Many business owners I speak to around Whakatāne are running flat out — long days, full books, and still not much left at month’s end. It’s a familiar challenge. And more often than not, the issue is that their hourly rate doesn’t reflect the true cost of labour in NZ. When you underprice your work, even slightly, you chip away at the sustainability of your business.
That hidden gap between cost and price is where good businesses lose ground.
It Looks Fine on Paper — Until It Doesn’t
Let’s say you pay someone $35/hr. If you only charge $60/hr, it may seem generous. But once you add in: leave, public holidays, ACC, KiwiSaver, downtime, travel, vehicles, tools, administrative support, insurance, rent, and more—your real cost per hour to the business can easily rise to $55–65 or higher (with no profit left).
Many businesses don’t stop to recast their rates when costs shift. That’s what causes margins to disappear.
Why It’s Easy to Miss
When you’re caught in the day‑to‑day — quoting, delivering, managing staff — it’s hard to pause and recalculate. Many owners price from intuition or what “feels fair,” not from a full cost model.
Because many clients are dear to us and we want to “help,” rates often lag behind actual cost. The result: generosity that ends up taken out of your own earnings.
What’s a Reasonable Markup? (With Caution)
There’s no one-size-fits-all. But here are useful starting points — and when they might not apply:
- For trades and services, a common heuristic is about 2× the direct wage cost.
(But only if your utilisation is high and overheads are modest.) - For businesses with vehicles, tools, travel, admin overhead, factors around 2.5× are not unusual.
- In retail and hospitality, pricing often works by gross margin targets (e.g. 60–70 %) rather than direct multipliers.
- In other services, because a lot of time is non‑billable, it’s common to load 2.5–3× (or more) over the “full loaded” cost to cover overhead and leave margin.
These are guidelines—not rules. Your own multiplier must reflect your actual costs, location, utilisation, risk, and growth ambitions.
Small Adjustments, Big Gains
You don’t need a complete overhaul overnight. Try:
- Build a full cost model
List all costs (direct + indirect + support + downtime). - Compute your true loaded cost per hour
(Direct wage + all burden + allocated overhead) ÷ billable hours. - Pick a multiplier (markup)
That gives you the margin you need to be sustainable. - Revisit pricing regularly
At least annually, or whenever major costs change. - Test incremental changes
Try small increases on select jobs, or raise rates for new customers first.
Sustainable pricing means you don’t have to chase “cheapest in town.” It means you stay in business, deliver quality, and keep your team
If this feels too much give us a call – we can help you create this report and check your charge out rates against industry averages
Not sure what your true cost is? Want help building a price model? Let’s talk.
