Written By
Jon Mailer
CEO & Founder – PROTRADE United
Written By
Jon Mailer
CEO & Founder – PROTRADE United
Have you ever wondered if you’re charging enough for your services? Or are you worried about undercharging and missing out on potential profits? Many business owners, especially in the trades and construction industry, face these challenges where pricing can be complex. Uncover the true cost of your employees and download our complimentary Hourly Charge-Out Rate Calculator and start using it in your business. Read on to uncover the benefits and a step-by-step guide to implement this resource today!
Have you ever wondered if you’re charging enough for your services? Or are you worried about undercharging and missing out on potential profits? Many business owners, especially in the trades and construction industry, face these challenges where pricing can be complex. Uncover the true cost of your employees and download our complimentary Hourly Charge-Out Rate Calculator and start using it in your business. Read on to uncover the benefits and a step-by-step guide to implement this resource today!
PROTRADE United’s Hourly Charge-Out Rate Calculator
PROTRADE United’s Hourly Charge-Out Rate Calculator
This tool is created to help business owners accurately evaluate all the costs associated with ‘on the tools’ employees, or what we call field labour. Field labour includes any employees out on job sites, whether that be in construction, painting, or plastering for example. This hourly rate calculator is designed for any Trades & Construction business, helping you craft the ideal hourly rate for maximum profitability. There are many hidden costs associated with employing field labour, and this calculator is designed to uncover them all. It helps business owners know where they need to price their work to recover these costs and make a profit.
An Hourly Charge-Out Rate Calculator helps tradie businesses determine the true cost of their employees. For instance, if a labourer’s wage is $40 per hour and works 38 hours a week, the gross weekly pay can be calculated. However, employees are not available to work 38 hours every week, 52 weeks a year, due to public holidays, annual leave, sick leave entitlements, and possibly rostered days off (RDOs) based on the award. Inefficiencies like meeting times, travel time, and job site delays also reduce billable hours. Businesses must cover overhead costs such as vehicles, insurance, software, and utilities. Adding all these up, a $40 an hour person may cost the business $100 an hour, including a profit margin.
The calculator incorporates all these factors to determine the actual cost per hour for an employee and adds a profit margin on top.
Every business owner, their management team, and tradies responsible for pricing work should use the Hourly Charge-Out Rate Calculator. I also believe it’s important for employees not directly involved in pricing to have some understanding of the actual costs of employing someone, because often they can be misled by the basic numbers. Employees can assume that if they’re being paid $40 an hour, but charged out at $140 an hour, the business must be making a small fortune! In reality, that’s not the case. An employee’s hourly rate may be $40 an hour, but there’s an additional $60 to $70 per hour that it costs to put them out on site. Additional costs must be recovered, and the business needs to make a profit to stay viable and provide ongoing employment.
Labour costs and wages are just one of many pricing mistakes we see trades and construction business owners make frequently.
The primary benefit is increasing the business owner’s awareness of the actual costs of running the business. If you’re unaware of the true costs and not across your numbers, you won’t be in touch with your business.
Using the tool ensures you charge accurately for labour, but the real benefit is the heightened awareness of your business operations. This awareness allows you to improve efficiencies, minimise downtime, and reduce waste. Having your team on-site doing more profitable work more often is the ultimate goal.
Written By
Jon Mailer
CEO & Founder – PROTRADE United
Unlock your potential and create business freedom and flow with time-tested principles. This book introduces timeless concepts rarely covered in typical business and life education programs. By consistently applying these principles, you can build a profitable, cash-positive business while enjoying quality time for what matters most to you.
Unlock your potential and create business freedom and flow with time-tested principles. This book introduces timeless concepts rarely covered in typical business and life education programs. By consistently applying these principles, you can build a profitable, cash-positive business while enjoying quality time for what matters most to you.
The calculator is incredibly easy to use and customise depending on your country of origin. Without the need to change the formula, you simply input the relevant details into the orange cells. You’re not required to edit any cell not highlighted in orange.
Complete the hourly rate, hours per week and weeks per year cells. Ensure the Superannuation or KiwiSaver percentage is correct.
Input the employees’ entitlements. These include annual leave, public holidays, RDO’s, delays etc.
This section identifies non-billable time and inefficiencies. Use previous data, such as travel time and work errors to create an accurate overview if available.
