Know Your Numbers: How to Actually Price a Building Job

Most builders I meet are brilliant on the tools and uncomfortable with their numbers. They quote on gut feel, price off memory, and wonder why a busy year still leaves the bank account looking thin. I was exactly the same for years. So here is the plain version of how to actually price your work, the stuff that should be taught in an apprenticeship and never is.

Start with the true cost of an hour

Your charge-out rate does not start with what the bloke down the road charges. It starts with what one hour of your team actually costs you.

That is not just the wage. It is the wage plus superannuation, plus leave loading, plus all the on-costs that ride along with employing someone. Add a small buffer on top, around 1.5 percent, for leave loading and the bits that always creep in. That number, your on-cost rate, is the real floor. Charge below it and you are paying for the privilege of working.

Billable hours are not paid hours

Here is the mistake that quietly kills margin. You pay someone for a 38 hour week, so you assume you can bill 38 hours. You cannot.

Strip out public holidays, annual leave, sick days and RDOs. Then strip out the productive time that is not on a job: toolbox meetings, training, travel between sites, cleaning up, loading the trailer. What is left, the hours you can genuinely put on a client’s job, is a lot lower than the hours you pay for.

This matters because you have to recover all of your costs across those fewer billable hours. Spread your real costs over an honest number of billable hours and your rate goes up. That is not you being greedy. That is you finally charging what the work costs.

Recover your overheads on purpose

Rent, vehicles, software, insurance, your phone, the office, your own time running the business. Those overheads get paid whether you win the next job or not, and they have to come out of the jobs you do win. There are three honest ways to build them in:

• In the hourly rate. Take your annual overheads, divide by your productive hours, and bake that into your charge-out rate. Simple and clean.
• As a markup on quotes. Add a percentage on top of your direct costs to cover overhead and profit. Easy to apply, but only accurate if your job sizes are consistent.
• A hybrid. Allocate a share of monthly overhead to each active job, then add a markup on top. More work, more accurate, better for bigger or longer jobs.

There is no single right answer. The wrong answer is not doing it at all and hoping the markup magically covers everything.

The GST trap

The GST you collect is not your money. It just visits your account on the way to the tax office. Builders come unstuck here constantly, because a big deposit lands and it feels like a good month.

Hold a reserve as you go. A rough rule that works: put aside 10 percent of your sales, minus 10 percent of your GST-applicable expenses (leave wages and super out of that, there is no GST on them). Your BAS turns up four to six weeks after the quarter ends depending on how you lodge, and when it does, the money is already sitting there instead of coming out of next month’s cash flow.

The one thing to take away

Know your break-even hour before you quote, not after the job is done. Once you know what an hour truly costs you, and how few hours you can actually bill, every quote becomes a decision instead of a guess. That single shift, from feel to numbers, is the difference between a busy builder and a profitable one.

This is exactly the kind of thing we build into Alfie and teach inside Future Builder, because getting it right is worth more than any tool you will ever buy.

Cheers Luke