How to set your day rate as a tradesperson (and stop undercharging)

Most tradespeople set their day rate the same way: they charge a bit more than they think the last person did, and hope it’s enough. It usually isn’t. A day rate pulled out of the air feels fine until you realise you’re working flat out and still short at the end of the month. Here’s how to set one from the numbers, so it actually pays you.

Your day rate isn’t what the market will bear. It’s the number that covers your costs and pays you a proper wage across the days you can actually bill.

Why so many trades undercharge

The trap is pricing off other people. You hear a mate charges £200 a day, so you charge £210 to feel competitive, and neither of you ever worked out whether £200 covers the bills. Undercharging spreads because nobody does the maths. Do it once and you’ll usually find your number should be higher than you dared to charge.

The other trap is thinking a day rate is just your wage. It isn’t. It has to cover the wage you want plus every cost of being in business plus the days you can’t bill for. Miss those and you’re quietly working for less than the number suggests.

Start from the income you actually want

Work backwards from a real target, not a vague one. Say you want to take home £45,000 a year. That’s the wage, before you’ve paid a single business cost. Write it down as the starting point, because everything else gets added on top.

Add your real costs

Now add what it costs to run the business for a year. Be honest and thorough:

• Van, fuel, servicing and insurance
• Tools, replacements and hire
• Public liability and any other insurance
• Phone, software and subscriptions
• Accountant and bank fees
• Materials you don’t bill directly, consumables and waste

Add it up. For a lot of sole traders this lands somewhere around £10,000 to £15,000 a year before they’ve earned anything. Say yours is £12,000. Your business now needs to bring in £45,000 plus £12,000, which is £57,000, before tax.

Divide by the days you can actually bill

Here’s the number that catches everyone out. There are about 260 weekdays in a year, but you will not bill for anywhere near all of them. Take off holiday, the odd sick day, bank holidays, and, above all, the days you spend quoting, chasing, buying materials and doing paperwork instead of earning.

A realistic billable figure for a busy sole trader is often around 200 days, sometimes fewer. So divide the £57,000 you need by 200 days, and you get roughly £285 a day. That’s your floor: the rate that covers your costs and pays the wage you set, if you fill 200 days. You can run your own figures through the day rate calculator in a few seconds. Charge £220 because it sounds friendlier and you’ve handed yourself a pay cut you never agreed to.

Adjust for the job, not for nerves

A day rate is your baseline, not a straitjacket. Charge more for awkward access, unsociable hours, specialist work, or a job nobody else wants to touch. Hold firm on the jobs everyone can do. What you shouldn’t do is drop below your floor because you’re nervous about the price. A job priced under your real day rate isn’t work, it’s a hobby that happens to tire you out.

By the day or by the hour?

Quote by the day for anything that fills a day or more. It’s simpler for the customer and it stops you nickel-and-diming your own time. Keep an hourly rate for the small stuff: a call-out, a quick repair, an hour to trace a fault. A fair hourly rate is usually your day rate divided by around six or seven, not eight, because a one-hour job still costs you the travel, the parking and the setup. Divide by eight and you’re quietly giving away the overhead on every short job.

Don’t race to the bottom

It’s tempting to shave your rate to win a quiet week, and now and then that’s a fair call. As a habit, it’s a trap. The customers you win purely on being cheapest are usually the ones who haggle hardest, pay slowest, and leave the least room for a mistake. Winning work on price alone trains you to work more for less. You’re better off winning it on being fast, clear and professional, and holding a rate that actually pays you.

Review it once a year

Your day rate isn’t set in stone. Materials, fuel, insurance and your own costs all creep up, and a rate that covered everything two years ago may not now. Put a note in the calendar to review it every year, ideally before your busy season. Nudging it up by a sensible amount rarely loses you good customers, and it stops the slow squeeze where your costs rise but your rate doesn’t.

Build it in and stop second-guessing

Once you know your number, you never have to agonise over it again. Price your quotes off it, build it into your saved items, and let it do its job quietly on every estimate. Your day rate is one part of pricing the whole job properly, alongside materials, overheads and margin. Here’s how the full pricing formula fits together, and why markup and margin aren’t the same thing when you add your profit on top.

Snapquo keeps your priced day rate and items in a saved list, so every quote is built off your real number without you doing the sum again. See how it works, or start free.