“What’s the going rate?”
This is a question that comes up from tradesman all around the country, young and old.
They all seem to be chasing this mythical figure, a definitive answer that will end their worries and start making them MONEY!
The truth is, there is no such thing as the going rate!
Stop worrying about what old mate down the road is charging. Stop worrying about what your old boss charges. Stop worrying about what Scott (from your local services Facebook group) charges. And stop worrying about what aunty Kath’s second cousin’s son Doug charges in Perth!
Yes, competitive analysis has its place (especially with larger commercial projects); however, it shouldn’t dictate EXACTLY what rate you price your jobs at!
That’s why you need to change your question to…
“What are MY going rates?”
There’s no shortcut to understanding what you need to price your jobs at. You need to focus on your own math and work out your own numbers.
For example, one plumbers’ cost to do a piece of work might be completely different to yours. He could be faster, more efficient with materials, have a bigger team, smaller overheads, etc. and therefore, his costs to deliver the work are likely completely different to yours!
Not to mention, most tradesman aren’t even pricing their work correctly in the first place; so, looking at their ‘going rate’ is more than likely going to set you back anyway!
You need to start pricing your work at a rate that allows you to deliver exceptional customer experience, produce high-quality work and MAKE THE RETURN THAT YOU WANT!
This is all about pricing for profit!
… And how do you do that!?
- 1Determine Your Overhead Costs
- 2Calculate Your Overhead Recovery Rate
- 3Set Your Gross Profit Margin Target (GPMT)
- 4Determine Your Direct Job Costs
- 5Calculate Your Jobs Breakeven Point
- 6Mark-Up Your Job Costs Based On Your GPMT
It doesn’t matter whether you use hourly charge out, fixed pricing, or take-off pricing, etc. you should be following the same steps above to price your jobs appropriately for your own business.
This is all about understanding your own costs, capabilities and goals to arrive at the correct charge out rate FOR YOU.
But don’t kid yourself… If you want pricing flexibility, you must differentiate yourself from the rest of the pack by providing massive value to your prospect throughout your marketing and sales process.
If all you have to offer is the same service, the same value… the same everything, then you will be forced to compete on price, because price will be your only point of differentiation.
If someone isn’t interested in a premium price for a premium service, then they’re not your ideal client anyway.
If you're an electrician, plumber, painter or any other trade or construction-based business and you want assistance with calculating YOUR going rate, click here to learn more about how our team can help!