Blog→How to Price a Job as a Tradie in NZ: Labour, Materials and Markup
How to Price a Job as a Tradie in NZ: Labour, Materials and Markup
A practical guide for NZ tradies to price jobs properly: your true hourly cost, material markup, overhead recovery and profit margin, with GST at 15%.
Pricing is the hardest skill in the trades. Price too high and the job goes to someone else. Price too low and you win it but lose money doing it. The framework below is the one most profitable tradies follow, whether they have written it down or not.
Once the job is priced, here is how to write and send the quote.
Start with your true cost per hour
Most tradies underprice because they count only their wage. Your real cost per hour also includes:
- Your take-home pay or drawings
- Retirement savings and any employer contributions you pay for staff
- Public liability and other insurance
- The vehicle: fuel, registration, finance and maintenance
- Tools and equipment, spread over their working life
- Unpaid hours: quoting, admin, travel, sick days and public holidays
- Accounting, GST returns and software
Take a sole trader who wants $80,000 a year to take home, bills 1,500 hours (not 2,000, because quoting, travel and admin eat the rest) and carries $25,000 of business costs. That person has to bill at least $70 an hour just to break even. Add a 20% profit margin and the minimum becomes about $84 an hour, before GST. Compare that to what you charge now. Many tradies are surprised.
Example: building an hourly rate from the ground up
| Component | Example (sole trader) |
|---|---|
| Take-home target | $80,000 a year |
| Billable hours | 1,500 a year |
| Business costs | $25,000 a year |
| Break-even rate | about $70 an hour |
| Plus 20% profit margin | about $84 an hour minimum |
The figures are an illustration, not a benchmark for your trade or region. Put in your own.
How to price materials
Buy at trade price and charge at cost plus a markup of 15 to 30%, not at cost. The markup pays for:
- The time spent sourcing, ordering, collecting and delivering
- Offcuts and wastage
- The risk of prices moving between quote and purchase
- The money you have tied up until the client pays
Handling materials is part of the service you provide. Quoting them at cost gives that service away.
Estimating hours accurately
Hours are where most underpricing happens, and the fix is a habit: record the actual hours on every job. Most tradies guess eight hours and find it took eleven. After ten jobs you know your tiling takes 40% longer than your gut says, and that knowledge is worth thousands a year. For a job type you have not done before, add a 20 to 30% buffer until you have your own data.
Overhead recovery
Overhead is everything you spend to run the business that is not on a particular job: insurance, accounting, phone, software, your website and advertising. Divide the year's overhead by your billable hours and add the result to every hour you bill. For example, $15,000 of overhead over 1,500 hours is $10 an hour of recovery.
Profit margin
Profit is not the same as your wage. It is what is left after every cost, including your own labour at a fair rate. Aim for a net margin of 15 to 25% on jobs. Below 10%, any cost overrun or quiet month hurts. Above 30% is sustainable only when you have a clear edge over the next tradie.
GST: price before it, show it separately
Work out your price excluding GST, then add GST at 15% as its own line on the quote. If you are not registered you do not add it. Registration is required once your turnover, or expected turnover, reaches $60,000 over 12 months, and a registered business that quotes GST-inclusive prices should still show the GST amount so the client can see it. Check the Inland Revenue pages before you decide, because the rules for your situation may differ.
Market rates as a sanity check
Build the price from the bottom up, costs plus overhead plus profit, then compare it with what others charge near you. Well above market means a cost problem or a premium you need to explain. Well below usually means you are underpricing. Rates differ between the main centres and smaller towns, so compare like with like.
The mistake most tradies make
They price the job they hope to get, not the job they might get. A job that looks simple from the doorway, such as a bathroom retile or a switchboard upgrade, often has a surprise under it: a rotten subfloor, wiring that falls short of current standards. Price the realistic job, state your assumptions on the quote, and agree changes in writing before doing extra work.
Related guides
Sources
Frequently asked questions
How do I work out my hourly rate as a tradie in NZ?
Add your take-home target to your yearly business costs and divide by the hours you can realistically bill, which is usually closer to 1,500 than 2,000 a year. Then add a profit margin of 15 to 25%. For example, $80,000 plus $25,000 over 1,500 hours is $70 an hour to break even, and about $84 with a 20% margin, before GST.
How much should I mark up materials?
Cost plus 15 to 30% is a common range. The markup covers sourcing, delivery, offcuts, the risk of price changes and the money tied up until you are paid.
Should my prices include GST?
Work out the price excluding GST and add 15% as a separate line if you are registered. Registration is required once turnover, or expected turnover, reaches $60,000 over 12 months. Check the Inland Revenue pages for your own situation.
How big a buffer should I add when I have not done the job before?
A buffer of 20 to 30% on your estimated hours until you have records of your own. Record the real hours on each job so the buffer shrinks as your data grows.
Can I charge more than the quote if the job runs over?
Only for a change the client has agreed to. The Consumer Protection website says quotes and estimates can be misleading if the final cost is bigger than the client expected, so state your assumptions on the quote and agree any variation in writing before you do the work.
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