By Tanya Olckers
How do you know what to charge for your services as a plumber? Do you come up short every month? Perhaps it’s time to take a long, hard look at how your business works out its rates.
Images supplied by Plumbing Africa
How do you work out what to charge for your plumbing services? This is a question that even well-established plumbers may ask. And, when you ask anyone else in the industry, you may end up with several different answers, with each person telling you their method is the one that works best. In the end, you may feel that there are no straight answers to this question at all.
While there may be a number of methods people use to work out their daily rates, here is one way to find out how much to charge.
Starting point
You won’t know what to charge unless you know what your overheads are. These are the things that add up to costs in running your business that are not related to your actual business or products. In this category, you will find things like rent, phone bills, paper for the printer, coffee and tea – if you provide those – stationery, work clothes, business cards and branded items. You can also add insurance in this category.
The next things to consider are what you need to do your work. Here you would be looking at things like tools, fuel, wear and tear on your van, training and materials that you have to purchase, for example, taps and geysers.
Make a list of all these items and note exactly how much each item costs you. Include your van repayment amount and any office equipment you have had to purchase. You will also want to include any salaries you have to pay, even if that salary is for the tea lady.
Add your profit in
Now that you have those numbers ready, you can add them all up, which will give you a figure. Let’s say that number is R80 000, as an example. Now you need to work out how much profit you need to make. Remember that your business doesn’t exist purely so that you can pay your bills and do it all over again from month to month. The purpose of a business is to make a profit. Is your profit going to be 10%? Maybe you prefer 15%? Add that onto the final figure. In our example, we will use 10% and add that to our R80 000, giving us R88 000.
This number shows us how much income we must generate in a single month.
Let’s do some maths
Our next step is to work out how much we charge per day. Realistically, we don’t work 30 or 31 days each month. There are 21 working days in a month, and unless you are working more than five days a week and are available on Christmas Day, that’s what you will be working with.
Take your figure that you’ve worked out – in our example R88 000 – and divide that by 21 days. This will give you your daily rate. In our example, that would give us R4 190.48. This is the minimum amount you have to earn on a daily basis.
Next, take that daily rate number and divide it by the number of hours that you work. Remember that you might think you are working an 8-hour day, but you are most likely also spending time travelling to and from clients. Also keep in mind that some days are slow and other busy, while there may be days when no calls come in at all.
In our example, let’s say we work six hours a day – which is a very rough estimate for the amount of time actually working and not travelling. We take that daily rate number – R4 190.48 in our case – and divide that by six (the hours worked). In our example, that would make R698.41 per hour. We have our hourly rate and now know the minimum amount we have to earn in one hour for a six-hour day to reach our daily target of R4 190.48.
Things to keep in mind
Remember that you are most likely not going to be working seven days a week, 365 days a year. There may be times you are ill or a staff member is ill. There are public holidays throughout the year and you may choose to take a holiday once a year. December may be quiet for some plumbers as so many clients may be away on holiday during that time. This will all have some influence on your bottom line.
There is no real basic budget to work from as every business differs, and your business may change from day to day. Perhaps tools got stolen or your bakkie broke down or you wanted an afternoon off to watch your kid’s karate tournament. This will be something that is constantly evolving and changing, which means that it is good business practice to regularly revisit your budget and make the necessary calculations to reflect those changes.
Ultimately, the objective is to make your business sustainable, and this varies from business to business. Take into account your services and expenses. Remember to add in and to take into account your services and your expenses.
Charges don’t take into account the intangible things like how much you value yourself and your business. It doesn’t take into account the value of your reputation as a plumber. These things all have value and, yes, you deserve to receive remuneration for it.
Steer clear of these business traps
Several businesses may feel unsure about their success in a competitive industry. Perhaps if they undercut the prices of one or two plumbers in the area, they think, they will be successful. This is not a sustainable business model. You may very well find yourself short every month.
In this business, there is no such thing as a quick favour for a friend or a member of the family. You still have to travel out to their home or business to assess a problem. You still need to purchase the materials you need to do the job. And then there’s the cost of your time.
A way around this is to either have a friends and family discount, or even better, make no exceptions for the charges you make for your services. However, nothing is for mahala, and unless it’s a registered charity, never work for free. You have worked hard in your studies and to build your business.
Giving clients credit is also a tricky situation to find yourself in. How many clients have you done that to and still had to beg them to pay you six months down the line? One solution is to ask for a deposit upfront, regardless of the job. Some may ask for a 50% deposit, others may ask for an 80% deposit. This is about protecting your income. You still have to buy materials for the job and you can’t do that if your wallet is empty. However, if you do decide to grant clients a payment plan, then make sure it’s in writing. If you have stipulated there would be consequences on non-payment, be sure to follow through.
What some plumbers have encountered in situations similar to this is a client telling them that they only have a credit card, no cash. A handheld point of sale device could be an easy solution to this particular problem.
The concern here is that if we charge friends and family or allow people to pay things off, we might not get repeat business. If no one is paying you, there is no business. You may find, instead, that clients will respect both you and your time more as a result.