The final section of the calculator will generate the required hourly rate required to hit your desired Net Profit Margin. The calculator outputs a different result depending on the service you provide.
For Service & Maintenance businesses, collate all your yearly operating expenses and input them into the calculator. Add all your full-time equivalent billable employees and your desired net-profit margin.
The project-based calculator only requires you to input the gross profit margin you require.
Our suggestion at PROTRADE United is to review the actual costs of employing an employee at least every 90 days. Costs like administration, rent, insurances, software, fuel, and vehicle maintenance are rising due to inflation. Regularly reviewing and adjusting pricing ensures that the business doesn’t lose money.
The charge-out rate formula is calculated by considering the actual capacity of an employee, which is typically around 70% of billable work. The remaining 30% must be recovered through the charge-out rate. This involves dividing the total costs by the available billable days to determine the correct rate. In essence, the big picture is we’re dividing the days we’ve got available into the amount that it’s actually costing the business, and then recovering it that way. It’s crucial to fully understand your schedule and capacity to effectively manage your business.
Australia and New Zealand’s #1 Business Coaching and Advisory Organisation, dedicated to the Trades and Construction Industry. With over 20 years of practical experience, we have a proven track record of helping more than 3900 business owners gain greater clarity, consistency and choice.
Australia and New Zealand’s #1 Business Coaching and Advisory Organisation, dedicated to the Trades and Construction Industry. With over 20 years of practical experience, we have a proven track record of helping more than 3900 business owners gain greater clarity, consistency and choice.
Yes, there are two variations of the hourly rate calculator available: one for service and maintenance businesses and another for project or construction businesses. Service and maintenance businesses often have higher overheads and more administrative costs. The overheads or operating costs are then split among the on-the-tools employees. These businesses usually have one or two office staff, more vehicles on the road, and often a premises, leading to higher associated costs.
In contrast, project or construction businesses can often run with fewer overheads, requiring less management behind the scenes, usually just the owner or one other person. This is why we have a slightly different calculator for these businesses, focusing on the gross profit margin the business wants to achieve.
The challenge arises when a business does both project/construction work and service/maintenance. In such cases, we need to evaluate and clarify the pricing. This is where working directly with PROTRADE United can help businesses determine the appropriate pricing structure.
When business owners first calculate their costs, the initial response is often, “That’s why I’m not making any money!” They realise they are undercharging for their labour because they haven’t properly accounted for the extra costs of putting someone on site. Adjusting the rates in their costing platform is usually a simple fix.
The challenge for the business owner can be emotional. They might think, “How can I increase my pricing by $20 an hour?” This is where we help business owners understand their real value. If people think the new rate is too high and worry about losing work, we explore ways to improve efficiency behind the scenes. This helps ensure that even if the labour rate is high, it doesn’t impact the project’s overall cost in the long term.
Using the hourly charge-out rate calculator ensures businesses charge what they are worth, leading to better financial results. Profitable businesses can reinvest in the client experience, providing better service. Understanding and charging the correct costs prevents resentment and ensure clients receive premium service.
A recent example involves a plumber client who hadn’t increased his prices in over 12 months. Although his business was reasonably profitable, we examined how much his overheads had increased during that time. We reviewed insurance, utilities, vehicle costs, staffing, and software, discovering a 7% to 10% rise in overheads. Since he hadn’t adjusted his prices, his business was financially regressing. We determined he needed to raise his prices by at least 10% to stay ahead.
Businesses need to be profitable to exist. When a business charges what it’s worth and generates good profits, it can reinvest in the client experience. You’ve probably heard the phrase, “the poor man pays twice.” When a business is cheaper and not making profits, it can become resentful and provide minimal service. Conversely, when a business understands its costs and charges accordingly, it can deliver premium service, benefiting the client as well. This calculator in addition to these financial tips from our expert coaches will put you on track to improving your business and client relationships.
I like to tell clients, “Rubbish in, rubbish out.” To get an accurate reflection, you must be honest with the data you input. The calculator offers a comprehensive cost assessment but needs regular updates to reflect current costs. Its accuracy depends on the quality of the input.
The downloadable asset includes an Hourly Charge-Out Rate Calculator for Australia and New Zealand, featuring two versions for each country: one tailored for service and maintenance businesses and the other for project and construction businesses. While these calculators are designed with Australia and New Zealand in mind, they can be simply customised to accommodate the legislation and requirements of any country.
