How to price a job when you are starting out
The first job you price on your own is terrifying in a specific way. Too high and you lose it and never find out why. Too low and you win it, work for three weeks, and discover in month four that you have been paying for the privilege.
Most people resolve it by asking around and pitching slightly under. That is the one approach guaranteed to fail, because you have copied a number without copying the costs, the volume or the efficiency that made it work for somebody else.
There is a sum instead. It gives you a floor rather than a price, and a floor is the thing you actually need first.
Work from what you need, backwards
Three figures. What you need to earn, what it costs you to trade, and how many hours you can actually bill.
Say you need £32,000 to live on. Not what you would like: what the mortgage and the food and the car require. Write the honest number.
Then the cost of trading, which is everything that goes out whether or not you work. Van, insurance, tools, phone, accountant, professional body, certification. For a one person trade this is commonly £12,000 to £16,000, and £14,000 is a fair figure to work with until you have your own.
Then billable hours, and this is where new people go wrong. Not the hours you work. The hours somebody pays for. A first year is thin on both sides: fewer jobs, and more time per job spent quoting, learning suppliers and driving to places you have never been. Eleven hundred billable hours in a first year is realistic. Optimism here does not make the year better, it makes the price wrong.
Now the sum. £32,000 plus £14,000 is £46,000, divided by 1,100 hours, which is £41.82 an hour. On an eight hour day that is about £335.
That is your floor. Not your price. The number below which the job is costing you money to do, before tax and before a single fitting.
Why it looks too high
Because it is being compared with a wage, and a wage is not the same animal.
An employed electrician on £35,000 costs their employer nearer £45,000 once national insurance, pension, holiday, sick pay, the van and the insurance are counted. Nobody shows them that figure, so the number in their head is £35,000 and the number in yours has to cover all of it.
The other reason is the unbillable half of the week, which is invisible from outside. Working out your real hourly rate makes the point sharply: a headline £35 an hour commonly nets under £17 once the hours nobody pays for are counted. The floor looks high because it is carrying the hours the rate does not mention.
What the market says, and what to do about it
Now go and find out what the going rate is, and do it properly. Not what somebody says in the pub. Ask two or three people who do what you do in a different town, so you are not asking a competitor, and look at what customers report paying rather than what firms advertise.
One of two things happens.
Your floor sits comfortably below the going rate, which means you have room and can stop worrying about price and start worrying about why quotes get ignored, which is a much more common way of losing work.
Or your floor is above the going rate, and that is genuinely useful information rather than bad news. It means one of the three inputs is wrong for your market. Usually it is the hours: 1,100 billable hours is a first year figure and it climbs. Sometimes it is the costs, and there is a van on finance doing work a cheaper van would do. Occasionally the market really is the problem, in which case that trade in that town does not support a new entrant at a survivable price, and knowing that now is worth a great deal more than finding out in month nine.
Pricing the job, not the hour
The floor is per hour, but almost nobody sells hours. They sell a bathroom, a rewire, a roof.
So price the job by estimating hours honestly, adding materials at cost plus a margin for the money you are laying out and the risk of carrying it, and adding something for the parts of the work nobody thinks to count. The trip to the merchant. The hour of clearing up. The half day waiting for the plasterer. Those hours exist and they are billable, and new trades leave them out because they feel like they should be free.
Then decide whether the number goes out as an estimate or a quote, which is a decision about who carries the risk of it running long. In a first year, when your hour estimates are least reliable, that decision matters more than it will ever matter again.
Redo it in six months
Every input in this sum is wrong on the day you write it, and less wrong every month afterwards. You do not know your billable hours yet. You do not know which jobs overrun. You do not know what your costs really are, because a year has not gone past.
Put a note in the diary for six months out, and do the sum again with what actually happened. The number will move, and moving it on evidence is the difference between pricing and guessing.