Charging the right amount makes the difference between a profitable business and one that merely survives.
If you run an installation company, you probably started out setting prices based on guesswork or copying what the competition charged. That is normal. But there comes a point when you need to know exactly how much each hour of work, each journey and each material costs you, so you can stop giving money away without realising it.
The most common mistake: not counting hidden costs
Most technicians calculate it like this: ‘the material costs me X, I add a margin, and that’s it.’ But they forget about:
- Travel. Fuel, wear and tear on the van, tolls, time on the road. If it takes you 40 minutes to get to a job and another 40 to return, that is almost an hour and a half that you are not billing for.
- Administrative time. Preparing quotes, answering calls, issuing invoices, going to buy materials. Easily 20–30% of your working day that does not appear on any invoice.
- Non-payment and cancellations. If 5% of your jobs go unpaid, the rest of your customers are covering that percentage — or worse, you are covering it yourself.
- Tools and training. Depreciation of equipment, certifications, professional insurance.
- Days without work. Public holidays, sick leave, quiet weeks. A self-employed person works around 220 days a year, not 365.
How to calculate your true hourly rate
Let’s work through the calculation using real numbers. Suppose you want to take home €2,500 net per month.
- Annual gross salary: With self-employed social security contributions and personal income tax, you need to invoice around €48,000 a year to take home that €2,500 net.
- Annual fixed costs: Van (lease, insurance, maintenance): €6,000. Tools: €2,000. Professional insurance: €1,200. Phone, software, accounting services: €3,000. Total: €12,200.
- Target turnover: 48,000 + 12,200 = €60,200 per year.
- Billable hours: If you work 8 hours a day, 220 days a year, that is 1,760 gross hours. But only 65–70% are billable (the rest is travel, administration and purchasing). That leaves around 1,150 billable hours.
- Minimum hourly rate: 60,200 / 1,150 = €52.35/hour.
That does not include materials. Labour only.
What if I have employees?
The formula is the same, but with one important nuance: each technician costs you between 1.3 and 1.5 times their gross salary (social security, occupational risk costs, tools and training). If you pay them €24,000 gross per year, their true cost is around €33,000. Divide that by their billable hours and you will have the minimum you need to charge for that person.
Three tips for setting prices with confidence
- Do not compete on price. There will always be someone cheaper. Compete on reliability, speed and professionalism. The customer who only wants the cheapest option is the one who causes the most problems.
- Provide quotes in writing. A professional quote inspires confidence and reduces misunderstandings. Itemise labour, materials and travel separately.
- Review your prices every year. Costs rise. Fuel goes up. Self-employed social security contributions go up. If your prices do not rise, your margin falls.
Golden rule: if you never lose a quote, you are probably charging too little.