The four items of a cost price
Materialsquantities actually installed × purchase price excl. VAT, offcuts and breakage included
Labourplanned hours × all-in hourly rate
Direct costshire, skip and waste removal, consumables, fuel, site parking
Cost pricematerials + labour + direct costs
Selling price excl. VATcost price × (1 + target margin ÷ 100)
The share of the company's fixed costs — ten-year structural and public-liability insurance, vehicle, premises, tooling, accountant, admin time — doesn't show up as a separate line: it's already inside the all-in hourly rate, provided that rate was worked out on genuinely billable hours. That's the whole point of the next step.
Step 1: calculating your all-in hourly rate
It's the figure that decides everything else, and the one most tradespeople underestimate. The formula fits on one line:
All-in hourly ratethe company's total annual overheads ÷ genuinely billable hours in the year
The annual overheads are all your running costs: loaded pay (yours included), vehicle and fuel, ten-year structural and public-liability insurance, tooling and depreciation, premises, accountant, phone and software, training.
The billable hours are the hours spent at the client's. Not the theoretical 1 800 hours of a full-time year: you have to take out measuring up, quotes, travel, trips to the merchant, callbacks, admin, holidays and bad weather. Count 1 300 to 1 500 billable hours a year per worker.
| Billable hours/year | Floor hourly rate | Difference over an 8 h day |
|---|---|---|
| 1 300 h | 36,90 €/h | + 39 € vs 1 500 h |
| 1 400 h | 34,30 €/h | + 18 € vs 1 500 h |
| 1 500 h | 32,00 €/h | reference |
| 1 800 h (theoretical) | 26,70 €/h | − 42 € : the trap |
Pricing on 1 800 hours instead of 1 400 is like giving yourself a 22% discount on every hour sold, without anyone asking for it. The same calculation exists online: the hourly rate calculator was written for the car workshop, but its method applies to the building trade unchanged.
Step by step: from measuring up to the selling price
- Price the materials, offcuts includedFor straight-laid tiling, count 5 to 10% for breakage and cutting; up to 15% for diagonal laying or an awkwardly shaped room. The calculation is done on the quantity bought, not the area on the drawing.
- Estimate the hours honestlyTake your real time on a comparable job, not your best memory. Add protecting the area, setting up, cleaning and clearing away: these are site hours, even if they don't lay a single tile.
- Apply your all-in hourly rateHours × the hourly rate from step 1. It's a cost, not a selling price: the margin comes after.
- Add the direct costsEquipment hire, skip, consumables, fuel, parking. These amounts are small taken one by one, and often add up to a job's whole margin once combined.
- Add the marginPrice excl. VAT = cost price × (1 + margin). Mind the trap: a 30% margin on the cost price is not 30% of the selling price, but 23%.
- Apply the right VAT rateIn France: 20% for new build, 10% for maintenance and renovation of a home completed more than two years ago, 5,5% for energy-improvement work and associated works. The reduced rates require a declaration signed by the client.
All six steps fit into the free building quote calculator: materials, hours, hourly rate, expenses and margin on one side, price excl. and incl. VAT on the other, recalculated at every keystroke.
A full worked example: 10 m² of tiling
A bathroom to tile, supply and fit included.
- Tiles: 10 m² at 15 €/m²10 × 15 = 150 €
- Adhesive, spacers, grout= 150 €
- Total materials150 + 150 = 300 €
- Labour: 8 h at 35 €/h all-in8 × 35 = 280 €
- Miscellaneous costs (cutting, waste removal)= 20 €
- Job cost price300 + 280 + 20 = 600 €
- Target margin of 30%600 × 1,30 = 780 € excl. VAT, of which 180 € margin
- VAT 10% (renovation)780 × 1,10 = 858 € incl. VAT
780 € excl. VAT, i.e. 78 € per m² supplied and fitted — 858 € incl. VAT for the client.
The real test comes after the job. If the tiling took 10 hours instead of 8, the cost price rises to 670 € and the margin falls from 180 € to 110 €, i.e. 16% instead of 30% — without a single price moving. Two hours too many eat 39% of the margin: that's why noting your real hours pays more than haggling with your merchant.
Redo the calculation at the end of every job with the real figures. After ten jobs, you know your own times better than any rate card, and your next quotes are right first time.
Benchmark table: margins and multipliers
In practice, many tradespeople aim for a 20 to 35% margin on the cost price, plus a 10 to 30% mark-up on the materials they supply. The right figure depends on your trade, your order book and the risk of the job.
| Margin on cost | Multiplier | Margin on selling price | Price excl. VAT |
|---|---|---|---|
| 15% | × 1,15 | 13,0% | 690 € |
| 20% | × 1,20 | 16,7% | 720 € |
| 25% | × 1,25 | 20,0% | 750 € |
| 30% | × 1,30 | 23,1% | 780 € |
| 35% | × 1,35 | 25,9% | 810 € |
| 40% | × 1,40 | 28,6% | 840 € |
| Benchmark | Ballpark |
|---|---|
| Billable hours per year per worker | 1 300 to 1 500 h |
| Offcuts and breakage (tiles, straight laying) | 5 to 10% — up to 15% on the diagonal |
| Mark-up on supplied materials | 10 to 30% |
| VAT, renovation of a home over 2 years old | 10% |
| VAT, energy-efficiency improvement | 5,5% |
| VAT, new build and out-of-scope work | 20% |
These VAT rates apply to France and require a client's declaration for the reduced rates; if in doubt about your situation, your accountant decides.
The mistakes that eat the margin
- Starting from the next guy's priceHis overheads aren't yours, nor is his equipment, still less his productivity. A per-m² price picked up from a fellow tradesman can be profitable for him and suicidal for you. The price is derived from your cost, never from the market alone.
- Counting 1 800 billable hours a yearIt's the most costly mistake in the trade. Quotes, measuring up, travel, callbacks and admin aren't billed: they're funded by the hours that are.
- Confusing margin and multiplierA 30% margin on the cost price is a multiplier of 1,30 and 23% of the selling price. Many tradespeople think they're making 30% of turnover when they're making 23%: on 200 000 € of work, the gap is 14 000 €.
- Forgetting offcuts and breakageOn tiling, 10% of offcuts left out of the quote means 10% of the materials line comes straight out of your margin, job after job.
- Never comparing planned versus actualA quote is only a hypothesis. Without feedback on the hours actually spent, the same pricing mistakes repeat endlessly — and always in the same direction.
- Forgetting to pay yourselfA sole trader who leaves their own pay out of the annual overheads gets an artificially low hourly rate. They then sell hours that don't pay them, and call it competitiveness.