Almost every underpriced job comes from the same four mistakes, and none of them is about being bad at woodworking. They are arithmetic mistakes: confusing margin with markup, forgetting overhead, applying waste in the wrong place, and billing fewer hours than the job consumed. Fix those four and your prices go up without you working faster.
Margin is not markup — and the difference is your profit
This one error costs shops more money than every other pricing mistake combined. Markup is a percentage added to cost. Margin is a percentage of the selling price. They are not the same number, and the gap widens as the percentage rises.
| Your cost | Method | You charge | Actual margin |
|---|---|---|---|
| £100.00 | 30% markup | £130.00 | 23.1% |
| £100.00 | 30% margin | £142.86 | 30.0% |
A shop that believes it works on 30% is actually keeping 23.1% — and on a £40,000 year that is roughly £2,760 of profit that was never charged. The formula for a target margin is price = cost ÷ (1 − margin), not cost × (1 + margin).
The order the numbers go in
The sequence matters. Waste applies to materials, overhead applies to the cost base, and margin applies last — to everything. Reordering them changes the price.
01Start with what the job consumes, not what it is worth
Add up materials at what YOU pay — sheet goods, solid stock, hardware, finish, abrasives, glue. Use your real supplier prices, not last year's. This is your direct material cost, and it is the only number in the whole exercise that is not a judgement call.
02Add waste before you add anything else
Offcuts, tear-out, the board you ripped wrong. Sheet goods typically run 10–20% waste depending on part sizes; solid stock with defecting can exceed 30%. Applying waste to materials — not to the final price — keeps it honest, because waste is a material problem, not a pricing one.
03Charge your real hourly rate, including the hours you do not bill
Most shops quote a rate that only covers bench time. Quoting, sourcing, collecting timber, cleaning up and delivery are all hours the job consumed. If you work 40 hours and bill 25, your effective rate is 62% of what you think it is — so either raise the rate or count the hours.
04Add overhead as a percentage, not a guess
Rent, power, insurance, tooling, blades, software, accountancy. Total your annual overhead, divide by your annual direct costs, and you have a percentage you can apply to every job instead of hoping it is "in there somewhere". For a small shop this is commonly 15–30%.
Steps 03 and 04 are one calculation in disguise, and it is the one shops get wrong most often — see how to calculate your shop hourly rate for the arithmetic, including why you bill far fewer hours than you work.
A worked example
An oak bookcase. £200 of timber and sheet goods, 10 hours at a £50 shop rate, 10% waste, 20% overhead, a 40% target margin.
Priced with a 40% markup instead, the same bookcase sells for £1,209.60 — and the shop keeps 28.6% rather than 40%. That is £230 of profit lost on one piece of furniture, from one misunderstood word.
The number you find out afterwards
An estimate is a prediction, and the only way to know whether yours are any good is to record what the job actually cost and compare. Most shops never close that loop, so the same optimism repeats for years. If your last five jobs each took 60% more hours than quoted, that is not bad luck — it is a 1.6× correction waiting to be applied to the next quote.
Common questions
Markup is a percentage added to your cost; margin is a percentage of the selling price. A 30% markup on £100 sells at £130 and keeps 23.1% — not 30%. To hit a target margin, divide: price = cost ÷ (1 − margin). Confusing the two is the most expensive arithmetic mistake a shop can make.
There is no universal figure — it depends on your overhead, your market and your skill. What matters more is that the rate covers the hours the job actually consumed, including quoting, sourcing, collection, clean-up and delivery. A shop working 40 hours and billing 25 is earning 62% of its stated rate.
Sheet goods commonly run 10–20% depending on part sizes and whether offcuts get reused; solid stock with defecting can exceed 30%. Apply waste to the material cost rather than to the final price — waste is a material problem, not a pricing one.
Record what each job actually cost and compare it against what you quoted. Without that comparison the same optimism repeats indefinitely. If your last five jobs all ran over on hours by a similar factor, that factor belongs in your next quote.