It’s the most frustrating trap in the trades: flat out all year, but the bank balance never grows. Almost always, the cause is the same — jobs are priced on gut feel, not on what they actually cost. Job costing is how you fix it.
What is job costing?
Job costing simply means working out the true, total cost of a job — every dollar that goes into it — so you can put a price on top that leaves you a real profit. Do it before the job to quote properly, and after the job to check you actually made what you thought.
The real cost of a job
A job costs far more than “materials plus a day’s pay.” The full picture includes:
- Labour — your team’s true hourly cost, not just their take-home pay.
- Materials — at cost, plus a sensible markup.
- Subcontractors — anything you pay others to do.
- Plant and equipment — hire, fuel, wear and tear.
- Overheads — a share of the costs of simply running the business.
- Profit margin — what’s left for you, on purpose, not by accident.
Work out your true labour rate
This is where most tradies under-charge. If you pay a tradesman $40/hour, they cost you far more than $40 once you add superannuation, leave, insurance, training, downtime between jobs, vehicle and phone. Your charge-out rate has to cover all of that before a cent of profit. Calculate the real cost of an hour on the tools and build every quote from that number.
Don’t forget overheads
Rent, insurance, software, accounting, advertising, the ute, your own admin time — none of it is “free.” Total your annual overheads, divide by the hours you actually bill in a year, and add that to your hourly rate. Skipping this step is why so many jobs look profitable but the business isn’t.
Markup vs margin — know the difference
These two get mixed up constantly, and it costs money. Markup is added on top of your cost; margin is the profit as a percentage of the final price. A 50% markup is only a 33% margin. If you think you’re making 50% but you’re actually making 33%, every job is quietly leaking profit. Decide the margin you need, then work backwards to the price.
Budget vs actual — the step most tradies skip
Quoting is only half of job costing. The other half is comparing what a job actually cost against what you quoted. Do this on every job and patterns appear fast: the work you consistently underquote, the clients who eat your margin, the jobs worth chasing more of. That feedback loop is what turns a busy business into a profitable one.