Hi guys, Tony from Profitable Tradie here. I’ve got a question for you; are you pricing to win work, or you are pricing to make money? Stay tuned.
So I am going to kick off with a quick story today. Now I met a guy yesterday, a young guy just starting out in business. He has been in business 6-12 months and he was telling me about his pricing strategy. Now this stuff will make your hair curl.
The greatest margins that he was achieving, he didn’t know what his greatest margins were, but when we figured it out, it was around 18-20% and his charging rate had been $50 an hour, he’s an electrician and he had just put it up to $55 an hour and thought he was on to a winner deal.
Now the sad reality is he learnt this pricing strategy from his old boss, the guy who he did his time with and he was actually doing the pricing for that guy before he went out in business. Now I am going to tell you straight up, if that is the way you are pricing, you are not going to make money, you are going to struggle to have cash in the bank to meet your obligations and you are certainly not going to have money to spend on yourself, your family and to grow your business.
So, the question is this, are you actually pricing to win work? Or, are you pricing to actually make a profit? Now if you are pricing to win work, the mindset or the psychology mostly is, “Hey, I need to get this job, I’ll sharpen my pencil just to make sure that I keep everyone busy.”
Unfortunately, that is just not going to get you to where you want to go. You need to understand what are the key benchmarks or targets for your gross profit margins that you need to hit to make a solid profit.
Now we teach the members of our Million Dollar Tradie Programme what these benchmarks are and they vary depending on what type of work you are doing. So if you are into the maintenance and servicing work, Plumbers and Electricians, it is going to be a lot higher than it is for say large commercial jobs because there is a lot more size in those jobs.
Now, the way this works is incredibly powerful and a quick story about that Graham and Sue from Swift Fix Plumbing in Auckland. So three months ago, they joined the Million Dollar Tradie Programme and their gross margins were around 32%. By understanding what the right benchmarks are for their type of work, and back costing all their jobs, they’ve got that up. Up to 45-50%, they have increased their sales by $33k a month over the last three months, just by pricing properly.
And you can do the same, so if you want to get your head around what the actual benchmarks are, I have got a super helpful guide for you, all you need to do is just put your details in the box here, click the button and we will shoot it straight out to you.
It will show you the benchmarks that you should be hitting in your Plumbing or Electrical business and to get the right gross profit margin. I think you will find it super helpful guys, download it now.
Good to catch up with you today again and let’s look to raise the bar across the industry for everyone, get those benchmarks margins up. Let’s make some proper money, have a bit more fun investing in our businesses and take them to the next level.
Catch you again next time, guys.