What should a self-employed electrician charge per hour?

Somebody asks what you charge an hour and you feel your stomach go. You know what the sparky down the road says he charges, you know what the customer is hoping to hear, and somewhere in the middle you pick a number that sounds about right and hope they say yes. That is not pricing. That is guessing with a straight face.

I did it for years. Nine staff, three vans, an office in South London, and I still could not have told you what an hour of my time actually needed to earn. In October 2007 that caught up with me. Two developers went under owing me over £40,000, the company went with them, and I found out the hard way that being busy and being profitable are two completely different things.

So here is how to work out what a self-employed electrician should charge per hour, using your numbers rather than somebody else’s.

Your hourly rate is not what you take home

The first mistake is treating the rate like wages. A customer pays you £50 an hour and it feels like £50 an hour. It is not. Out of that hour comes the van, the fuel, the insurance, the test gear and its calibration, the scheme membership, the accountant, the phone, the tools you replace, the tools somebody nicks, the software, and the hours you spend quoting, invoicing and chasing money that nobody pays you for.

Then take off the weeks you are not on the tools at all. Holiday. Christmas. The week you had flu. The two days you spent waiting in for a delivery that did not come.

How to work out your own electrician hourly rate

Get a piece of paper. This takes twenty minutes and it will change how you quote for the rest of your working life.

• 1. What do you want to earn? Not what you scrape by on. What you want to pay yourself, before tax. Write it down as a year.
• 2. What does the business cost to run? Every year, before you have earned a penny. Van, fuel, insurance, scheme, calibration, accountant, phone, software, workwear, tools, training. Add it up honestly and then add ten percent, because you have forgotten something.
• 3. How many weeks do you actually work? Fifty two, minus holiday, minus bank holidays, minus the week you will be ill. Most one van businesses land near forty five.
• 4. How many hours of those weeks are chargeable? This is the one everybody gets wrong. If you are on site five days, the quoting, buying, invoicing and driving still has to happen, and it happens in your time. Six chargeable hours a day is a fair, honest figure for a one man band. Some weeks it is four.
• 5. Divide. Take what you want to earn, add what the business costs, and divide by your real chargeable hours. That is your rate. Not the sparky down the road’s rate. Yours.

Here is what that looks like with round numbers, and they are only an example, put your own in. Say you want £45,000 for yourself and the business costs £15,000 a year to run. That is £60,000 to find. Forty five weeks at six chargeable hours a day is 1,350 hours. Sixty thousand divided by 1,350 is a shade over £44 an hour, and that is before a single quiet week, a single unpaid quote or a single job where the customer takes ninety days to pay.

Now you know why the number you picked out of the air was too low.

Day rate, hourly rate or priced work

Once you know your hour, everything else is arithmetic. A day rate is your hourly rate times the hours, with a bit off if it suits you to have the diary filled and nothing off if it does not. A priced job is your hours plus materials plus a margin on those materials, because ordering, fetching and guaranteeing them is work.

The one thing I would say: stop quoting by the hour where you can. The hourly rate is what you work the price out from, it is not what you show the customer. Tell somebody £44 an hour and they will spend the whole job watching the clock and asking whether you stopped for a brew. Tell them the job is £390 and they are buying a finished job, which is what they actually wanted. Same money, completely different conversation.

Why nobody argues with the expensive spark

There are two blokes on a beach in Crete selling scuba dives. Costas actually knows what he is doing. Yani has the tan, the polo shirt, the photo board and the queue. Same beach, same price, and Yani takes the money all day long. It is not fair, but it is how people choose.

Your rate is a signal before it is a cost. A price that arrives fast, in writing, with the job spelled out and no spelling mistakes, reads as expensive and safe. A price mumbled on a doorstep three days late reads as cheap and risky, and cheap and risky is the one people haggle with. If you are getting beaten up on price constantly, the problem is usually not the number. It is everything around the number.

Raise it on the next quote, not on the old customers

If the sum you just did says your rate needs to go up, do not ring round your existing customers and announce it. Put the new number on the next quote that leaves your phone, and the one after that. See what happens. Most electricians find out the customers they were scared of losing were never comparing them with anybody in the first place.

And if you lose one, look at who you lost. If the only people saying no are the ones who wanted three quotes and a favour, your rate has just done its job. That is the S in Specialise doing the filtering for you, well before you get in the van.

Do the sum this week

You do not need better pricing software. You need twenty minutes, a piece of paper and the willingness to look at what your hour has to earn. Once you have that number written down, every quote you send gets easier, because you are not making it up any more.

Working out the number is the easy half. Holding it, saying it out loud without flinching and building the sort of reputation locally where people expect to pay it, that is the part we work on inside My Electricians ToolBox with around 300 other electricians. Tools, training, mentoring and somebody to check your sums, rather than another course to watch on your own.

One question before you go. If you had to say your hourly rate out loud right now, could you explain where it came from?