How to price building work without losing money

Most builders who go under were busy. They were not short of work; they were short of margin, and by the time that shows up in the bank it is eighteen months too late.

Pricing is where that happens. Here is a method that holds up.

What goes into a price?

Five separate figures, worked out separately and then added. The mistake is blending them.

1. Labour, including your own time on the tools
2. Materials, including waste allowance
3. Plant and equipment, hired or owned
4. Subcontractors, quoted in writing
5. Preliminaries, the cost of running the site at all

Then, on top: overhead recovery, then profit. They are not the same thing and treating them as one is the most common reason a busy firm makes nothing.

How do you work out your labour rate?

Not what you pay someone per hour. What they cost you per productive hour.

Take the annual cost of employing them: gross pay, employers National Insurance, pension, holiday, sick pay, training, PPE, insurance. Divide by the hours they will actually be productive on site, which is not 2,080. After holidays, bank holidays, sickness, travel, yard time and weather, 1,500 to 1,600 is more realistic.

A person on £18 an hour frequently costs £30 to £34 per productive hour. Pricing at £22 feels like a margin and is a loss.

What are preliminaries and why do they get missed?

Preliminaries are everything the job needs that is not the work itself:

• Skips and waste removal
• Welfare, toilet, site set-up
• Scaffolding and access
• Temporary protection and dust control
• Deliveries and travel
• Your time visiting, ordering and coordinating
• Building control fees, structural calculations
• Cleaning at the end

On a domestic extension this routinely runs to £3,000 to £8,000. Builders who lose money almost always absorb this rather than pricing it.

How much profit should you add?

Overhead recovery comes first. Total your yearly fixed costs, the van, insurance, accountant, phone, software, yard, admin wages, then divide across the turnover you realistically expect. That percentage goes on every job before any profit at all.

Then profit. On domestic work, a net 15% to 25% is a healthy target. On commercial and tendered work, expect to be pushed to 8% to 15%, which is why volume and repeat clients matter more there.

If your quote is cost plus 10% and you have not recovered overhead separately, you are almost certainly running at a loss on that job.

How do you handle variations?

This is where domestic margin quietly disappears. The client asks for a change, you say yes because you want a good relationship, and nobody prices it.

The fix is dull and works: every variation gets written down, priced, and signed off before it happens, even if it is £200 by text message. Say up front that this is how you work, and the client will respect it rather than resent it.

Should you publish prices?

Ranges, yes. Fixed quotes, no.

"Single-storey rear extension, typically £48,000 to £75,000" costs you nothing and saves you evenings. People with a £25,000 budget filter themselves out before they reach you, and people with a realistic budget arrive already comfortable.

It is also one of the highest-volume searches in the sector, so the page pulls in traffic as well as filtering it.

What about inflation and long programmes?

On anything running beyond a few months, either fix your material prices with suppliers in writing, or include a clause that allows adjustment on named materials. Quoting a twelve-month programme at today's prices with no mechanism is a gamble you do not need to take.

The short version

Cost it properly, recover overhead separately, add real profit, price preliminaries, sign off every variation. Firms that do this are not busier than the ones that do not. They just keep more of it.