Are you Charging Enough?
The age old dilemma of many trades people and builders is the question of what to charge. Its a very fine line at times in a competitive environment where price is often the main deciding factor for a customer.
Here are some ideas on how to manage your business more effectively so that you know you are charging enough to make a good living that reflects the hard work you put into your business.
Calculate all of the costs to run your business per week. Be sure to include your personal drawings, time spent estimating costs, etc. Then add a percentage for profit (this can be based on the industry standard).
Determine how many hours per week you intend to work on site and how many hours per week you will be working on planning and administration. Cost these activities accurately.
You can now start to determine what your hourly rate should be to maintain your business operations.
As part of this process you should also understand how much you need each week and month to cover your wages, superannuation, insurances, etc.
It is important to allow for times when you can not work the amount of hours you initially intended. This may be due to sickness, injury, lack of available work, or even weather conditions.
Put a contingency plan in place to ensure that you are covered during times when you are unable to source enough work. This contingency may be a Sickness and Accident Policy or the ability to reduce your overheads to ease financial burdens.
Review your overheads regularly. That way you can ensure that you are charging enough. Regular review of your financial situation will help you to maintain a suitable operating profit and keep your creditors happy.
If you decide to raise your prices to ensure a positive cash flow through your business, you may need to add value or ensure that you provide a high quality service – one that doesnt require you to pay more to do so. There are many ways you can add value, simply and creatively. It comes down to your attitude to keeping your customers happy, and going that little bit further to help them.
There are trades people and builders out there making very good money today, covering their costs, and have a positive cashflow – so it can be done.
Filed Under: Trade Administration
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