Setting the right labour charge-out rates is one of the most important things for any tradie or builder running their own business.
Get it wrong, and you could end up underpricing jobs, burning cash, and wondering where the profit’s gone.
In a recent podcast, Marc and Mat from NextMinute sat down to chat about this exact issue. With their years of experience in the construction and plumbing trades, they shared some handy tips on how to avoid these common mistakes and keep your business ticking along smoothly.
Here’s a quick wrap-up of their key takeaways to help you get your charge-out rates sorted and make sure you’re actually turning a profit.
Key Lessons from the Podcast
1. Markup vs Profit Margin – Don’t Get Them Mixed Up
One of the biggest traps tradies fall into is thinking markup equals profit. It doesn’t. Markup is just the extra percentage or dollar amount you add on top of your costs. But that doesn’t mean it’s all profit.
Profit margin is what’s left after you’ve paid all your expenses—stuff like fuel, insurance, downtime, and even tax. If you’re just slapping 15% on materials and thinking that’s your profit, think again. You’ve got to factor in everything or you’ll be in for a shock when the bills come rolling in.
2. Get Your Labour Charge-Out Rates Right
Marc and Mat introduced NextMinute’s free labour markup calculator to help tradies get their labour rates right. It’s way too easy to undercharge for labour if you’re not considering all the extra costs—like super, workers’ comp, downtime, and those non-productive hours we all know too well.
In their example, if you’re paying an apprentice $15 an hour, you actually need to be charging nearly $30 an hour just to break even. And if you want to make a decent profit, that rate’s got to go even higher. The calculator makes it easy to figure this out, so you’re not left out of pocket.
3. Quote by Days, Not Hours
Another gem from the podcast is the idea of quoting jobs by days, not hours. Rather than estimating how many hours a job will take, break it down into days. This covers all the extras that can mess with your timeline—travel, picking up materials, delays on site—and gives your clients a clearer picture.
Plus, it stops you from getting caught out if things take longer than expected. It’s a simpler, more accurate way to quote, and it saves a lot of headaches down the track.
4. Don’t Go It Alone – Get Financial Help
Marc and Mat made it clear that you don’t have to manage everything on your own. Whether it’s a bookkeeper or a business advisor, getting professional help with your finances is one of the best investments you can make. It can help you avoid costly mistakes and ensure you’re staying on top of things like cash flow and profit margins.
5. Use a Job Management System
If you’re still managing your jobs with bits of paper and a whiteboard, it might be time to upgrade. Marc and Mat are big fans of using a job management system like NextMinute. It keeps everything in one place—quotes, timesheets, invoices—and makes it a hell of a lot easier to stay organised and avoid mistakes.
Plus, it’s a lifesaver when it comes to keeping an eye on your cash flow and making sure you’re not underquoting jobs. With everything tracked in one spot, you’ll have more time to focus on getting the job done, not chasing paperwork.
Conclusion
If you’re a tradie looking to keep your business running smoothly and avoid the stress of underquoting or losing money, getting your labour charge-out rates right is a must. Marc and Mat’s podcast offers some great tips on how to do this, and it’s definitely worth a listen.
To make things even easier, check out NextMinute’s free labour calculator. It’s designed to help you work out the right rates for your team, so you’re covering all your costs and still turning a profit.
Download the Free Labour Calculator
At the end of the day, whether you’re just starting out or you’ve been in the game for years, getting your pricing right will help you stay on top of your finances and keep your business moving in the right direction.
