# How to Price Fabrication Work
Pricing fabrication work is one of the hardest skills to master as a shop owner. Price too high and you lose jobs. Price too low and you lose money — sometimes without even knowing it.
This guide breaks down a practical pricing framework used by successful fabrication shops to quote confidently and profitably.
## Why Most Fabricators Underprice
The most common pricing mistake is charging for materials and labour without accounting for everything else it costs to run your shop. Rent, electricity, insurance, equipment depreciation, and your own time all have real costs — and if they’re not built into your quotes, you’re subsidising every job you take on.
The result is a shop that stays busy but never gets ahead.
## The Four Components of a Fabrication Quote
Every fabrication job should be priced across four components:
### 1. Material Costs
Start with the raw materials needed for the job. This includes:
– Steel, aluminium, timber, or other base materials
– Consumables (welding wire, cutting discs, fasteners, adhesives)
– Finishing materials (paint, powder coat, sealants)
– Waste allowance — typically 10–20% depending on complexity
Always price materials at your **current replacement cost**, not what you paid for stock sitting in your shed. If steel prices have gone up since you bought your last batch, your quote should reflect today’s price.
### 2. Labour Costs
Labour is more than just your hourly rate or your employee’s wage. Your true labour cost includes:
– Base wage or owner’s draw
– Superannuation (11.5% in Australia)
– Workers compensation insurance
– Leave entitlements (annual leave, sick leave)
– Payroll tax (if applicable)
A tradesperson on $35/hour wages typically costs $50–55/hour in true labour cost once on-costs are included. Use that number, not the base wage.
Estimate the hours realistically. New shops tend to underestimate — add a contingency of 15–20% on your time estimate until you have historical data to work from.
### 3. Overhead Allocation
Overhead is every cost that keeps your shop running that isn’t tied to a specific job. Examples include:
– Rent or mortgage on your workshop
– Electricity and utilities
– Equipment leases and loan repayments
– Insurance
– Accounting and software subscriptions
– Vehicle costs
– Marketing and website costs
To allocate overhead to a job, calculate your **monthly overhead total** and divide it by your available billable hours each month. This gives you an overhead rate per hour.
**Example:**
– Monthly overhead: $6,000
– Billable hours per month: 120 hours
– Overhead rate: $50/hour
Add this to every hour of labour you quote.
### 4. Profit Margin
Profit is not the same as what’s left over. Profit should be deliberately built into every quote as a percentage of your total costs.
A healthy fabrication shop targets 15–30% gross margin depending on the type of work and level of competition. Custom one-off work should command higher margins than repeat production runs.
Apply your margin **after** all costs are included:
> **Selling Price = (Materials + Labour + Overhead) ÷ (1 – Margin %)**
For example, if your total costs are $1,000 and you want a 25% margin:
> $1,000 ÷ 0.75 = **$1,333 selling price**
## Putting It Together: A Simple Example
Let’s say you’re quoting a steel fabrication job:
| Component | Calculation | Cost |
|———–|————-|——|
| Materials | 20kg steel @ $4.50/kg + 15% waste | $103.50 |
| Labour | 8 hours @ $55/hour true cost | $440.00 |
| Overhead | 8 hours @ $50/hour | $400.00 |
| **Total Cost** | | **$943.50** |
| **Selling Price (25% margin)** | $943.50 ÷ 0.75 | **$1,258.00** |
## Common Pricing Mistakes to Avoid
**Not tracking actual job costs.** If you never compare your quote to what the job actually cost, you can’t improve. Track hours and materials on every job — even rough notes help.
**Discounting without adjusting scope.** If a client pushes back on price, don’t just reduce the number. Reduce the scope. Less work, lower price.
**Forgetting your time on quotes and admin.** The hours you spend quoting, emailing, and invoicing cost money. Build a small allowance into your overhead for non-billable time.
**Using competitor prices as your baseline.** Your costs are your costs. A competitor might be undercapitalised, paying themselves nothing, or running a loss. Price your work based on what it actually costs you to deliver it profitably.
## Tools to Help
Calculating costs manually every time is time-consuming and error-prone. Our free **Profit & Loss Statement Generator** can help you understand your overall business profitability, while the tools we’re building in FabPortal will automate job costing directly into your quoting workflow.
In the meantime, build yourself a simple quoting spreadsheet with your overhead rate pre-calculated. Even a basic template saves significant time and reduces errors.
## The Mindset Shift
Pricing confidently requires trusting your numbers. When you know your true costs, you can quote without second-guessing — and walk away from jobs that don’t meet your margin without hesitation.
The fabricators who build profitable businesses aren’t the ones who win every job. They’re the ones who know exactly which jobs are worth winning.