This year has been filled with a new barrage of challenges, has it not? 

Yes, COVID is in the past, for the most part, travel has picked up again and life seems to resemble something that can be clarified as ‘normal’ or somewhat. The demand that began as a result of COVID and people discovering an unhappiness with their current homes has ended. Demand has settled and you no longer have your gas pedal to the floor trying to keep up. 

Hopefully, you got some good coin that made the stress worth it… If not, I’m sorry. 

Now, stresses were very evident during this period despite the demand and some of those pressures are still apparent today (as well as new ones which have sprung up). 

I’ll delve into these and illustrate how you can push past a seemingly impenetrable barrier and move your business forward but drop a line in the comments if I’ve missed one and I’ll try and get to it. 

The first pressure many trades business owners are struggling with is finding tradespeople – it seems to be nay impossible. Now this isn’t a new problem but it was accentuated by COVID. No one seems to be looking for a job, all the qualified, experienced applicants already have a job… it’s an arid desert of applicants out there. 

That would slow you down from making the most of the wave of demand, wouldn’t it? 

Rising prices on materials, that was a challenge. This seems to have mainly affected the larger project home builders who signed contracts for builds to start 9-12 months into the future and then had to wear these huge cost increases on already slim margins. But everyone felt that to an extent didn’t they? 

These were the two main trade frustrations not too long ago and now material price increases and demand have both eased, however, there still aren’t many tradespeople looking for a job. 

Everyone is feeling the effects of inflation and this is impacting your ability to find good people. Why? Well apart from it being difficult to find people so you can grow, everyone wants to be paid more and fair enough. The cost of living has increased dramatically so we need to pay our people in accordance with that. Job ads are displaying amazing hourly rates and your current team sees that and wants pay increases too. You have to give them to them but this upward wage pressure squeezes your margins unless you raise your prices too, which isn’t always the easiest thing to do. However, those inflated costs of living are affecting you too, especially if you have a mortgage or business loans (increased interest rates have affected many). 

So this puts you in quite the sticky situation… 

And on top of all of this, interest rate increases have also made it difficult for people who have jobs dependent on finance, as loans are being declined and development project business cases are being reconsidered.

Yes demand has softened and you have been able to ease off of the accelerator a touch but there are still a lot of other pressures pushing in. 

(Jesus, I’ve made myself feel a little hopeless and I’m not even a trades business owner, I’m a business coach (for tradies and builders))

Let’s step back for a minute and take a deep breath – it’s not terrible and the media is making it out to be far worse than it is in reality (as they always do) as that’s how they get clicks and that is what pays the advertisers. 

But let’s get onto something constructive – how to protect yourself from these challenges. 

The Margin Squeeze and How to Confront It

We all know there is upward pressure on your costs; both your labour and material costs so to combat this you need to charge more. First – figure out the true cost of your labour – how? My clients use our Tradie Labour Cost Calculator to add a reasonable margin to calculate the new charge-out rate – this is all done in the calculator, you can download a copy if you’d like. 

You should be making a gross margin of between 20% and 30% on labour and materials as well as 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 their charge-out rates as well as use my experience to help them be more confident in what they’re charging. They also work on their Sales Machines, they are putting forward higher prices in the context of better sales – better than attempting to do it in isolation. 

You should do this.

You should also make sure you don’t get caught out by the price increase of materials in the time frame between quote preparation, signing of the contract and when you actually go and buy the materials (or contract the subcontractors). 

One way to avoid this is to use provisional sums in your contract for the things you are concerned might increase in price (make sure your customer understands this); 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 or timeframe. There is no perfect way to protect yourself here but you should try to lessen your risk. 

You must protect your margins – if you don’t, you’ll find yourself busy, completing jobs yet making no profit… And that would be a damn shame, wouldn’t it? 

People and How to Find the Good Ones 

It’s frustrating to continuously be interviewing people who just aren’t suitable for the role – they’re unqualified, inexperienced or there’s just no one out there. There’s been an overflow of demand and a lack of manpower for the work. 

Now listen here, there are still people out there looking for jobs – good, qualified, hardworking, experienced people. The offence I constantly see committed here is trade business owners failing to recruit properly. 

Make sure you are clear about why it is good to work for you. Nobody cares about a bog standard job -there are plenty of ads for those. Write something that is appealing – that illustrates all the great things about being part of your team and your business. That tells people why they should work there. 

Then make sure plenty of people are seeing your ad. I mean A LOT. Don’t just throw it up on SEEK and hope for the best (there is nothing wrong with SEEK but you should be doing more). Run your ad on every social media platform you are on and target the audience specifically to the demographic of people you are looking for. Show your job ad to people who may not be actively looking. Consider recruiting from overseas or bringing in an immigrant. 

There are so many ways to make your job hunt more successful. 

Managing the Pesky Brakes Pushing on our Economy 

Demand is falling, I know this and you do too, however, it isn’t by very much. This will be specific to the part of the industry you’re in but there is work to be had. So go out there and get it. 

You can no longer expect work to roll in on that wave of demand. You are going to have to invest in your marketing. It’s a numbers game and you have to play it. So, spend money on ads if you work with residential customers and get busy on the phone if you work with businesses. 

This is where lazy or ignorant business owners suffer and those prepared to do the work succeed. Be the latter – succeed but get some help – from me of course.