Ignorance is a choice. Not knowing is a choice. Putting your head in the sand and pretending that you know the numbers in your business is a choice. When you have tools at your fingertips and support and guidance from an organisation like PROTRADE United, business does not need to be as complicated and as hard as you might be experiencing it. Download the tool, reach out for some support and get your business on track for profitability and growth.
If you would like any support in the above, please connect with the team at PROTRADE United.
Discover how having a direction is important to make the best decisions possible as the year progresses.
Discover strategies to set profit margins, calculate overhead recovery rates, determine job costs, and avoid undercharging.
How to weigh the benefits vs. costs of implementing overtime to ensure it’s the best decision for your business.
Yes, there are two variations of the hourly rate calculator available: one for service and maintenance businesses and another for project or construction businesses. Service and maintenance businesses often have higher overheads and more administrative costs. The overheads or operating costs are then split among the on-the-tools employees. These businesses usually have one or two office staff, more vehicles on the road, and often a premises, leading to higher associated costs.
In contrast, project or construction businesses can often run with fewer overheads, requiring less management behind the scenes, usually just the owner or one other person. This is why we have a slightly different calculator for these businesses, focusing on the gross profit margin the business wants to achieve.
The challenge arises when a business does both project/construction work and service/maintenance. In such cases, we need to evaluate and clarify the pricing. This is where working directly with PROTRADE United can help businesses determine the appropriate pricing structure.
When business owners first calculate their costs, the initial response is often, “That’s why I’m not making any money!” They realise they are undercharging for their labour because they haven’t properly accounted for the extra costs of putting someone on site. Adjusting the rates in their costing platform is usually a simple fix.
The challenge for the business owner can be emotional. They might think, “How can I increase my pricing by $20 an hour?” This is where we help business owners understand their real value. If people think the new rate is too high and worry about losing work, we explore ways to improve efficiency behind the scenes. This helps ensure that even if the labour rate is high, it doesn’t impact the project’s overall cost in the long term.
Using the hourly charge-out rate calculator ensures businesses charge what they are worth, leading to better financial results. Profitable businesses can reinvest in the client experience, providing better service. Understanding and charging the correct costs prevents resentment and ensure clients receive premium service.
A recent example involves a plumber client who hadn’t increased his prices in over 12 months. Although his business was reasonably profitable, we examined how much his overheads had increased during that time. We reviewed insurance, utilities, vehicle costs, staffing, and software, discovering a 7% to 10% rise in overheads. Since he hadn’t adjusted his prices, his business was financially regressing. We determined he needed to raise his prices by at least 10% to stay ahead.
Businesses need to be profitable to exist. When a business charges what it’s worth and generates good profits, it can reinvest in the client experience. You’ve probably heard the phrase, “the poor man pays twice.” When a business is cheaper and not making profits, it can become resentful and provide minimal service. Conversely, when a business understands its costs and charges accordingly, it can deliver premium service, benefiting the client as well. This calculator in addition to these financial tips from our expert coaches will put you on track to improving your business and client relationships.
I like to tell clients, “Rubbish in, rubbish out.” To get an accurate reflection, you must be honest with the data you input. The calculator offers a comprehensive cost assessment but needs regular updates to reflect current costs. Its accuracy depends on the quality of the input.
The downloadable asset includes an Hourly Charge-Out Rate Calculator for Australia and New Zealand, featuring two versions for each country: one tailored for service and maintenance businesses and the other for project and construction businesses. While these calculators are designed with Australia and New Zealand in mind, they can be simply customised to accommodate the legislation and requirements of any country.
Ignorance is a choice. Not knowing is a choice. Putting your head in the sand and pretending that you know the numbers in your business is a choice. When you have tools at your fingertips and support and guidance from an organisation like PROTRADE United, business does not need to be as complicated and as hard as you might be experiencing it. Download the tool, reach out for some support and get your business on track for profitability and growth.
If you would like any support in the above, please connect with the team at PROTRADE United.
Use a powerful diagnostic business tool, to understand the current reality
Uncover the obstacles that may be holding you back from more profits, time and freedom
Craft a realistic action plan to produce results in the next 6-12 months
Gain recommendations specifically designed for trades and construction businesses operating in Australia & New Zealand
