Calculating your margin before you send the quote, not after

The quote goes out, the job starts, and it is only at the final invoice that an electrician finds out the margin was not what he thought. The short answer: the margin is calculated before the quote is sent, not after the job, from three simple lines. The rest of this article details those three lines and what they change on a real quote.

Why the margin gets discovered too late#

A quote is often built backwards: you start from a price that seems reasonable for the client, check that materials fit inside it, and labour adjusts so the total doesn't move too much. The margin is never calculated on its own: it is whatever is left once everything else is fixed.

Three things slip into the blind spot at that point:

• The actual hours, guessed roughly rather than counted task by task.
• Overheads, rarely spread across the quote even though they weigh on every job.
• The target margin, which exists nowhere in writing: nobody knows whether 10%, 15% or 20% was applied.

The result shows up at the final invoice, when it is too late to act: a job that cost more in hours than planned, and a real margin lower than what the owner thought he had negotiated.

The four-line calculation, before the quote goes out#

The method fits in four lines, filled in before the quote is sent, not after the job. Take an electrician pricing a full rewiring job.

Once the cost price is known, the target margin is set as a percentage of the selling price, not of the cost price: that difference changes everything on a tight quote.

The selling price is not what the calculator shows first#

Two calculations give two different prices from the same cost price. Applying an 18% margin on the cost (€7,733 × 1.18) gives a selling price of €9,125, with a real margin of 15.2% once measured against the selling price. Applying 18% on the selling price, by dividing the cost price by (1 minus the target rate), gives a different result.

The gap, €305 on a single quote, repeats on every job of the year if the rule is never written down. Deciding once which of the two methods applies stops it from changing from one salesperson to the next, or from one mood to the next.

What changes with an application built for the company#

An application built for the company doesn't redo this calculation by hand on every quote: it carries it.

• The most recent purchase prices feed the materials line, with no re-keying from a supplier invoice.
• Estimated time per task type comes from a library specific to the company, refined job after job rather than recalculated from memory.
• The overhead rate and the target margin are set once, applied everywhere, and only the owner can change them.
• The margin shows on screen before the quote is sent, not after it is signed: the salesperson sees exactly what they are agreeing to negotiate when a client asks for a discount.

The quote goes out with a known price, not a hoped-for one. The rest, chasing that quote if it goes unanswered and then tracking its conversion rate, builds on the same figure written once.

What not to do#

Setting a single target margin for every job, regardless of its risk. A job with many unknowns (difficult access, an old building, a tight deadline) deserves a higher target margin, decided before the quote is sent, not discovered along the way.

Changing the calculation method without saying so. If the company moves from margin on cost to margin on selling price, every quote in progress must follow the same rule, or the numbers from one quarter to the next stop comparing.

Calculating margin before a quote: the key takeaways#

A job's margin is not discovered at the final invoice: it is calculated before the quote is sent, from three lines written down once and for all, materials, labour and overheads. The calculation method, on cost or on selling price, matters as much as the target rate: a gap in method repeats on every quote of the year.

An application that carries these three lines, with up-to-date purchase prices and a time-per-task library, shows the margin before the quote goes out rather than after the invoice. The owner then negotiates with full knowledge, not by guesswork.