How to Price a Job
Business and Self-Employment
📄 Three ways to arrive at a number
Pricing is the single highest-leverage decision most small businesses make and the one given the least structured thought. A five percent improvement in price goes almost entirely to the bottom line, while a five percent improvement in efficiency has to fight its way through every cost in between. Yet most quotes are produced by taking last year's number, adding a bit, and hoping. This guide sets out how to build a price deliberately. It covers the three legitimate approaches and when each applies, then works through building a number from the ground up: labour, materials, subcontractors, plant and the overhead recovery that most quotes leave out entirely. It deals in detail with the confusion between markup and margin, which is the most expensive arithmetic error in New Zealand small business and costs real money on every job. It covers allowing for rework, warranty and variations, the GST question that differs depending on whether your customer is a consumer or a business, and how to set a walk-away price before a negotiation rather than during one. It ends with what to actually say when a customer asks you to come down.
Cost-plus pricing
Work out what the job costs you, add a margin, quote that. This is the default in trades and manufacturing and it has one great virtue: it is very difficult to lose money on a job priced this way, provided the costing is honest and includes overhead.
Its weakness is that it ignores what the work is worth. If your costs are low because you are fast and experienced, cost-plus quietly punishes you for being good at your job. Use it as your floor rather than your ceiling.
Value-based pricing
Price according to what the outcome is worth to the customer. A drainage repair that prevents a $40,000 flood claim is worth more than the four hours it takes, and the customer knows it.
This works where the value is identifiable and large relative to the cost, and where you can articulate it without sounding opportunistic. It works badly for routine commodity work where the customer has three comparable quotes on the table.
Market pricing
Price relative to what comparable providers charge. Useful as a sanity check and dangerous as a method, because you are pricing off other people's cost structures, which may be nothing like yours. A competitor quoting lower may have lower overheads, may be about to go out of business, or may have misread the job.
Build the cost-plus number first, because it tells you the floor below which the job destroys value. Then ask what the work is worth to this customer, which may justify going higher. Then sanity-check against the market to understand where you sit. A price built this way survives a negotiation, because you know exactly what each dollar of movement costs you.
🔢 Building the number from the ground up
A complete job price has five cost components and two adjustments. Leave out the fourth component, overhead recovery, and you will be busy and unprofitable, which is the most common condition in New Zealand small business.
Step one: direct costs
Note that the labour figure is the cost of the hour, not the charge-out rate. It should include employer KiwiSaver, ACC and the loading that covers leave, which our true cost of employee calculator works out.
Step two: markup on materials and subcontractors
This markup is not profit, or not only profit. It covers sourcing, collecting, storing, handling and warranting other people's goods and work, and the risk you carry when a supplied item fails. Passing materials through at cost means doing all of that for nothing.
Step three: overhead recovery
This is the step that gets skipped. Your vehicle, insurance, phone, software, accountant, premises and unbillable hours exist whether or not this job happens, and every job must carry a share of them. Our overhead recovery rate calculator derives the percentage from your actual accounts rather than a guess.
Step four: rework, warranty and variation allowance
Some jobs go wrong. A return visit, a warranty claim, a material that fails, an hour spent on a variation nobody agreed to pay for. Pricing every job as though it will run perfectly means the ones that do subsidise the ones that do not, and you never see it happening.
Step five: the margin
Our job costing calculator runs this whole sequence, and our minimum price calculator works backwards from a target margin to the price that delivers it.
⚖️ Markup is not margin, and it costs you every job
This is the most expensive arithmetic mistake in small business, and it is made constantly because the two words are used interchangeably in conversation.
Markup is a percentage of your cost. Margin is a percentage of your price. They are never the same number, and the gap widens as the percentage rises.
Cost including contingency is $12,982.20 and the intended margin is 20%.
Done correctly: price = cost ÷ (1 − 0.20) = $16,227.75. Check it: profit is $3,245.55, which is exactly 20% of $16,227.75. Note this is equivalent to a 25% markup on cost.
Done wrongly: adding 20% to cost gives $15,578.64. Profit is $2,596.44, which is only 16.67% of the price, not 20%.
The shortfall is $649.11 on this single job. On a business doing forty jobs of this size a year, that is roughly $26,000 of margin that was intended, quoted for, and never received. Nothing in the accounts flags it, because the job was profitable, just less profitable than planned.
The conversion is worth memorising. To achieve a margin, divide by (1 minus the margin). A 20% margin needs a 25% markup, a 30% margin needs a 42.9% markup, and a 50% margin needs a 100% markup. Our markup versus margin calculator converts between them, and it is worth running once for the percentages you actually use so you are not doing it in your head in front of a customer.
GST: inclusive or exclusive depends on who you are quoting
If you are GST registered, GST is not yours and never was. You collect it and pass it on. It is not revenue, it is not margin, and pricing off a GST-inclusive figure without noticing is a reliable way to lose 13% of what you thought you were making.
Quoting a business customer: quote GST exclusive and say so. They will claim it back, so the GST-inclusive figure is not what the job costs them and including it in the headline just confuses the comparison.
