There can be a lot of misguided information out there and inaccurate price guides when it comes to what businesses should be charging, so let’s blast open the truth trades businesses need to hear and customers need to know.
This may come as a shock, but did you know 80% of businesses fail within the first 5 years in operation? This can come from many different reasons which we will explore. The first being poor pricing.
Poor pricing can result in you as a business owner undervaluing your services and products. Understand people will buy for VALUE over a cheaper price. This is why businesses who look professional online, clearly outline their services, have awesome reviews, and beautiful professional images of the work they’ve previously done naturally get more customers ready and willing to pay more. Customers want to have a specialised quality project done that they will love. As a business, do the most professional job, create value in what you offer, and know your worth!
As a consumer, you want the projects and the people you hire to perform them to be of the highest standards, so pay them fairly for the job. A healthy working relationship on both the customer side and the service professional’s side will make for a smooth transaction based in fair business practises and a healthy exchange that benefits both parties.
"In my experience, many Tradies don't charge what they should because they don't have the business knowledge to work out what they should charge. They need to understand their labour and overhead costs first, then they are ready to quote." - Anna Turner, Professional Landscape Estimator, Guest Speaker for Trades Events, and Writer for Landscape Contractor Magazine and BCM for Tradies
Lack of planning and focus
So you’re the entrepreneur. You’re constantly flooded with new ideas and excitement about all of the things you’re going to create and how all the brilliant ideas will eventually flood your bank account with infinite wealth. Well, this is more than achievable… But you have to create a plan for your business and commit to giving it unshakeable focus.
As a consumer, you can sense when a business has it together. They are professional in every exchange, show up on time, seem organised and collected. They clearly explain their pricing model to you and you can sense that you are hiring a reliable business.
There is more than one way to charge a customer! And as a consumer, you should know this information too.
The most common pricing models to charge someone for a service involve: the “do and charge” model and the “quoting” model. There are many opinions regarding which is most beneficial for the business, but businesses should adopt the one they feel most comfortable with as both are fair and easily communicated ahead of time to the customer.
Poor record keeping and lack of financial awareness
Your business demands constant record keeping and financial monitoring. It is not enough to just have a plan, you must constantly monitor your business’ progress and make sure that you are meeting your financial targets throughout the year. You must also pay attention to tax and ensure you are putting away enough each pay to cover the taxes you will owe for the year as an independent business.
As a consumer, understand your trades professional needs to make ends meet and keep their business thriving. Fair payment and giving local businesses loyalty and respect helps the Australian economy thrive and keeps small businesses, well… in business! Understand that when you’re hiring a tradesperson, you are their number one priority and a piece of the success and sufficiency of their business. Not only do you get to have your dream home or renovations be brought to life by this professional, but you are also a vital nutrient to their business’ overall success and wellness.
Lack of market awareness
Know who your customers are. Study them, attract them, source them. Understanding your local market will help you become the best business you can possibly be. Network with other businesses, discuss prices, services, and value, meet more potential customers, create a killer online presence, and stay connected with the community.
Have you ever heard success is a journey, not a destination? Same goes for market awareness as the market is always changing and evolving. As the market changes and evolves, so must your business.
When you’re taking a trades business’ pricing into consideration, make sure to understand the expenses that a business deals with. Common expenses for a trades business include plenty of overhead such as: equipment, running costs, operating costs, travel costs, materials costs, labour costs, and any little ‘extras’.
Click our Profit Maximiser Template below to better understand how a business charges their customers.