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What your hour really costs

Work out your billable hours, overhead, equipment and labour costs in Quoting's Cost rates, then set the margins that turn them into the sell rates your quotes start from.

This article is being updated.

To price work well, you need to know what an hour of your business costs. Cost rates in Quoting works it out in five steps, from your team's billable hours to your overhead, equipment and labour. Your margins then turn those costs into sell rates, and every quote's labour and equipment lines start from them.

Getting there

Go to Quoting and select the Cost rates tab. The See what your hour really costs step on your Home checklist opens it too. That step is ticked off once a role in step 4 has its annual pay.

Five tiles sit above the tabs: Billable Hrs/Person, Overhead Rate, Avg Equipment, Avg Labour and Labour Margin. Select a tile, or a step button - Billable hours, Overhead, Equipment, Labour or Sell rates - to go to that step.

Each figure saves when you click away from it or press Enter, and every rate works itself out again straight away.

1. Billable hours

How many hours a year each person spends earning revenue. This figure flows into every other step.

  1. Under Time Off Per Year, fill in Annual leave, Sick / personal leave and Other time off in weeks, and Public holidays in days.
  2. Under Working Pattern, fill in Days per week and Billable hours per day.

Your Numbers shows the working weeks and the result, Billable hours / person / year. Quick Reference lists common patterns to check your number against.

2. Overhead

Costs that exist whether you work or not, such as rent, insurance and software.

  1. Your list starts with common costs for your kind of business. Click a description to rename it, or select Add item for a new row. The bin removes one.
  2. Enter each one's Monthly cost. The Annual figure is worked out for you. A row left blank stays out of the rate until you fill it in.

Equipment cost groups that are recovered through overhead show under From Equipment. You change those in Equipment.

Overhead Summary shows the Overhead cost rate per hour: your annual total spread across your billable hours and your billable people from step 4.

3. Equipment

Assets with ongoing ownership costs, such as vehicles, machines or leased gear. If your costs are all overhead and labour, skip this step.

Your usage-rated equipment cost groups are listed with their Monthly/asset, Billable hrs/yr and Cost/hr. They're read-only here. If your role can manage equipment, Edit in Equipment opens the cost group.

To add one from here:

  1. Select Add equipment.
  2. Give it a name and its monthly Finance, Insurance, Registration & licensing and Maintenance costs. A cost left blank counts as nothing.
  3. Select Create.

This creates a cost group in Equipment. It uses your step 1 hours until you give it billable hours of its own there. One-off hire for a single job belongs on that job's quote, not here. See Equipment, cost groups and compliance.

4. Labour

What each role costs you. Enter one row per role, with the number of people in it.

  1. Your list starts with common roles, such as Founder / Owner and Apprentice / junior. Click a role's name to change it, select Add role for a new one, or use the bin to remove one.
  2. Fill in People, Annual Pay and Other Costs, such as PPE, tools, training and subscriptions per person per year.

For yourself as owner, enter what you want to take home. For employees, enter their actual pay package. Contractors go in as a role too.

Employment on-costs applied shows the on-costs added to pay, such as super and workers comp. You change them in your business settings, through the set in Workspace → General link.

Labour Summary shows the Avg labour cost / hr, Total people, Total team cost (p.a.) and each role's cost per hour. The people you count here also spread your overhead in step 2.

5. Sell rates

What you charge is your cost rate plus margin.

  1. Under Your Margins, set the Labour margin (on labour and overhead), the Equipment margin and the Materials markup (on materials and other costs).
  2. Labour Sell Rates and Equipment Sell Rates show each rate's cost, margin and Sell/Hr. Key Sell Rates lists them side by side.

These sell rates appear when you add labour and equipment lines to a quote. See Creating and sending a quote. You can also build a product's price up from these rates. See Your price book.

Who can see it

Cost rates are part of Quoting's settings. If your role doesn't have access, the tab says so and asks you to check with an owner or manager. If your role can see them but not change them, every field is locked. Figures your role isn't allowed to see read Restricted.