Mike thought $85 an hour was good money. It sounded right. Other sparkies in his area charged similar rates. But after six months in business, he was struggling. The bills were paid, but barely. He could not afford to hire help. He was working harder than ever but had less money than when he was an employee. The problem? He was pricing his jobs wrong, and it was slowly killing his business.

The Pricing Trap

Most electricians set their rates based on what others charge, what sounds fair, or what they would accept as an employee. This is a mistake. Your hourly rate as a business owner needs to cover far more than just your wage:

Your actual wage (what you need to live on)
Tax and GST (money that belongs to the government)
Vehicle costs (fuel, maintenance, insurance)
Tools and equipment (replacement and maintenance)
Insurance (public liability, tools, vehicle)
Admin time (quoting, invoicing, bookkeeping)
Superannuation/KiwiSaver (your retirement)
Holidays and sick days (time you are not earning)
Business profit (money to grow and invest)

When you add it all up, charging $85/hour often leaves you with less than $40/hour in your pocket. And that is before the unexpected costs hit.

The Real Hourly Rate

A self-employed electrician charging $85/hour typically keeps $35-45/hour after costs. An employee earning $40/hour with super, holidays, and no risk is often better off. This is why undercharging kills businesses.

How Electricians Undercharge

1. Guessing Time

"That should take about 4 hours." But it takes 6 because of access issues, missing materials, or complications. You quoted for 4, you worked 6, you just gave away 2 hours for free.

2. Forgetting Materials

You remember the big ticket items but forget the sundries. The connectors, the cable clips, the conduit fittings. These small items add up to 10-15% of material costs.

3. Underestimating Complexity

Old houses with asbestos, tight roof spaces, heritage requirements. You discover these on the job, after you have already quoted. Now you are absorbing the extra time.

4. Competitive Pressure

Customer says "That sounds expensive, another sparkie quoted $500 less." You panic and drop your price. Now you are committed to a job you already know is underpriced.

5. No Call-Out Fee

You absorb the travel time and fuel because "it is only a quick job." But 30 minutes travel each way, plus fuel, on a 1-hour job means you are working for half your rate.

The Hidden Costs You Are Missing

When you set your rates, are you accounting for:

Time driving to suppliers? (Unpaid travel)
Time quoting jobs you do not win? (Lost time)
Time on the phone and email? (Admin)
Weekend catch-up work? (Free overtime)
Callbacks and warranty work? (Rework costs)
Slow periods between jobs? (Idle time)

These are all real costs of running your business. If your pricing does not cover them, you are subsidising your customers with your own time and money.

How to Price Jobs Properly

Step 1: Calculate Your True Hourly Rate

Start with what you want to earn annually. Add 40% for taxes and super. Add $20,000-30,000 for vehicle costs. Add $5,000-10,000 for insurance and tools. Add 20% for admin and quoting time. Divide by your actual billable hours (not 40 hours x 52 weeks, more like 30 hours x 46 weeks). That is your minimum hourly rate.

For most electricians, this calculation reveals they need $110-140/hour, not $85.

Step 2: Use a Quote Template

Stop reinventing the wheel for every quote. Use a template that includes:

Labour hours (with buffer for overruns)
Materials list (comprehensive, not guesswork)
Call-out/travel fee
Contingency (10-15% for unexpected issues)
Clear terms and conditions
Payment terms

Step 3: Track Actual vs Quoted

After every job, compare what you quoted to what it actually cost. Did you make money? How much? Use this data to improve future quotes.

Step 4: Build in Profit

Your hourly rate covers costs and your wage. Profit is extra. It is what lets you hire help, buy better tools, take holidays, and build a business that is worth something. Aim for 20-30% profit margin on every job.

The Pricing Formula

For any job, your quote should be:

(Labour hours × Hourly rate) + Materials + Travel + Contingency + Profit margin

If you are not including every element, you are losing money.

When to Say No

Not every job is worth taking. Learn to recognise:

Customers who negotiate too hard on price (they will be trouble)
Jobs with too many unknowns that you cannot price safely
Work that requires skills you do not have (subcontract it)
Projects that tie you up for weeks at low margin

Saying no to bad work leaves room for good work.

Raising Your Prices

If you realise you have been undercharging, you need to raise prices. This scares most electricians. Here is how to do it:

New customers: Quote at your new, correct rates immediately.

Existing customers: Give 30 days notice of a rate increase. Most will accept it. Some will not. That is fine.

Large contracts: Honour the current job, but quote higher for the next phase.

You will lose some customers when you raise prices. But you will make more profit from fewer jobs, with less stress. That is the point.

Pricing Jobs Wrong