financial management.

Don’t Set It and Forget It

Calculating the rate is only half the job — the results need to be monitored.

Actual hours worked and team productivity should be reviewed regularly throughout the year. If the original assumptions turn out to be off, the calculation can be updated and rates adjusted for future work — while there’s still time to do something about it. Wait until the end of the financial year, and that opportunity to recover lost revenue is usually gone.

Have This Conversation with an Accountant for Tradies

This is exactly the kind of forward-looking advisory work we do with our trades clients. It’s not just about preparing your annual accounts and telling you what you made last year — it’s about asking:

  • What profit do you want to make this year?

  • What revenue will you need to get there?

  • How productive does your team need to be?

  • What should your charge-out rates actually be?

  • Are your real results tracking against those numbers?

These conversations mean we’re reviewing your performance with you throughout the year, not just once your financial statements are done.

Different Roles Often Need Different Rates

A single, one-size-fits-all charge-out rate rarely reflects the real economics of your business. Different team members can have different wages, on-costs, available hours, productivity levels and chargeable hours.

That’s why we recommend calculating rates by individual team member or by role. The goal is a rate that, applied to realistic productive hours, contributes exactly what’s needed towards overheads and your profit target — for each person or category of employee.

Trades person

Ready to Find Out What You Should Really Be Charging?

We use a dedicated Trades Charge-Out Rate Calculator that factors in labour on-costs, wages, available working hours, non-chargeable time, productivity, overheads and your targeted profit — so we can work out the rate your business actually needs, and then keep checking it against your real results.

The real value isn’t the calculator itself. It’s starting the conversation:

Do you know whether the rates you’re charging today will actually generate the profit you want to make this year?

For a lot of trades businesses, the answer to that question can make a real difference to the bottom line. If you’re not sure, get in touch with our team — we’d be glad to help you work it out.

Book a Consultation