Most day rates get set by asking a mate what he charges. Then you spend a few years wondering why you're flat out and skint. Here's the actual sum.
Why "what everyone charges" is a bad starting point
The lad down the road charging £250 a day might have no van payment, work for one contractor who never pays late, and do his own books at midnight. Your costs aren't his costs. Copy his number and you inherit his margins without his setup.
Step 1: what you need to earn
Start with what you want to take home, before tax. Be honest rather than modest. Say £50,000.
Step 2: what it costs you to turn up
Every cost that exists whether or not you're on site. A typical one-man setup:
| Van finance or depreciation | £4,800 |
| Van insurance, tax, servicing | £1,600 |
| Public liability and tools insurance | £600 |
| Tools and replacements | £1,000 |
| Phone, software, website | £600 |
| Accountant | £600 |
| Fuel | £2,600 |
| Training, tickets, PPE, workwear | £800 |
| Total overheads | £12,600 |
Do this with your own numbers. Most people are surprised by the total, because it never feels like much when it leaves the account in dribs and drabs.
Step 3: how many days you can actually bill
This is where the sums usually go wrong. There are about 260 weekdays in a year. You are not billing 260 of them.
| Weekdays in the year | 260 |
| Holiday | (20) |
| Bank holidays | (8) |
| Sickness, appointments, van in the garage | (8) |
| Quoting, invoicing, chasing money, collections | (20) |
| Gaps between jobs | (12) |
| Billable days | 192 |
Step 4: the sum
(£50,000 + £12,600) ÷ 192 days = £326 a day
Call it £325. If that feels high next to what you're charging now, that's the point. At £250 a day across 192 days you'd bring in £48,000, take £12,600 of overheads off it, and be left with £35,400 before tax for a full year of graft.
What to do with the number
- Don't put it on the quote. Price the job, not the day. "£2,600 for the bathroom" lands better than "8 days at £325", and it stops the customer negotiating your rate instead of the work.
- Price awkward work higher. Occupied houses, tight parking, stairs, listed buildings, a client who wants a daily update. That's real time.
- Check it against reality. When a job's finished, compare the days you allowed with the days you actually spent. Do that ten times and you'll price better than any calculator can.
- Review it every year. Your costs went up. Your rate should have.
If you've got lads working for you
Same sum for each of them, but their cost to you isn't their wage. Add employer's NI, holiday pay, pension, their share of the van and insurance. Then work out the rate you charge out, and watch the gap between what they cost and what they earn you. That gap is your business.