Introduction
Are you tired of chasing your tail with hourly rates that barely cover costs? In episode 105 of The Builders Business Success Podcast, Mick Hawes dives into the pitfalls of charging hourly rates in the building industry and shares transformative strategies to focus on value instead. Joined by industry experts Katie Crismale-Marshall from Profit First for Tradies and Steph Campanella from Tradies Go, this episode uncovers why hourly rates are holding your business back and how shifting to value-based pricing can supercharge your profitability, save time, and attract premium clients.
This blog distills the key insights from the episode and equips you with actionable steps to modernise your approach. Discover the ultimate business hack to grow your building business—one that benefits your clients, team, and bottom line.
Why Hourly Rates Suck
Hourly rates have long been the norm in the building industry, but they come with significant downsides. Mick Hawes and his guests outline several reasons why this outdated pricing model is holding you back:
- They’re Bad for Profitability: Katie points out that many builders operate at a loss or razor-thin margins because their hourly rates don’t cover all business expenses, including wages and profit. Builders often neglect to review and update these rates regularly, leaving them vulnerable to rising costs.
- They Undermine Efficiency: As Steph notes, charging by the hour penalises you for working faster and more efficiently. Instead of rewarding productivity, this model can lead to burnout as you’re forced to work longer hours to maintain revenue.
- They Shift Focus to Price, Not Value: When the conversation revolves around hourly rates, clients judge your worth based on cost rather than the value you deliver. This creates price wars and undervalues the expertise and quality you bring to the table.
The Business Hack: Focus on Value-Based Pricing
The solution? A complete shift from hourly rates to value-based pricing. Here’s how you can make this transformational change in your building business:
1. Understand Your True Costs
Katie’s first piece of advice is to sit down with your numbers and calculate exactly what your business costs. This includes wages, materials, overheads, and, most importantly, profit. Many builders set rates without a thorough understanding of their financials, leading to underpricing.
“If your hourly rate isn’t covering your costs, it’s time to dive deeper into your pricing strategy,” says Katie.
2. Shift the Conversation to Value
Mick emphasises the importance of moving client discussions away from hourly rates and toward the outcomes they want. Clients care about the results—a beautifully renovated home, a functional space, or an on-time project delivery. Focus on communicating the value you bring and pricing accordingly.
“It’s their pile of money for the outcome they’re getting. That’s the only conversation that matters,” Mick advises.
3. Build a Brand That Reflects Value
Steph highlights the importance of branding in attracting the right clients and eliminating price-focused competition. By clearly defining your target audience and building a brand that resonates with them, you position yourself as the go-to expert for premium projects.
“When you lead with clarity about who you serve and the outcomes you deliver, you’ll attract high-quality clients and deter those who aren’t a fit,” says Steph.
4. Involve Your Team in the Transition
Your team plays a critical role in this shift. Mick suggests creating a culture where the focus is on achieving outcomes rather than logging hours. Encourage team members to contribute ideas for improving efficiency, productivity, and client satisfaction, and reward them for their contributions.
“When the team focuses on delivering value, everyone benefits—from the client to the business owner to the employees,” Mick explains.
5. Communicate the Change to Clients
Switching to value-based pricing may require educating your clients. Be transparent about the benefits they’ll receive—not just a service, but a premium experience and outcome. Clients are more likely to appreciate and pay for your expertise when they understand its value.
Real-Life Examples
Mick shares stories from Builders Business Blackbelt members who implemented these strategies and saw remarkable results:
- Increased Profit Margins: One builder realised their hourly rate was far too low after reviewing their financials. By transitioning to value-based pricing, they increased their profit margins while maintaining client satisfaction.
- Improved Client Relationships: Another member began charging for proposals and project management, positioning themselves as a premium service provider. Their clients valued the transparency and were happy to pay.
Take the First Step Today
If you’re ready to ditch hourly rates and embrace value-based pricing, here’s your action plan:
- Review your financials and calculate your true costs.
- Identify the outcomes your clients value most.
- Build a brand that reflects your expertise and attracts premium clients.
- Involve your team in creating efficient, value-driven processes.
- Educate your clients on the benefits of value-based pricing.
Shifting from hourly rates to value-based pricing is the ultimate business hack for builders. It’s a strategy that rewards efficiency, elevates your brand, and ensures profitability. By focusing on the value you deliver, you’ll not only attract better clients but also create a more sustainable and enjoyable business for yourself and your team.
Do you know what you must charge to cover your costs and ensure profit? If not, it’s time to find out. Let’s start the conversation and build a stronger, more profitable future for your business.
Ready to implement this game-changing strategy? Reach out to Mick and the team at Builders Business Blackbelt for personalised guidance. Visit the ToolShed or start a conversation in the comments below. Don’t let your business become another statistic—embrace value-based pricing and thrive.
