Business Growth

Pricing Strategies for Tradies in Australia

Pricing jobs has never been a simple task. But recently, it's gotten a lot tougher. 

The thing about pricing strategies for tradies is that you need to consider so many more aspects than just the hard work you put in. Your prices are also affected by current economic challenges, such as the rising costs of the materials you use, labour shortages and, thanks to the pandemic, border closures that are making accessing the materials you need much more complex and costly.

But your customers don't know about all that, do they? And, really, they don't care. 

Because of the rising costs of practically everything to do with trade businesses, you're now faced with the challenge of scaling your pricing. By doing so, you'll likely either alienate some potential customers or else face cuts to your profit margin if you don't handle it with care and patience. If you're worried, you're not alone.

So, let's take a look at the importance of creating up to date pricing strategies for tradies and figure out a way to introduce higher prices to your customers without losing them.

The Importance Of Pricing Strategies For Tradies

If you've been in the business for a while, it's more than likely that timelines, cost percentages, and revenue has shifted significantly since the beginning of the pandemic. So, before you get out and start job pricing again, you need to get reacquainted with the numbers. Understanding your costs and current profit margin will give you a much better understanding of how your pricing strategies work and the factors you need to consider to ensure you're pricing your jobs within the right bracket to retain customers without accepting a loss.

Factors To Consider When Setting Your Rates

What types of pricing strategies you use is up to you. You might elect to charge an hourly rate, or you might prefer to estimate your project costs and quote per project. No matter which you choose, there are a few factors you need to consider.

Understanding Your Costs And Overhead

This is where many tradies slip up. When quoting, you know you have to factor in wages, materials, and time into your pricing strategies for tradies. But those aren't the only costs your business needs to cover. You also need to incorporate your overhead costs into every single job you do. 

No matter what trade you're in, you will inevitably incur overhead costs, so it's important to understand what they are and how they can affect your bottom line. 

What Are Overhead Costs?

Overhead costs are the costs associated with the day-to-day running of a business. They aren't for things like materials and labour; more, they're for your rent or mortgage, office supplies, taxes, employee benefits, marketing fees, shipping, software subscriptions, and phone bills. If you don't incorporate your overhead costs into your pricing strategies, you'll have a lot of trouble making a profit. So, sit down and review your expenses to find out how much you spend on your overhead every month. From there, you can begin increasing your prices to meet your business's outgoing costs.

The Level Of Experience And Expertise Of The Tradie

It stands to reason that a tradie who has been on the tools for 15 years can charge a higher price than an apprentice. It's absolutely fair to charge your customers more based on your level of experience.

But to build a good reputation, you'll need a choir of former customers keen to sing your praises, so charging a little less in the name of building that reputation could be seen as a good investment.

The Location And Competition In The Area

To develop updated pricing strategies for tradies, you'll also need to factor in how many other tradies in your area offer the same services you do. While you'll want to think about pricing yourself competitively to win new clients, don't undercut yourself - it's not sustainable, and if you price yourself too cheap, customers will think they're getting a cheap job.

The Type And Complexity Of The Work Being Performed

Pricing strategies for tradies depend largely on the type of work you do more than the hours it takes you to do it. For example, specialising in a niche or hazardous area of your field will allow you to charge higher prices. And completing the more complex jobs of your trade will give you a higher earning potential: replacing switchboards and running new gas lines, to name a few.

RELATED: Here's the job costing guide that every tradesperson should read.

Strategies For Communicating Your Pricing Strategies With Your Clients

Some customers are always up for a debate; they may not accept your quote on the first go. Now, there is no reason for you to feel the need to barter - if you're confident in your pricing, negotiating might give the impression that you began the conversation by trying to extort them. After all, if you can lower your price, why did you quote them a higher one on the first go? 

Here are some tips:

  • When talking about cost, always speak first - you're the expert.
  • Be open to discussion. If your customer wants to reasonably present an alternate pricing structure that you would consider fair, you may gain a new loyal customer by hearing them out.
  • Defend your bottom line. You can't operate a profitable business by constantly undercutting yourself. At the end of the day, you're there to do them a service, and that service costs money.
  • Be clear. It's important that your customer understands why you are charging these prices for them to be comfortable. Being clear about your costs won't leave room for unrealistic expectations or confusion about your value.
  • Don't give in. This can be tricky, especially if you're new, but when you've settled on a final price for a specific service, it's important to your bottom line that you stick to it. If a customer requests an additional service or makes changes to the original agreement, you can negotiate a new price to include their requests.
  • Be patient. Most disagreements around pricing happen because of misunderstandings and false expectations. Often, a simple conversation about pricing can help alleviate friction. Of course, there will always be customers out there who want something for nothing, so use your discretion when deciding whether or not it's worth your time and effort to work with them.

Tips For Managing Your Pricing And Staying Competitive

The changing landscape of trade businesses today presents challenges that trade enterprises have never seen before. To stay successful, you need to update your pricing strategies in line with the challenges of today. 

Stay Up To Date With Industry Standards And Trends 

  1. Remove the guesswork

Putting in the hours to create accurate pricing strategies and templates will reap untold rewards when you're trying to fire off a quick invoice under pressure. Your bottom line is essential, so you have to support it in every single job. The best way to do that is with job costing and invoicing software; like ours! AroFlo's system removes the guesswork from creating an accurate pricing structure in the field when you're under the watchful eye of a customer. 

  1. Talk to your team

Your team, like you, spends a lot of time talking to customers, retail assistants at hardware stores, and other tradies during their day, and they're likely picking up on trends. Make an effort to talk to your team. It's a great idea to set up an internal communications system and encourage your team to share updates and interesting findings on the go.

  1. Subscribe to magazines or trade journals

Industry-specific publications make an effort to keep up with the latest trends. Find one or two that you enjoy and block out some time every week to read through them.

  1. Network

Go to conferences or training groups. Join industry-focused Facebook groups. Put in the time to network with your colleagues.

Today's Challenges Reflect New Pricing Strategies For Tradies

Your customers aren't going to be excited about paying more for your services. But in all likelihood, they're facing financial challenges as well due to the rising cost of living.  

These are hard times; there's no doubt about it. Pricing strategies for tradies today need to reflect the current economic challenges the world is facing while staying competitive enough to retain customers. Remember that compassion and understanding always win out when pricing your services during tough times, and the most loyal repeat customers are often the ones you did right by when they needed it most.

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