Pricing

[PlumbersMate]

@hammers4spanner, are you talking about the wage you take home or the profit your business makes? The 2 are completely different of course and I want to be clear we are talking about the same thing. £200 per day is £48,000 turnover before sales of parts are added in, based on a 240 day working year. At £250 per day the turnover is £60,000 which is an extra £12,000 of profit per year as fixed costs are the same. I think £15k per year is fairly typical of running costs for a plumbing business. So as a sole trader you can pay yourself £33k a year if you don't want to grow your business, based on £200 per day, assuming you book out every working day of the year and your van is never off the road.

This is a good wage I would say and not one I would want to dip much below given all the hassle that goes with running a business. Certainly not when plumbers can earn £25k now quite easily just for working for someone else.

For me the extra £12k per year gained by charging £50 extra a day goes into growing the business, buying more vans etc. This will be my pension one day and will be much better than any pension I can buy from large companies who **** my cash up the wall!

All I know is from my experience, on £200 a day I simply could not earn enough money to expand my business and I would still have been working on the tools now. At £250 per day I am doing this less and less and letting employees do more of the work so I can grow my business. Without meaning to sound patronising (as it's not meant to be), this was the biggest lightbulb moment for me in 6 years of running my business. I could either be busy working on the tools or busy working on my business. I know which one I prefer!

Interestingly, workload has increased since my rates have gone up. Perhaps the good customers that we want link price to quality??

Great post

 

[hammers4spanner]

£15k a year to run a plumb business you need to reign that in big time ,

You need to asses your outgoings

Like most i want to earn good solid money however i have had many a time where i have earnt £500 a week . Thats still 26k a year ( if working every week) , however even with four weeks off its still 24 k. I dont earn 24k tho but more however outgoings of £15k is some going

I wont be relying on the govt for a pension other means.

 

[villa_tom]

Is that not living with your mum though? How are your outgoings so low? Low miles?

I still live at home while I'm doing my house up yeah, but why would who I live with have any bearings on how much it costs me to work??

My outgoings are diesel, van insurance, PLI, gas safe reg plus any costs with running a van like mot and tax etc.

 

[villa_tom]

The things is with this post is we are all talking about different business' within the same industry.

Some of us work alone doing only contracting like me, where out goings will be next to nothing and so the amount needed to be earned before profit is small.

Others are one man bands doing private work where there are another set of costs including parts etc and extra fuel costs with driving to merchants all the time, therefore outgoings are more and more has to be earned before you are in profit.

Then we have blokes who employ blokes, have numerous vans and wages to pay. The outlay on this type of business will inevitably be massive compared a bloke just doing contracting in the local area.

 

[villa_tom]

Nail on head. My annual diesel bill is more than that. Accountant is about half that again. Add insurances, GSR registration etc etc.

I do my accounts myself, it the best thing I ever decided to do, it takes me about half and hour to process and I don't know why I ever used an accountant in the first place

 

[PlumbersMate]

I still live at home while I'm doing my house up yeah, but why would who I live with have any bearings on how much it costs me to work??

My outgoings are diesel, van insurance, PLI, gas safe reg plus any costs with running a van like mot and tax etc.

I didnt mean in the context of costs to work I meant how £190 a day is a lot more appealing to someone living with their mum than someone who has mortgage, bills and hungry mouths to feed. Weren't a dig though mate if It came across that way.

 

[PlumbersMate]

I do my accounts myself, it the best thing I ever decided to do, it takes me about half and hour to process and I don't know why I ever used an accountant in the first place

I will always employ an accountant as they know all the loopholes etc that's what I'm happy to pay for

 

[villa_tom]

I didnt mean in the context of costs to work I meant how £190 a day is a lot more appealing to someone living with their mum than someone who has mortgage, bills and hungry mouths to feed. Weren't a dig though mate if It came across that way.

£190 a day is still over £950 a week, so about £700 take home after expense and tax.

I can live on that quite easily once I'm in my new house.

 

[villa_tom]

I didnt mean in the context of costs to work I meant how £190 a day is a lot more appealing to someone living with their mum than someone who has mortgage, bills and hungry mouths to feed. Weren't a dig though mate if It came across that way.

I didn't take it as a dig mate

 

[Masood]

I do my accounts myself, it the best thing I ever decided to do, it takes me about half and hour to process and I don't know why I ever used an accountant in the first place

You're not a limited company then?

 

[PlumbersMate]

£190 a day is still over £950 a week, so about £700 take home after expense and tax.

I can live on that quite easily once I'm in my new house.

yeh I could live on that pretty well, just think I like crofts point of charging more to grow his business, you in a way have a job for life at BG so are obviously happy to take that week in week out with no stress etc, nice position to be in

 

[villa_tom]

You're not a limited company then?

No I'm not limited.

Theres no need for me to be limited

 

[villa_tom]

yeh I could live on that pretty well, just think I like crofts point of charging more to grow his business, you in a way have a job for life at BG so are obviously happy to take that week in week out with no stress etc, nice position to be in

Croft is spot on with his way of thinking, he want to grow his business and charges his customers accordingly.

I however have no aspirations to employ anyone or become any bigger than I currently am. Therefore I am happy for working what I am working for

 

[Ray Stafford]

Heres a thought.

Lets say a plumber sets up and establishes a rate of £40 per hour. In his 1st year, he struggles to fill his week, and money gets short, there are rows with the missus, and he wonders if he has done the right thing.

