This year is not without challenges, is it?
COVID is behind us, it seems, and we can fly again. The mad rush of demand for tradies and building work that came out of COVID. And that was caused by everyone being stuck at home seeing how sh*tty their home looked and having nothing much else to spend their money on for a while (and some free stimulus cash); that’s ended, hasn’t it? Demand has settled and you’re no longer running at top speed to keep up.
Hopefully, you made some good money from that situation. If you didn’t, I’m sorry.
Pressures Tradies Are Facing After COVID
There were pressures despite the demand and some of them are still here (and some new ones, of course).
I’ll focus on these but if I’ve missed any obvious ones, drop a comment and I’ll try to discuss them.
It’s very hard to find tradespeople lately, isn’t it? All the good ones seem to have a job, nobody seems to be looking, at least.
That would slow you down from making the most of that wave of demand and I’m sure. Rising prices on materials was a challenge, wasn’t it?
Mostly, this seems to have affected the larger project home builders who signed contracts for builds to start 9-12 months in the future and had to wear huge increases in costs on already tight margins. But everybody got hurt by that a bit, didn’t they?
They were the two human frustrations a little while ago. Now the materials price rises have eased, demand has eased. There’s still aren’t many tradies looking for a job.
This means apart from it being hard to find people so you can grow, everyone wants to get paid more too. There are job ads showing great hourly rates and your people are
seeing them and wanting pay increases to help them with the increasing cost of living caused by the inflation we’ve been having and the rising interest rates that followed.
Upward pressure on wages squeezes your margins unless you raise your prices too, which isn’t always easy, and those increased cost of living affect you too, (don’t they?) especially if you’ve got mortgages or business loans.
And finally, those interest rates prices have made it difficult for people whose jobs are dependent on finance – loans are being declined and development project business cases are being reconsidered.
So demands have softened a bit and some specific brakes have been applied.
(I’ve made myself feel hopeless and I’m not even a tradie, I’m a business coach for Tradies and Builders).
Look, it’s not that bad and the papers are making it sound worse than it is because that gets clicks which is what their advertisers pay for.
But those challenges are real and you should protect yourself.
What You Can Do To Manage The Pressure
Let’s talk margin squeeze.
There’s upward pressure on your costs – your labour cost and your material costs (of course) need to charge more.
My clients use our Tradie Labour Cost Calculator to work out their true cost of labour and make sure they add a reasonable margin to calculate their new charge-out-rate.
You should be making a gross margin of between 20% and 30% on labour and materials and subcontractors, if you’re a builder, and between 30% and 40% if you’re any other trade. If your margins are less than that, you’re leaving money on the table.
My clients compare notes on what they’re charging and use my experience to help them be more confident in what they’re charging.
They also work on their sales machines so they’re putting forward higher prices in the context of better sales – much better than trying to do it in isolation. You should do this.
You should also make sure you don’t get caught out by the prices of your materials rising between when you prepare your quote, when you sign your contract and when you actually buy the materials (or contract the subcontractors).
You can use provisional sums in your contract for the things you are concerned might go up in price; (make sure your customer understands); you can lock-in the buy prices with your suppliers (if they’ll let you); you can minimise the time between quote and job and make sure your quotes are only valid for a short time.
There’s no perfect way to protect yourself here but you should try to minimise your risk.
You must protect your margins – if you don’t, it’s easy to be busy and work hard but not make much money. Which would be a damn shame, wouldn’t it?
Finding it difficult to find good tradespeople is a frustration.
There’s been all that demand and you can’t get the people to do the work.
There are still people out there looking for jobs and the main sin I see people committing here is failing to recruit properly.
Make sure you are clear about why it’s good to work for you. Nobody cares about a bog standard job. Write an appealing job that tells people why they would want to work with you. Then, make sure plenty of people see your ad. Don’t just bring it on SEEK and hope for the best. (Nothing wrong with SEEK but do more). Run your ad on Facebook and show
your lovely jobs to the people who aren’t actively looking. Consider recruiting overseas and bringing in an immigrant.
Finally those pesky brakes on our economy
The demand is falling out but probably not by much. This will be specific to each part of the industry you’re in but there’s work to be hand. Go out there and get it.
No longer can you expect work to come to your door in a flood, you’re going to have to invest in marketing. It’s a numbers game, you have to play it. Spend money on ads if you work with residential customer and get busy on the phone if you work with businesses.
This is where lazy businesses owners suffer and those prepared to do the work do well. Be the second one. Get help. From me, of course.