How do I know if a job is profitable - before I send the quote?
A job is profitable when the price covers every cost of doing it - labour at your real hourly rate, materials, and a share of your overhead (vehicle, insurance, super, your own pay) - and still leaves a margin. The trick is checking that before you send the quote, not months after the job's done.
Plenty of jobs get quoted on gut feel, and whether they actually paid only shows up much later - if ever. The number that tells you isn't the total on the quote. It's the effective hourly rate the job leaves you once every cost is taken out. Work that out before you send the price and you stop taking on work that keeps you busy but broke.
Why the loss shows up too late
The job looks fine on the day. The price covered the materials and felt about right for the hours. But the quote never counted the overhead - the vehicle, the insurance, the super you should be putting aside, the time spent quoting jobs you didn't win. By the time the real cost shows up, the job's done and the money's spent.
It's not a small leak, either. Research puts trade admin alone at up to 5 hours a job, before you've counted a single tool or kilometre.
Source: hipages, April 2024.The one number: your effective hourly rate
Forget the total on the quote - it can look healthy and still be a dud. The number that actually tells you is the effective hourly rate: the price, minus materials and job costs, divided by the hours the job will take. Set that against your real hourly rate - your break-even after overhead - and you've got your answer at a glance:
- Above your real rate - the job's profitable, and the gap is your margin
- At your real rate - you're breaking even: working for wages, no profit
- Below it - the job loses money, however busy it keeps you
This leans on knowing your real rate. If you haven't worked it out, do that first.
Work out your real hourly rate
Check the job before you send the quote
Once you know your real rate, every quote can be tested against it. Price the labour and materials, and look at the effective hourly rate the quote implies - green if it's above your break-even, amber if it's marginal. If it's below the line, you change the price or walk away while it still costs you nothing.
This is exactly what figrd does: it works that effective hourly rate out in the quote builder as you add labour and materials - overhead and real travel distance included - and shows it to you while you can still change the price. Australian-built, A$39/month inc GST, unlimited users.
Then check it after the job
Knowing a job will pay is half of it; knowing whether it did is how you get sharper at quoting. After the job, compare what you quoted to what it actually took - the real hours, the real materials. If a two-hour job kept turning into three, your next quote for that work should say so. Do that a few times and the hours you put in a quote stop being a guess.
figrd keeps both numbers side by side after every job, so the lesson's there without you digging for it.
The quick test
- Count the real hours - including travel, set-up and clean-up, not just the hands-on work.
- Price labour at your real hourly rate, not your take-home pay.
- Add materials at cost, plus a markup if you carry them.
- Check the effective rate the quote implies: the total minus your costs, divided by the hours the job will take.
- Decide before you send - if it's below your break-even, change the price. Don't discover it after the job.
Related questions.
How do I know if a job is profitable before I quote?
Work out your real hourly rate, then check the effective rate each quote implies - the total minus your costs, divided by the hours the job will really take. If it lands above your break-even, the job's profitable. If it's below, change the price or walk away before you send it.
How do I know if a job actually paid, after it's done?
Compare what you quoted to what it actually took - the real hours and real materials - and look at the effective hourly rate it left you. If the actual rate came in below your real rate, the job lost money even though the invoice got paid. Doing this after each job sharpens your next quote.
What's a healthy effective hourly rate?
At or above your real hourly rate - the rate that covers all your costs after overhead. At your real rate you're breaking even; above it, the gap is profit; below it, the job loses money no matter how busy it keeps you.
See the rate before you send.
We're bringing on Australian trade businesses in small groups. Leave your details and we'll set you up.