In the second year, his diary starts to fill up, but he has a bit of a mountain to climb, because he ran up some credit card debt paying for groceries in year one, so things still feel pretty tight.

In the third year, although things are much better, the the fear of going quiet still haunts him in the small hours when he can't sleep.

In the fourth year, he toys with putting his rates up, but he loses a couple of quotes, and hears of a bloke in the merchant whose working for £20 an hour, so he sticks where he is.

In the fifth year, things start to get tight for a different reason. He's got plenty of work, but the cost of living keeps on rising, and the missus tastes don't get any cheaper, and anyway, whats the point in being your own boss if you can't go on holiday when you fancy it? Except he can't afford it.

By the end of the sixth year, he suddenly realises that with an average of 4.5% inflation, he shoud be charging £50 per hour. He panics, and shoves the rate up. His regular customers howl at this, so he discounts them back down to £45, gets £50 from new customers, and so ends up averaging £47.50.

Now here's the mental arithmetic test. How much has he lost over the years by not increasing his rate by 4.5% per year?

The answer is a staggering and irrecoverable £55,000. Admittedly taxable, but still a very tidy pile of change, which he can never get back.

And before you tell me that customers are too price sensitive to stand 4.5% per year, answer me this:

Why is it that Aldi and Lidl between them have only 7% of the UK grocery market, and all the discount supermarkets combined have less than 10%, whilst the big 4 "middle priced" supermarkets have 75% market share between them?

Its because the overwhelming majority of people buy based on perception of value, not on price.

 

[IDCHAPPY]

You're telling me I'm too cheap at £25 ph??

 

[hammers4spanner]

Hardly any aldi or lidl supermarkets thats why

 

[Destroyer2813]

:angel_smile::angel_smile:I blame merchants for everything

 

[Ray Stafford]

Hardly any aldi or lidl supermarkets thats why

Both brands have more than 600 UK stores - about the same number each as Morrisons, and slightly more each than Asda.

If you add in the other discounters like Iceland and Farmfoods, there are way more discount stores than any single supermarket except Tesco, who are probably a few hundred ahead, but only because of the proliferation of little tesco express stores.

 

[lame plumber]

My perception on this is to do the following:

work out what all your fixed costs are and write em down, insurance, fuel, van costs be they hp,leasing or interest on a loan, capital repayments, tool purchases/replacements, stock build up for van - so you dont have to look a plonker and always pop off to the merchants ( customers don't worry so much about arts costs but do get peeved at you disappearing over the horizon!) There are so many things people tend to forget, ie cost of ppe each year, van servicing, bits n bobs they ignore etc etc.

Then sit down and look at how many hours a day you actually get to be working, not travelling to and from, but on the job. Take off time for lunch n tea if you take them, and take it off even if you dont!! Then youll start to see you only achieve 4 or 5 hours actually working, especially in my part of the world, low customer base/mile. Then take off week ends, holiday, sickness (allow for it, you will be ill) and you suddenly see the number of days available per year your working and the number of hours available per day. After that pick your salary, add on the fixed costs and divide that by the number of hours you see available to you. If you want £30k a year, I'd be very surprised if your hourly rate required is less than £52-55 pounds per hour!! If your figures are less I'd say you havent been honest with your costs and hours available.

There is out there a working formula on one of the sites for gas forms to help you do this, if you havent worked youer way through this sort of calculation once in a while your heading for a fall one day.

 

[hammers4spanner]

Their was something in the news few weeks back about how they are now damaging the big boys .

Morrisons and tescos have knocked back prices due to threat of these two

 

[Ray Stafford]

Their was something in the news few weeks back about how they are now damaging the big boys .

Morrisons and tescos have knocked back prices due to threat of these two

Nevertheless, more than 75% of people shop in a mid market shop, and less than 10% at a discounter. In fact, more people shop in Waitrose than shop in Aldi, and more shop at M&S food than shop in Lidl. So why not aim for the Waitrose and M&S clientele?

 

[Ermintrude]

Value? Did a job today . Gas escape in street during purge and relight house was capped as massive drop but no smell . The national grid gave our number as close. . £45 plus vat to come have a look , try and isolate and re establish. Went crawled under floor for 1 1/4 hours came out capped about 30m of compression fittings . Boiler on, ncs the shoddy install and £108 inc vat. Quoted £450plus to re pipe . About a bundle of 22 and two men for two hours . Customer was happy to pay to have job done properly. And by what is perceived as "good" engineers

 

[hammers4spanner]

Nevertheless, more than 75% of people shop in a mid market shop, and less than 10% at a discounter. In fact, more people shop in Waitrose than shop in Aldi, and more shop at M&S food than shop in Lidl. So why not aim for the Waitrose and M&S clientele?

Simple answer to that is the cust thinks if it has water coming out of the tap and gets hot then why pay extra. Aldi and lidl plumbers rule roost down here you try charge 1800 for boiler change and you be undercut left right center.

Notorious low paid area

 

[lame plumber]

there's always a mixture of rich and poor, you just need to target those you want to work for, I aim for a smaller market and it seems to work, it also means you pick up work from lower income folks who hear your a good tradesman. ie quick callout today to repair a split 15mm pipe on a recommendation , there less than 15 mins, £100, no complaints and very happy custard, plus picked up her boiler and rayburn for a service next month.

 

[Ray Stafford]

Notorious low paid area

Guardian report on pay by region.

Plymouth and Portsmouth are much the same. The best I could find for 2013 was that average full time salary in Portsmouth beat Plymouth by just £600 per year. Bristol has us both beat.