When JM asked his networking group what they thought his services cost, he was shocked. They believed he was undercharging by at least a third. The reality is, many tradies stepping into small business ownership don’t know what to charge. You might think that getting paid the same as before is enough, but there’s more to running a business than just your wage.
The Problem:
When you start your own business, you’re no longer just a tradie—you’re a business owner. You have bills to pay, and you need to pay yourself too. Many tradies think they can find more clients by undercutting the industry rates. Sadly, this mindset leads many to quit their jobs, buy a van, brand it, run out of money, sell the van, and go back to employment.
Common Mistakes:
One common mistake is underestimating the full costs of running a business. It’s not just about covering your previous wage—you need to factor in business expenses, taxes, insurance, and more. Another mistake is thinking that lower prices will attract more clients. In reality, this often leads to a race to the bottom.
Detailed Examples:
Take Joe, a plumber who thought undercutting his competitors would win him more clients. Initially, he saw a spike in jobs, but soon he was overwhelmed and struggling to make ends meet. Conversely, Dave, another plumber, did his homework and set his prices to reflect his skills and the value he provided. Not only did he attract clients, but he also built a sustainable business.
The Guide:
It’s crucial to understand that charging too little is a surefire way to struggle. Talk to friends who’ve gone solo. Ask what they charge and if they’re actually making money. Don’t just settle for covering costs—ensure you’re making a profit.
Steps to Determine Pricing:
- Calculate Costs:List all your business expenses, including tools, transportation, insurance, and marketing.
- Research Market Rates:Look at what others in your field are charging.
- Set Profit Margins:Ensure your prices include a reasonable profit margin.
- Adjust as Needed:Regularly review and adjust your prices based on costs and market conditions.
Importance of Professional Branding:
A professional brand can justify higher prices. A well-crafted website and consistent branding show clients that you’re serious about your business. This professionalism translates into trust and willingness to pay more for quality services.
Marketing Your Value:
Effective marketing helps communicate the value of your services. Highlighting your expertise, showcasing testimonials, and demonstrating your work through before-and-after photos can convince clients that your higher prices are worth it.
SEO and Online Presence:
A strong online presence, optimized for search engines, helps attract clients who are willing to pay for quality. Investing in SEO ensures that your business shows up when potential clients search for your services, increasing your visibility and credibility.
Client Testimonials:
Displaying testimonials from satisfied clients can reinforce the value of your services. Positive reviews and success stories help build trust and justify your pricing.
Educational Content:
Creating educational content like blogs and videos demonstrates your expertise. This not only helps clients understand the value of your services but also positions you as a thought leader in your field.
