By Rob Burger, small business finance and strategy consultant, 2XR Business Solutions
Most contractors and tradespeople work hard.
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About the author:
Rob Burger CA(SA) is a finance and strategy consultant who helps small businesses, contractors and professionals simplify their finances and grow sustainably. He has 30 years of experience inbusiness and now focuses on helping SMEs build stronger, more profitable enterprises. |
Extremely hard. Long days, physical work, problem- solving under pressure.Yet many still struggle to make decent money at the end of the month.The reason is rarely a lack of work. It is pricing.
Too many jobs are priced to stay busy, not to earn a real profit. That keeps cash moving, but it does not build a business. It simply creates exhaustion with little to show for it. Let’s change how pricing is viewed.
The most common mistake
Many contractors price jobs by asking, ‘What will the customer accept?’ or ‘What does the guy down the road charge?’ That mindset turns a business owner into a price-taker. It focuses on winning the job, not on whether the job is worth doing.
Every price must cover three things:
- First, the real cost of the job
- Second, your time, skill and experience
- Third, a profit that allows the business to grow and survive
If one of those is missing, you are paying for the job with your own effort.
Markup versus margin
Markup and margin are often confused, and this misunderstanding quietly destroys profitability. Markup is what you add to your costs. Margin is what remains after the job is completed and paid for.
If a job costs R1 000 and you add 20% markup, the selling price becomes R1 200. The profit is R200. That is not a 20% margin – it is only a 16.7% margin. This matters because overheads are paid from margin, not markup. When margins are too thin, the business survives only as long as nothing goes wrong.
Why thin margins are dangerous
Every trade business has costs that do not belong to a specific job. Vehicles, fuel, insurance, tools, phones, admin, bookkeeping and compliance all continue whether work is steady or slow. If margins are too low, one quiet month, one unpaid invoice or one comeback job can erase weeks of hard work.
Healthy trade businesses typically aim for gross margins between 35–50%, depending on the trade, risk and level of competition. That buffer allows reinvestment, stability and resilience.
Pricing labour properly
Your hourly rate is not what you want to earn personally. It is what the business must charge to remain viable. That rate must cover your salary, downtime, non-billable hours, admin time, overheads and profit. If you only charge for time spent on site, you are under-pricing your work.
Travel, quoting, sourcing materials and follow-ups are all part of delivering a job. They must be priced in.
Materials are not pass- through items
Many contractors apply little or no markup on materials, believing this is fair. In reality, materials involve time, cash flow pressure, price risk and warranty responsibility. A sensible markup on materials compensates for those risks. It is not greed – it is good business.
Profit has a purpose
Profit allows you to replace tools, hire help, survive slow periods and say no to bad jobs. It also creates a business that has value beyond your own labour. Before accepting any job, ask one simple question. If you did this job every week for a year, would your business be stronger or weaker? If the answer is weaker, the price is wrong.
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