How to Calculate Charge Out Rates

Suzanne Faulkner 21 July 2022

Getting your prices right can be challenging, but it’s an essential aspect of a profitable business – and even more important when operating in a market where labour and material costs are continually increasing.

Reviewing your prices isn’t a “one moment in time” activity – it’s something you need to tend to throughout the year to make sure your profit isn’t being eroded. So you need to have a good system in place that captures all the relevant costs and allows you to quickly check if your pricing is on track.

But how do you find the balance between generating a decent profit and making sure you stay competitive?

 

Calculating Competitive Pricing

I recently presented a webinar on exactly this question, in partnership with the Master Plumbers’ Association of Queensland.

I covered a range of factors to consider when pricing, as well as walking through a pricing calculator we produced in partnership with Master Plumbers.

You can also download the free Guide to Calculating Charge Out Rates here.

Check out the webinar below and download the free calculator.

Pricing & Profitability Calculator

 

 

Key takeouts from this session include

  • The difference between Margin and Markup – It’s critical you get this right to make sure you don’t undercharge by mistake – the Guide to Calculating Charge out Rates, provides a simple table that shows the connection between Margin and Markup
  • Factoring in all the variables that can impact your pricing
  • Staff entitlements (super, holidays, sick days, workcover RDOs etc)
  • Lost days (e.g. wet weather)
  • Quiet trading days
  • Training days
  • Different wage rates for workers at different skill and experience levels
  • Factoring in overheads
  • Factoring in local demand and your location into your pricing – some traditionally prices are higher in metro areas however a lack of trades in regional areas can also impact price.
  • How to talk to your customers about price increases and dealing with difficult customers

If you’d like some help reviewing your prices – get in touch today for a free consultation.

Note: As part of our ongoing support of Master Plumbers, members can take advantage of our range of discounted service packages.

Watch other webinars we’ve hosted on our Building & Construction Accounting page.

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