Calculating Charges and Rates

It is a frequent mistake to approach the calculation of charges and costs on the basis of an imagined requirement of revenue per day or revenue per mile. As we have asserted on page in the explanatory notes, there is no such thing. You must approach this task by assessing both the time likely to be required to complete a job and the number of miles that will be covered.

You must then apply to the time element, the cost per day as determined; add any specific bonuses, extra hours, subsistence and sundries and miles at the appropriate cost.

This will give you a fair cost of the job for which you are quoting. To this you must add a percentage for profit. In today’s market this is extremely difficult because, on many occasions, you will find the costs as properly determined from these notes are greater than the revenue likely to be derived from the rates being charged by your competitors.

Notwithstanding this you must aim for a profit margin and a practical exercise is to add 10% to your total costs, when comparing yourself with what you know about competitive market rates. In the case of fuel you should always attempt to negotiate a clause into all rate schedules and contracts allowing fuel price increases to be passed on to the customer as they occur.

You must then decide whether you can accept a job at less than the rate thus calculated and, even more crucially, whether you can accept it at less than the true cost of undertaking it. In anything but the shortest run you cannot afford to do the latter; except perhaps for casual or special jobs which fit into the pattern of your overall work.

You should never embark upon work at rates which, overall, you know will not cover the costs you have identified from following the rules suggested in these notes.

You can download a template, showing the ground you should cover when calculating a rate.

If you have any queries or require advice concerning these schedules please contact Brian Fish: brianfish@dffintl.co.uk