EP #16 – Your Profit Is More Than Your Salary: Pricing A Trades Business w/ Doug D’Aubrey

Overview

Lots of trades business owners come to the realisation that they’ve created a job, not a business, for themselves. What’s the difference, what does it mean, and what role does pricing play in it all?

Find out in this week’s episode with Doug from ETC as we talk about everything from what kind of conversion rates you should be getting to labour costing and why you shouldn’t pride yourself on being the cheapest.

Listen to the episode:

Highlights

Where to start looking to increase profit

• Pricing is the very first thing. People pride themselves on being the cheapest with high conversion rates – but this means you’re too cheap. (1:16)
• If you’re too cheap, everyone will buy you – and you’ll be busy without much profit. (2:00)
• Anything above 50% conversion rate for quotes, and you should review your pricing. You should sell on the outcome you’re delivering, not the price. (2:26)
• People buy what they need and want, not price – if the product or service is truly important to them. (3:10)
• Sell what’s important to the customer, and not what you do. Then you’ll be able to sell at the right price. (6:15)
• Instead of working hard and ending up with no money, you’ll close fewer customers and make real profit. (7:22)

Creating a pricing formula for your business

• You should have a formula on a spreadsheet or equivalent to cost everything, but also the time-related overheads of running the business. (8:31)
• You need to understand your finances and numbers like your turnover, cost of sale, and overheads. Your jobs have to pay these overheads – but don’t forget the profit. This can be calculated as a percentage added onto each job. (10:02)
• Once you’ve worked it out, you’re not going to do a job for too cheap. You’re either making a loss or making no profit. (16:32)
• Doug telling stories of his clients losing 4-5 grand on some jobs. (17:05)
• When you’re pricing, put in contingency as well, and management time. (17:30)

Working out how much profit you need: A business is more than a job 

• Doug tells a story of one of his clients – labour costing is not the same as profit. As a business, you need to start generating profit – not just your salary. (13:48)
• If you don’t price correctly, you won’t be there next year and are doing a disservice to your customers (and all your employees). (19:45)