Month: January 2024

Should Trades Businesses Charge Call-Out Fees?

Picture this scenario: you run a trades business, and the debate about whether to charge customers a call-out fee is a constant thorn in your side. It’s a predicament that countless tradespeople face, and the truth is, not many customers relish the idea of a call-out fee. So, where does that leave us? Let’s delve into this contentious topic and shed some light on the matter.

For instance, imagine you’re at the helm of a trades business that tackles a handful of small projects each day. Say your charge-out rate per hour stands at $100—an amount determined by meticulous calculations or industry standards. This rate is meant to cover various overheads, including holidays, sick leave, superannuation, and other costs for your team.

Now, here’s the crux of the issue: how much do you charge during those hours that your team isn’t directly on-site? Let’s say they’re only on-site for four hours. If you bill exclusively for those hours, what about the time they spend driving, running errands, and handling tasks not related to the project at hand?

It’s a dilemma that most small trades businesses grapple with. Those “off-site” hours are laden with various activities—washing equipment, visiting suppliers, fetching parts, and tidying up after a day’s work. The question then becomes: who foots the bill for these activities? This is precisely where the concept of call-out fees enters the picture.

When explaining the rationale behind call-out fees, you’re essentially elucidating that it encompasses more than just driving to the location. It’s about compensating for the non-project-related activities that contribute to the smooth functioning of your business.

Guidelines For Billable Work

Here’s the bigger query: How do you establish clear guidelines for what constitutes billable work and what falls under ancillary tasks? This is where the notion of billing rules comes into play. Establishing a set of rules that delineate what is attributed to the job and what pertains to other activities is crucial.

In fact, some businesses go the extra mile by compiling a comprehensive list of billing rules. These guidelines provide a structured approach for your team to discern what should be accounted for in a job’s billing and what should be attributed to tasks like workshop duties or non-productive time.

For those intrigued by how this is executed, you’re in luck. We’ve prepared a downloadable resource that outlines a sample set of billing rules. This resource not only empowers you but also serves as a training tool for your team members, ensuring transparency and consistency when it comes to charging for your services.

The call-out fee conundrum is no small matter for trades businesses. Striking the right balance between charging for on-site hours and compensating for the intricacies of running a business is a challenge that requires careful consideration. By implementing well-defined billing rules, you not only clarify expectations for your team but also establish a fair system that respects the diverse aspects of your trades business.

Find out more by grabbing a copy of my two Wealthy Tradie Books

How Much Should Your Tradie Business Charge?

The age-old question of determining the ideal pricing strategy is a conundrum that frequently perplexes tradie business owners. As a complex and multifaceted issue, there’s no one-size-fits-all answer. While I can’t cover all the nuances in a single blog, I can shed light on the key considerations that often occupy the minds of tradie entrepreneurs.

The Balancing Act: Customer Loyalty vs. Profitability

For many tradies, the dilemma revolves around striking a balance between retaining long-term customers and ensuring profitability. The value of a loyal, longstanding client cannot be overstated, and the prospect of alienating them with sudden price hikes is a valid concern.

Crafting sustainable relationships while covering costs and generating profit remains a top priority for tradie business owners. They’re acutely aware of the investments they’ve made in equipment, aiming for long-term sustainability and profitability.

Starting with the Fundamentals: Understanding Costs

One of the foundational steps in tackling this challenge is delving into the core costs of your business. This encompasses not only direct expenses like materials but also overheads, labour costs (including holidays, overtime, and insurance), and your own earnings as the business manager or owner.

Knowing your costs inside out is pivotal. It provides a solid launching pad for shaping your pricing strategy, ensuring that each project contributes to covering your expenses while allowing room for profit.

The Profit Factor: Balancing Income and Growth

Determining how much you should be earning as the business owner or manager is another critical facet. This entails considering your long-term goals – are you willing to earn less in the initial growth phase? Your remuneration should eventually align with your aspirations for the business and your personal satisfaction.

The interplay between your personal earnings and the business’s financial health adds a layer of complexity to the pricing puzzle.

Gauging Market Dynamics: Price and Demand

As you navigate the pricing landscape, it’s imperative to gauge what the market can bear. Exploring how much customers are willing to pay for your services requires a blend of market research and intuitive understanding.

Balancing your pricing strategy with the market’s demand elasticity is a strategic move that directly influences your business’s growth trajectory.

Tailoring Your Approach to Your Goals

Deciphering the “right” pricing approach hinges on your unique business goals. Are you striving to establish a premium brand with higher rates and potentially less frequent projects? Or do you envision a bustling enterprise that stays busy with a more moderate pricing structure?

The right price is a reflection of your aspirations, your business model, and your desire to balance workload and remuneration.

Navigating the Terrain: A Step Forward

While the question of pricing remains intricate, a foundational step is understanding your costs. This knowledge empowers you to set accurate charge-out rates that cover your expenses and propel your business toward profitability.

For an in-depth guide on calculating the real wage cost in your business, we’ve prepared a video resource. Click the link below to access it. This tool can kick-start your journey towards crafting a comprehensive pricing strategy tailored to your tradie business.

Remember, there’s no one-size-fits-all answer to the pricing predicament. Your business’s uniqueness and your personal goals will guide your approach. With a solid understanding of costs and a strategic outlook, you’re equipped to navigate the terrain of pricing with confidence.

Explore the wage cost calculation guide here and take the first step toward establishing a pricing strategy that aligns with your vision for your tradie business.

 

Find out more by grabbing a copy of my two Wealthy Tradie Books