Empower Tradies With Stronger Pricing Strategies

Why Most Tradies Are Underselling Themselves — And How Accountants Can Fix It

For years, many professionals have assumed that trades businesses use precise mathematical formulas to calculate their charge-out rates.

Is this true?

Unfortunately — no. Not even close.

Across Australia, a significant proportion of trades businesses are guessing their numbers. They’re adjusting last year’s rate by CPI, copying a competitor’s pricing, or relying on instinct rather than financial management. And it’s costing them — heavily.

The Reality Behind Tradies’ Charge-Out Rates

Most trades businesses are not using structured, evidence-based calculations. Instead, they rely on:

CPI Indexing Last Year’s Rate – Even when last year’s rate wasn’t appropriate or profitable.

Matching a Competitor’s Rate – Despite having no idea of that competitor’s:

✅ Productivity levels

✅ Labour structure

✅ Overheads

✅ Targeted profit

✅ Break-even position

…the competitor could be undercharging — and they copy it anyway.

Poor Financial Performance Across SMEs – According to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO):

✅ 43% of small businesses made no profit

✅ 75% of SME owners earned less than the average Australian wage

✅ Many are operating in what ASBFEO calls “the worst financial performance ever for Australian small businesses.”

Trades businesses sit squarely inside these alarming statistics.

This situation highlights an enormous opportunity — and responsibility — for accountants and bookkeepers. SMEs desperately need structured, mathematically sound financial calculations, and you are the logical advisor to lead this transformation.

Bottom line: Most tradies are NOT using a proper calculation process.

The ESS BIZTOOLS Trades Industry Charge-Out Rate Package

ESS BIZTOOLS has developed a structured, accountant-friendly system that helps you calculate accurate, profitable charge-out rates for every labour classification within a trades business.

This system considers:

Labour Classifications & Productivity

Every trades business employs people with different pay rates, skill levels, and productivity expectations. Apprentice, tradesperson, senior tech, project manager — each classification has unique:

✅ Chargeable hours

✅ Labour productivity percentages

✅ Expected recovery rates

The calculation must be done per classification — not as a single firm-wide rate.

In some cases, productivity may even need to be calculated for individual team members.

Labour On-Costs

For each team member category, the calculation includes:

✅ Annual leave

✅ Annual leave loading

✅ Public holidays

✅ Personal/carer’s leave

✅ Long service leave

✅ Superannuation

✅ Payroll tax (if applicable)

✅ Workers Compensation

✅ Training & professional development

✅ Apprentice training obligations

These are individually calculated for full-time, part-time, and casual staff.

Labour Budget

By combining total labour cost (wages + on-costs) and productivity percentages, you can produce the full cost of labour, forming the foundation of accurate pricing.

Targeted Net Profit Before Tax

The owner’s expected rate of return must be built directly into charge-out rates.

If this step is skipped, profitability becomes a matter of luck — not design.

Overhead Allocation

Overheads must be reviewed and included in the final calculation, ensuring the charge-out rate accounts for:

✅ Vehicle costs

✅ Rent

✅ Tools & equipment

✅ Insurances

✅ Admin wages

✅ Marketing

✅ Utilities

✅ Subscriptions

✅ Everything required to run the business

Materials Mark-Up Strategy

Most tradies purchase materials for clients. The ESS BIZTOOLS system helps determine whether the materials mark-up should subsidise labour rates, or be treated as super profit. This decision has a major impact on final charge-out rates.

Determining the Charge-Out Rates

The system produces a Proof Sheet summarising:

✅ Each employment classification

✅ The hourly charge-out rate

✅ Chargeable hours expected

✅ Targeted annual income

This becomes a powerful advisory tool for your firm and your client.

The Calculation Is Only the Beginning

Charge-out rates must be monitored, measured, and adjusted throughout the year.

Successful advisory firms help clients implement:

Weekly Performance Reports – Tracking:

✅ Chargeable hours

✅ Productivity percentages

✅ Deviations from forecast

Variation Analysis – If productivity falls, it must be examined early — not discovered at year-end.

Monthly Financial Reports & KPIs – Including analysis of:

✅ Labour recovery

✅ Overhead absorption

✅ Materials mark-up profitability

Recalculation When Needed – If productivity drops or overheads rise, charge-out rates must be recalculated — ensuring every future job is priced correctly.

This is where accountants and bookkeepers become indispensable.

A Practical Advisory Solution Your Tradie Clients Will Value

With the ESS BIZTOOLS Trades Industry Charge-Out Calculator, you can deliver:

✔ Accurate pricing

✔ Stronger margins

✔ Better cashflow

✔ Weekly performance visibility

✔ Reduced financial stress

✔ Confident decision-making

This is advisory in its purest, most valuable form.