Quoting a consumer: quote GST inclusive and say so. A homeowner cannot claim it back, so the inclusive figure is the only one that means anything to them. On the worked example, $16,227.75 excluding GST is $18,661.92 including it, and quoting the lower number to a homeowner sets up an unpleasant conversation at invoice time.
Whichever you choose, state it explicitly on the quote. "$16,227.75 plus GST" and "$18,661.92 including GST" are the same price and different documents. Ambiguity here produces disputes that cost more than the GST. Our GST calculator converts between the two, and our GST for tradies page covers the situations specific to trade work.
💰 Your walk-away price, and how to hold it
Decide the lowest price you will accept before you send the quote, and write it down somewhere the customer will never see. A limit decided during a negotiation is not a limit, it is a preference.
On the worked example, the base cost of $12,604.08 covers direct costs, markups and a full share of overhead but carries no contingency and no profit. At that price the job is worth doing only for a strategic reason you can name, and never as a habit.
What a discount actually costs
Customers ask for ten percent because it sounds modest. It is not modest.
A ten percent discount removes nearly half the profit, because the discount comes entirely out of margin while every cost stays exactly where it was. The thinner your margin, the worse this gets: at a 15% margin, a 10% discount removes two thirds of your profit, and at 10% it removes almost all of it. Our margin of safety calculator shows how little room a thin-margin business actually has.
What to say instead of yes
Change the scope, not the price. "I can do it for that, and here is what comes out." This is the single most useful response because it is true, it is not confrontational, and it keeps your margin intact. Customers frequently accept a reduced scope, and the ones who do not were negotiating rather than budget-constrained.
Change the terms. A deposit, progress payments, or payment on the day can be worth real money to you and cost the customer nothing. Our overtrading risk calculator shows what shorter payment terms are worth in cash.
Ask what the number needs to be, and why. Sometimes there is a genuine budget and a smaller job is possible. Sometimes there is a competing quote that includes less. Either way you learn something before conceding anything.
Be willing to say no. The businesses with the healthiest margins are not better negotiators, they are simply more willing to lose work. Winning a job at 11% margin when you needed 20% is not a win, it is four weeks of committed capacity earning half what it should. Our business health check calculator shows what a year of that does to the whole business.
Two jobs with identical costs can rightly carry different prices. A customer who pays on time, gives clear instructions and does not change their mind mid-job costs you less than one who does the opposite, and the difference is real money. There is nothing improper about pricing that in. If a particular customer reliably consumes an extra six hours of chasing and rework, those hours belong in their quote.
Related guides and tools
- How much should I pay myself guide, since your own wage is a cost every quote must carry.
- Can I afford to hire guide, for when the answer to being busy is more capacity.
- Should I delegate or do it myself guide, on why quoting is work to keep.
- Tools: job costing calculator, minimum price calculator, overhead recovery rate calculator, tradie charge-out rate calculator, markup versus margin calculator, and GST for tradies.
The pricing method here is standard management accounting practice rather than anything prescribed by a New Zealand authority, and the percentages in the worked example are illustrative: your overhead recovery rate, markups and target margin should come from your own accounts. The GST treatment reflects the standard 15% rate and the ordinary position for a registered person, where GST collected is passed on rather than retained. Confirm your own registration status and obligations with Inland Revenue or your accountant. This guide is general information and not tax or financial advice.
🎯 Test Your Knowledge
Complete this 10-question quiz to check your understanding of pricing a job
If you've found a bug, or would like to contact us, or learn more about James Graham and Calculate.co.nz.
Calculate.co.nz is partnered with Interest.co.nz for New Zealand's highest quality calculators and financial analysis.
Calculate.co.nz is the sister site of CalculatorHub.com, the world's largest calculator website by tool count.
All calculators and tools are provided for educational and indicative purposes only and do not constitute financial advice.
Calculate.co.nz is proudly part of the Realtor.co.nz group, New Zealand's leading property transaction literacy platform, helping Kiwis understand the home buying and selling process from start to finish. Whether you're a first home buyer navigating your first property purchase, an investor evaluating your next acquisition, or a homeowner planning to sell, Realtor.co.nz provides clear, independent, and trustworthy guidance on every step of the New Zealand property transaction journey.
Calculate.co.nz is also partnered with Health Based Building and Premium Homes to promote informed choices that lead to better long-term outcomes for Kiwi households.
Calculate.co.nz is hosted in Auckland by SiteHost New Zealand.
All content on this website, including calculators, tools, source code, and design, is protected under the Copyright Act 1994 (New Zealand). No part of this site may be reproduced, copied, distributed, stored, or used in any form without prior written permission from the owner.
About & trust: Why Calculate is NZ's most comprehensive · By the Numbers · How we compare · Editorial standards · How we keep data current · NZ finance glossary · Research & data · Financial literacy NZ · About · Privacy policy · Terms of use
Reviewed and maintained. Last reviewed 2026-08-10 and checked on a twice-monthly cycle against IRD, RBNZ and Stats NZ. How we keep data current.
© 2026 Calculate.co.nz. All rights reserved. Building free NZ calculators since 2011.