A bathroom fitter quotes a job two ways in the same week. For one customer it is £280 a day and he thinks it will take eight days. For the other it is £2,400 for the whole thing, finished.
The numbers are within a couple of hundred pounds of each other. The two jobs are not remotely the same deal, and which one is better depends entirely on something neither customer can see, which is how accurate his eight days is.
A day rate has to cover the days you do not charge for
The commonest pricing mistake in the trades is treating a day rate as a wage.
Start from the calendar. There are 261 weekdays in a year. Take off eight bank holidays and four weeks of holiday, and you are at about 233. Take off a fortnight for illness, a funeral, a child's sports day and a van that would not start, and you are near 223. Now take off the days you are not on a job: quoting, pricing, measuring, waiting for a delivery, chasing money, doing the books, servicing the van, going to the merchant. That is realistically one day a week.
Two hundred chargeable days is a good year for a sole trader working alone. A hundred and eighty is more common.
At £280 a day and 190 days, that is £53,200 of labour income before anything comes off it. Then take off the van, the fuel, the insurance, public liability, tools and their replacement, the phone, the accountant, protective equipment, training and certification, and whatever you contribute to a pension. None of those stop in a quiet month.
What is left is your income, and out of that comes income tax and Class 4 National Insurance. A rate that felt generous against the £180 a day you used to be paid as an employee is frequently not, because as an employee somebody else was buying the van.
There is a second thing a rate has to cover and almost nobody prices it, which is the day you are not working because you have not got a job to go to. A trade with a three-week backlog and a trade with a one-week backlog are different businesses at the same rate.
Pricing the job means you have bought the risk
When you quote a day rate, the customer carries the overrun. If the joists are rotten, that is more days and more money, and the money is theirs.
When you price the job, you have sold them certainty and you now own everything that is behind the plaster. That is not automatically bad. It is worth money, and you should charge for it, because certainty is genuinely what most domestic customers want. They would rather pay £2,400 and know than pay £280 a day and wonder.
But it changes what a quote is. A priced job is a quote plus a contingency, and the contingency has to be real. Ten per cent on a job you have done fifty times in houses of the same age is probably right. Ten per cent on a Victorian property you have not opened up is optimistic. If you cannot see what is behind the wall, either price for the worst plausible case, or write the exclusion into the quote clearly and in plain words, so that "if the joists need replacing it is £X extra and Y more days" is agreed before you start rather than argued after.
The other advantage of pricing work is that it pays you for being good. If you fit that bathroom in six days rather than eight, on a day rate you have earned £560 less for being quicker. On a priced job you have earned the same and gained two days. Over a year, efficiency only pays if you are selling the outcome.
The overrun is where the money actually goes
Every experienced tradesperson can tell you about the job that ate a month.
They are rarely dramatic. It is the customer who changes their mind about the tiles when the tiles are already on. It is the part that has a four-week lead time nobody checked. It is the previous trade's work that turns out to be wrong and has to be undone before yours can start. It is having to come back twice for a half-day of snagging, which costs you a whole day each time because you cannot book anything else round it.
The defence is not pessimism, it is specificity. Write down what is included and what is not. Put the sequence in the quote, including what you need from the customer and by when. Price a return visit as a return visit. And put a variation line in your terms so that a change requested on site is priced and agreed in writing before it happens, even if the writing is a photograph of a note on your phone.
The other defence is to stop quoting jobs you cannot see the end of. A good rule is that the less you know about a property, the more you should prefer a day rate, and the more standard the work, the more you should prefer pricing it.
Raising the rate on people who know your old one
A new customer will pay whatever you tell them. The awkward ones are the ten regulars who have had you at £240 for four years while the van, the insurance and the materials have all gone up.
The approach that works is unglamorous. Pick a date, well ahead, and tell everyone at once. Tell them in one sentence, without justifying it at length, because a long explanation invites a negotiation. "From 1 April my day rate is £280." No apology and no essay.
Expect to lose one or two. That is the point of the exercise rather than a failure of it, because the customers who leave over a 15% rise are usually the ones whose work was marginal anyway, and the hours they were taking are now available for better paid work. Businesses that never raise prices do not keep their customers, they keep the least profitable half of them.
If a regular genuinely cannot pay it, you can hold their old rate for a defined period and say so. What you should not do is hold it indefinitely and quietly, because in three years you will have a book full of 2024 prices and no way to move it.
Where this shows up in the game
In Business Baron a trade business quotes work with a labour estimate and a materials estimate, and the actual is not the estimate. Choosing a day rate hands the overrun to the customer and caps your upside. Pricing the job keeps both. Raise your rates and existing customers respond according to how long they have been with you and how they were treated, which is why the trust model in the game has three separate components rather than one.