Join Our Live Webinar

Empower Tradies with an Effective Pricing System

🗓 Thursday 4 December

⏰ 11:00 AM AEST

Discover how the ESS BIZTOOLS Trades Industry Charge-Out Rate Calculator helps you guide clients through productivity, overheads, mark-ups, and profit targets to create real, sustainable pricing.

You’ll Learn How to:

✅ Calculate accurate, profit-focused charge-out rates

✅ Introduce monthly reviews and KPI tracking

✅ Deliver proactive advisory services tradies truly value

REGISTER HERE

Black Friday Special — 75% Discount Until 5 December

ESS BIZTOOLS is offering a massive 75% discount on all main packages to help accountants and bookkeepers provide critical support to SME clients in this challenging climate.

Each package includes the Trades Industry Charge-Out Rate Calculator.

EXPLORE ESS BIZTOOLS AND SUBSCRIBE HERE

Visit our website – www.essbiztools.com.au – to discover the detailed overview of the services provided by ESS BIZTOOLS. You are also welcome to contact us on 0418 190 181 or email .

Insights From Our Affiliates

Why Benchmarking Works Best When It Gets Uncomfortable

Last week’s article sparked a wave of emails — most saying, “Darren, my clients don’t like looking at Top 20% numbers because it makes them uncomfortable.”

Good.

That discomfort is exactly where the change starts.

If benchmarking feels comfortable, it’s not shifting behaviour. Clients don’t improve when they’re told they’re “close to average.” They improve when they see a gap that punches them in the chest — a gap they can’t ignore.

Take a café I reviewed recently. Doing 9% net profit. The industry “average” was 8%, so everyone relaxed. But when we showed the Top 20% number — 22% — the mood changed instantly.

That’s the moment benchmarking works. Not the report.

The realisation.

And here’s the human side: nobody wants to be left behind. When clients see where the best operators sit — and how far ahead they actually are — FOMO kicks in. Not the social kind. The financial kind.

“Why am I not there? What am I missing? What are they doing that I’m not?”

Fear of missing out is a powerful motivator.

So is fear of being the one business that never improves.

Show clients the top numbers. Let the truth do the heavy lifting.

Make sure to use the Referral Code: ESS100 for $200 off your annual subscription.

EXPLORE TAXFITNESS AND SUBSCRIBE HERE

Offer to Accountants

Sign up to The Boss Factor Library for an annual subscription of $70 (plus GST) per month.

Free Webinar by ESS BIZTOOLS

Financial Forecasting Package: Advisory With Vision

📅 Wednesday 26 November | 11am AEST

💻 REGISTER HERE

BLACK FRIDAY FEATURE WEBINAR - Innovation Journey: Helping SMEs Create, Grow, and Prosper

📅 Monday 1 December | 11am AEST

💻 REGISTER HERE

Empower Tradies with an Effective Pricing System

📅 Thursday 4 December | 11am AEST

💻 REGISTER HERE

Guiding SMEs to Success Through Business Planning

📅 Thursday 11 December | 11am AEST

💻 REGISTER HERE

Smart Succession Planning for SMEs

📅 Thursday 18 December | 11am AEST

💻 REGISTER HERE

ESS BIZTOOLS Podcast

In this episode of Accountants Minute Podcast, Peter Towers unpacks why only 15% of SMEs currently see their accountant as a true Key Strategic Partner – and what you can do to change that. You’ll discover how to reposition your firm from “tax return provider” to virtual CFO, delivering Financial / Commercial / Management Accounting advisory services that help SMEs survive, thrive, and scale up. Peter also shares practical insights on debtor management, cash flow, the innovation journey, and capital raising – and outlines how the ESS BIZTOOLS product packages (including a limited-time 75% Black Friday discount) can fast-track your road to advisory excellence.

CLICK HERE TO LISTEN TO OUR PODCAST

Listen to more Accountants Minute Podcast episodes here

Want to know more?

Visit www.essbiztools.com.au.

If you would like to have a discussion about how this concept of virtual CFO services can be supplied by Australian accounting firms please ring our Managing Director, Peter Towers, on 0418 190 181 and we will arrange a complimentary 45-minute Zoom meeting to discuss your firm’s position and to give you our advice.

We believe that this is the blueprint for the delivery of an enhanced range of services by Australian Accounting and Bookkeeping firms to assist SME businesses to add value to their businesses and to assist accountants and bookkeepers not only to attract but to retain outstanding talent who want to be involved in the delivery of “real accounting services”.

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