Work and Reward
You probably know this poem by Jessie B. Rittenhouse
An example of how the two can become detached.
Other than a thank you and maybe a bottle of wine, you are not likely to receive anymore than the sum you quoted.
If you feel you deserve more for your services it’s easy to find out, increase your margins. Yes plural don’t have the same margins for all the different trades, some are riskier than others.
Also you may have some anomaly’s in your margins where one trade compensates for another.
That’s O.K. until you do a job without the other trade and you lose money. I’ll clarify, say you are under allowing for brickwork but over allowing on painter. That works well until you do a job with loads of brickwork and no painting.
“I bargained with Life for a penny,
And Life would pay no more,
However I begged at evening
When I counted my scanty store.
For Life is a just employer,
He gives you what you ask,
But once you have set the wages,
Why, you must bear the task.
I worked for a menial’s hire,
Only to learn, dismayed,
That any wage I had asked of Life,
Life would have willingly paid.”
Don’t forget there will be an erosian of the margin through “Red Tape”. You may have the capacity to undertake 3 jobs per month but the occaisional job will fall through because the Shire typist has gone to Bali or something. You have to cancel the commencement and re-schedule for when she returns.
I’m starting with the Balance Sheet and working my way forward as I feel it needs the most attention. When you are starting off you may charge something like cost plus 15%. As time goes by you start getting tighter rates from trades and bigger discounts from suppliers so your cost goes down. To then apply the same rate of 15% will result in a decrease in profit.
Not exactly a just reward for your endeavours.
Stats show builders in Australia average around 25% of sales. The larger companies spend half of this on Sales, Promotion, Displays, Commissions etc.
That leaves about 12 ~ 13% for overhead and profit. Say overhead is over 11% that leaves just over 1% for profit. That’s probably OK for some with huge turnovers.
With the smaller businesses they average over 20% of sales. That’s cost plus at least 25% with 15% on overhead (that’s cost plus 18%) and 5% profit. This means to earn $150K p.a. you must do at least $3 mil p.a. on budget. That’s a lot of work.
These margins are paid for by the trades (continuous work flow) and suppliers (loyal customers).
They are not paid by the consumer.
Owner builders save the overhead but it costs more anyway.
So what are you worth?
The only way you’ll find the answer to this question is to see. Try increasing your margin.
To do this you’ll need more enquiries than you can handle. Do a month of Google ads and see what happens.
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