What an hour of quoting really costs you

What goes into the number

Your business pays for more than your time. Add up what it costs to run for a year, then divide by the hours you actually bill. Six numbers cover it:

• Wages: what you pay yourself and anyone on the tools, for the year.
• Super: what you put away on top of those wages.
• Insurance: public liability, tools, vehicle and anything else you carry.
• Vehicle: fuel, rego, servicing, repairs and finance.
• Overheads: phone, software, accountant, tools, uniforms and the rest.
• Billed hours: the hours in the year you actually charged a customer for.

Use your own figures. If you are not sure, your accountant or last year's statements will have most of them.

Do not worry about being exact. A rough figure that you can update beats a perfect one you never work out.

Then the sum is short. Add the first five numbers together to get your yearly cost of running the business. Divide that by your billed hours. The answer is what each billed hour has to earn just to break even.

Why the billed hours matter most

Most owners divide by every hour they work. That feels fair, but it hides the problem. The hours you spend on quotes, driving out, ordering materials and chasing payment are real work, and they do not show up on an invoice.

Divide your costs by billed hours only, and you get the true cost of each hour a customer pays for. It is usually higher than people guess. That is not a reason to panic. It is a reason to price properly.

Worked example

The numbers below are made up and round, to show how the sum works. Yours will be different.

Try your own numbers

If your answer is higher than you expected, you are not alone. Most trade owners have never worked it out. Knowing it is the first step to pricing jobs so that they pay for the time they really take.

Read the example first, then try your own numbers in the box below it. Nothing you type leaves your phone. Nothing is saved or sent.

Notice how much of the yearly cost sits in wages and super. That is you and your crew, and that is fair. What surprises people is how far the vehicle and overheads push the hourly number up.

What unbilled hours add up to

Now take the hours you spend on quoting that never turn into a paid job. In our example, say that is five hours a week over 46 working weeks. That is 230 hours. At the example cost of $140 an hour, those hours are worth $32,200 a year.

That figure is not money you lost. It is time you spent, and time you could spend on paid work, on your family or on rest. The point is to see it.

Try it with your own week. Write down every hour you spend this week on quotes, site visits that go nowhere and messages to people who do not reply. Most owners are surprised by the total. You do not have to fix it all, just see it.

Three ways to bring the number down

• Ask the five questions before you quote, so you only price jobs that fit. See the guide on questions before you quote.
• Follow up each quote in a few short messages, so the time you spent pricing has a better chance of paying off.
• Charge for large quotes, or roll the cost into the job price when you win it.

Use the number

Write the number on a sticky note and keep it where you price jobs. When a customer asks for a quick quote on a small job, look at the note first.

Once you know your cost per billed hour, check it against what you charge. If your rate sits under your cost, every job is costing you money. If it is well above, you have room. Either way, you are making the call with facts.

For a quick estimate of what your quoting time costs, try the Quoting time calculator on the summer page. It is an estimate and a first read, not an audit.

Check it again once a year, or when your costs change. A new vehicle, a bigger insurance bill or fewer billed hours all move the figure.

And a note on honesty. This is a rough guide for your own planning. It does not replace advice from your accountant, who knows your whole picture.