With the cost of materials, fuel, and other day-to-day necessities on the rise, it’s no surprise that many tradespeople have begun to adjust their own prices to compensate. In fact, in a recent social media poll conducted by Tradify, 81% of tradespeople who responded said that they planned on increasing their rate before the end of the year.If you haven’t updated your charge-out rate in a while, now is the time. Inflation is showing no signs of slowing, so it’s important that you’re able to adapt in order to maintain healthy cash flow and keep good profits coming in. So, where do you begin? How much should you adjust your rate? How do you make sure a rate hike won't cost you customers?
Short on time? Skip ahead!
The first step is to recalculate your charge-out rate. Where your rate may once have been fair considering previous price levels, things have changed. You need to take into account all the expenses that come with doing your job and adjust your rate accordingly. Here’s how to calculate your charge-out rate so that it matches the market.
Carefully consider how existing and potential clients will react to an increased rate. The last thing you want is to damage your reputation or lose clients, but you also need to make sure that you’re doing what’s best for your wallet.
Completing a short-term job where the price has already been agreed upon? If so, it’s probably not worth trying to change your rate. A rate change on a job like this will most likely diminish your client-contractor relationship and could even lead to a dispute.
Focus on getting the job done so that you can start charging your new rate to other clients.
On longer-term contracts, it pays to have a discussion with your customer. Explain to them the financial burden that inflation is placing on your business and how rising material costs have reduced the cash flow and profit coming into your business. If you can appeal to them and give valid reasons why an agreed-upon rate may need to be increased, you may be able to reach a deal that keeps you in a good financial position.
If you’ve been re-hired by an existing customer, you can start right off the bat with your new charge-out rate. Just make sure that they’re aware of the new rate and be sure to get their acknowledgement of this in writing in the form of an accepted quote. This’ll avoid any possible quibbles or misunderstandings when it comes time to send your first invoice.
To avoid any confusion and eliminate fruitless enquiries, it’s vital that you update any mention of your charge-out rate. Start by doing an audit of your own website and social media accounts. Then, if you’re on any small business directories, ensure that those are up-to-date, too.
Not on a trade business directory yet? Try these out!
Great job management software like Tradify can go a long way in making your business run more efficiently, even in the face of issues like rising inflation. Tradify seamlessly streamlines all your admin processes like invoicing, quotes and estimates, and even integrates with popular accounting software like Xero, Quickbooks, MYOB, and Sage.
Get your business in the right position to handle anything the world throws at it, sign up for a 14-day free trial or pop over to one of our live walkthrough webinars to see it in action.