Why does working harder not automatically mean more profit?
Greg Allan ran his electrical business, Responsive Electricians, with a team and worked 16-hour days for a full year. At the end of the financial year his accountant told him he had made $2,000 net profit. He was paying himself around $80,000 as an employee of the business, but after all costs that was all that was left.
The problem was not effort. It was pricing. Constantly undercutting competitors to win work had pushed margins down until there was almost nothing left. That result forced a complete change in how the business approached pricing, efficiency, and billable hours.
What shifts when you stop being a tradie and start being a business owner?
The mindset shift is the starting point. Pricing is not a race to the bottom, it is a strategy. If you are under-pricing, you are not just leaving money on the table, you are setting yourself up for burnout.
Pricing needs to cover your costs, build in profit, allow for growth, and reflect the value you deliver to clients. Getting that right is where the transition from tradie to business owner actually begins.
What pricing models are available to a trade business?
There are four main models to understand.
- Hourly rate pricing: Straightforward, but your income is directly tied to hours worked. That limits your ability to build profit, for you and your staff.
- Flat rate pricing: A set fee per job. It can command higher prices and gives clients predictability, but if your estimates are inaccurate you can lose a lot of money quickly.
- Shopping List Pricing System (SLPS): Every task is broken into individual pre-priced items. Clients see a transparent breakdown, bill shock is reduced, and you bundle labour and materials together so clients cannot compare your price directly against someone else's hourly rate. Greg created this model about 15 years ago and Responsive Electricians uses it for around 95% of all work, residential and commercial.
- Cost plus pricing: You add a markup to materials and labour. Simple, but harder to justify higher prices unless you are clearly adding value beyond the materials themselves.
No single model fits every business. Your industry, your market, your competition, and your business goals all shape the choice. A combination of models can work, and the right approach may change as you grow.
How does the Shopping List Pricing System actually protect your margin?
Greg came up with the idea at a Woolworths checkout. He had bill shock at a $430 grocery receipt, then looked at the itemised list and the shock disappeared immediately because every item had a price next to it.
He applied the same logic to trade work. When you bundle labour and materials into pre-priced line items, clients see exactly what they are getting without seeing an hourly rate or a materials markup separately. That makes it nearly impossible for them to do a direct comparison with a competitor quoting an hourly rate, which is usually how customers end up just picking the cheapest option.
It also means your admin team can provide accurate pricing without needing to call you for every job.
What steps can you take right now to improve your pricing?
Four actions to start with:
- Evaluate your current model. Is it hitting your profit margins and attracting the right clients?
- Do your market research. Understand what competitors charge and decide whether you want to position yourself differently by delivering more value.
- Know your numbers. Your overheads, material costs, and desired profit margin are the foundation of any pricing strategy.
- Test and adjust. Try different approaches, track how fast your team completes jobs, and refine your item pricing as you gather real data.
Also look at how you communicate value. When Greg started adding more detail to invoices and quotes, describing exactly what was done rather than writing a single vague line, the perceived value of each job increased. Clients who could not see the effort assumed there was not much there. More detail in your paperwork signals that you take your work seriously, which supports a higher price point.
