Pricing a Job Backwards From the Margin You Need

Price a job from the margin, not the market

Start with the profit you need to keep, then work backwards to the price. That's the whole trick. Most tradies do it the other way round — they cost the job, add a bit, then glance at what the bloke down the road charges and shave it. That's how a busy quarter still ends with an empty bank account.

Picture a Tuesday. Dan the electrician quotes a switchboard upgrade based on what a mate charged for a similar job. He wins it. He also wins the next four. By Friday he's flat out and still short on the BAS. High win rate, low margin, no idea why.

This post gives you the sum that fixes it: a charge-out rate built from your real overhead and billable hours, and a target margin baked in before you ever say a number.

Key takeaways

• Work backwards: decide the margin first, then set the price that delivers it.
• Charge-out rate comes from real overhead divided by real billable hours — not a gut number.
• "Cost plus a round number" quietly loses money because markup on cost isn't the same as margin on the sale price.
• A win rate that's almost perfect is a pricing warning, not a trophy.

Why "cost plus a bit" quietly loses money

Markup and margin are not the same number, and confusing them is where profit leaks. When you add a percentage on top of your cost, the margin on the final sale price is always smaller than the markup you added — because the profit is a slice of the sale price, not the cost.

Want a true target margin? You divide the cost by one minus the margin, rather than simply multiplying the cost up. The gap looks small on one job. Across a year of jobs it's the difference between paying yourself and funding your customers.

Here's the catch:

Most owners never notice, because the money still moves. Cash in the account feels like profit right up until the quarterly bill lands.

Build a charge-out rate from real hours

Your charge-out rate is total overhead divided by the hours you can actually bill — then loaded with your target margin. Not the hours you're at work. The hours you can invoice.

Start by separating three things:

1. Direct costs — materials, subbies, hire, anything that exists only because this job exists.
2. Overhead — the stuff you pay whether the phone rings or not: insurance, rego, fuel, tools, software, super, your own admin nights.
3. Billable hours — the real number. A full working week is rarely all billable hours. Quoting, driving, chasing invoices and fixing stuff-ups all eat it.

Add your yearly overhead. Divide it by your realistic billable hours for the year. That's what every billable hour must earn before materials and before profit. Load your target margin on top and you've got a rate that pays for the whole business, not just the day on the tools.

Pro tip: if you've never counted your real billable hours, guess low. Owners overestimate them almost every time.

Read your win rate like a gauge

A suspiciously high win rate is telling you your price is too low. If you're winning nearly every quote, you're leaving money on the table — you've priced below what the market would happily pay. Winning is not the goal. Winning at your margin is.

There's a healthy zone. Lose a few on price and you know you're testing the ceiling. Win them all and you're the cheapest option in town, which is a race you don't want to lead.

When a customer says "just send me a price," the temptation is to go low to lock it in. Resist it — handling price-first enquiries without dropping your rate is a skill worth building. And when the job grows mid-way, charging for variations is how you protect the margin you set on day one.

Put the margin on the page, then hold it

Once your rate and margin are set, your quote has to reflect them cleanly. A vague quote gets negotiated down; a clear one gets accepted. If you're still eyeballing prices per job, tighten the process with a job quote that wins the work and, on bigger jobs, a progress payment schedule so you're never funding the customer's build out of your own account.

The deposit conversation matters too. Ask early, ask plainly — how and when to ask for a deposit keeps cash coming in while the work's underway, not 30 days after it's done.

Name the objection: "won't a higher price cost me jobs?" Some, yes — the ones that were never going to pay you properly anyway. Losing a handful of low-margin quotes to protect the rest is the trade you want.

How IgniteOS does this for you

Work out the rate on paper once. Then let the system hold the line every time. IgniteOS quoting sends a clear, itemised price with your margin already built in, so you're not eyeballing numbers at 9pm. Turn accepted quotes into invoices the moment the customer says yes, and take the deposit on the spot with text-to-pay and card payments instead of waiting on a bank transfer.

That's 20+ tools and 60+ features in one login — quoting, invoicing, deposits and follow-up talking to each other instead of living in five apps. Our calculator shows a typical replaced stack runs about $18,000 a year.

Start with get paid faster to see how the price you set makes it into the bank. The 14-day free trial includes free migration and an onboarding session, and you can cancel anytime. The fastest win: quote your next job backwards from your margin, send it in minutes, and collect the deposit before you leave the driveway.

Frequently asked questions

How do I work out a job price from the margin I need?

Decide your target margin first, then divide your total cost by one minus the margin. Working backwards from the margin guarantees the profit lands, instead of hoping a round markup on cost covers it. It's a simple, repeatable sum that protects every quote.

Why is markup different from margin?

Markup is a percentage of your cost; margin is a percentage of your sale price. When you add a percentage on top of cost, the margin on the final price is always smaller, because the profit is a slice of the sale price. To hit a true target margin you divide cost by one minus the margin.

What does a very high win rate mean for my pricing?

A win rate that's almost perfect usually means you're priced too low. If nearly every quote gets accepted, you're the cheapest option and leaving money on the table. A healthy rate loses a few jobs on price — that tells you you're testing the ceiling rather than sitting under it.

How does IgniteOS help me hold my margin on every quote?

IgniteOS quoting sends an itemised price with your margin already built in, turns accepted quotes into invoices instantly, and collects deposits by text-to-pay or card on the spot. See how the price you set reaches the bank at our get paid faster page.