Upped Prices and
Busier Than Ever

In This Episode

• Why Jacob started Bang On Electrical Services

  John: G'day. Tell us a bit about yourself.

  Jacob: I started our electrical business back February the sixth, 2022. Not long after COVID. You were actually my last electrical business employer. I'd been in the industry for about 12 years at that point. I kind of got tired of actually being an electrician and thought I'd go do something else. I went and became a supervisor for an insurance builder. I lasted six months. I was sick of getting yelled at for other people's mistakes. One piece of advice that my dad gave me, who owns his own business, really rang true: if I got to the age of 65 or 70, would I regret not going into business and giving it a crack? So I just went full deep. My wife was my biggest supporter and my biggest fuelling fire. She really pushed me as well. And I always thought you were a pretty good employer, the way you treated staff, and I kind of used a lot of that to guide my own path.

  John: What kind of work do you predominantly do?

  Jacob: We focus predominantly on commercial maintenance, about 30%, and the rest is all residential maintenance. Mums and dads, EV chargers, downlights, just good cash flow and good turnover. I have two builders I work with. We do smaller projects, up to the $100,000 mark. We don't take on too much risk. But doing the domestic stuff is good for cash flow and I find it very rewarding because you're seeing the people you're working with. They want the downlights, they want the EV charger, they're doing a kitchen reno, and when you deliver that end product and you see the look on their faces, it's pretty satisfying. And in maintenance, fixing problems has always been something I love. When someone calls in and the lights aren't working, the motor's stopped working, and you figure it out and you feel like a superstar.

  John: I know exactly what you're saying. When I sold my businesses and I was figuring out what to do, I went through a process and I realised my number one motivating factor in business wasn't actually making money. It was serving people. That's why I called this Serve SME. When you actually have a mindset of serving people, you get a lot of reward from them being happy with what you've done. I like that you've got the same attitude toward business. Because if you focus on that, the money almost takes care of itself.

  Jacob: Yeah. To a degree. You're definitely gonna learn that one of those early questions you asked were about the correct way to charge. One of the pieces of advice you gave me straight up was knowing your numbers and being more on top of your figures. From there you can work out what you should be charging. But it's not a quick process.

• Why undercharging is ripping your family off, not your clients

  John: How did you get to know your numbers? What did you do?

  Jacob: Two years of undercharging. That's what I did. I was definitely undercharging for a long time and I was just surviving. I had a very low mortgage at that point and my little girl only came along in 2018. So we didn't have a lot of risk. But it got to year two and it was the end of another month of putting aside my super and all that stuff. And I had no more cash in the bank account than I did the month prior. I was just like, there's gotta be something I'm not doing here. There's gotta be a better way. A lot of people get to that point where it's like I'm doing something wrong, I may as well go back to wages, because there's a lot of stress involved with owning a business. That was when I made the decision to change something. I really enjoy running my own show, having that flexibility. And that's when I discovered a coaching and mentoring course.

  John: And in doing that course, you learned what your costs per hour actually were?

  Jacob: Yeah. The mentoring person running it was very open and honest. He owned and still operates an electrical business and does the mentoring on the side. He gave everyone this little spreadsheet where you punch in all your figures, what you want to take home as a wage, what all your business expenses are, and then it spits out a figure for what you need to be billing. Having that in front of me, I thought, wow, okay. That's what I should be hitting.

  John: When you say it spits out a figure, is that an hourly rate or what you need to bill weekly?

  Jacob: It was what you should be charging per hour. Especially in the maintenance game, we've only got maybe six billable hours because in between jobs you're chasing up materials and things like that. Compared to construction companies running it at a hundred percent billable hours, it's a bit different. So having that figure from a maintenance perspective was really helpful.

  John: Were you surprised when you saw that figure? Was it much larger than what you thought it should be?

  Jacob: I was shocked. It took me a good six months to get comfortable with charging that much and changing my processes. But I am honestly charging more than I ever have. And I'm busier than I've ever been.

  John: I want to go back to what you said because there's something very interesting. When you realised you weren't charging enough, you said it took you a while to get to where you needed to be. What was the mental anguish there? What was the holdup? Why didn't you just go, okay, I know I need to charge this, so I'm just gonna start charging this?

  Jacob: It was a lot of feelings. When I was quoting and pricing people, I was like, this is what I feel like I should be charging. This is what I feel like the client should be paying. Why did I feel that way? I should know what my price is. What's the saying? I'd rather stay home and go broke than go to work to go broke. Once you know what you should be charging, the emotion's out of it. If I'm not earning this from the job, there's no point in me being here.

  John: Even though you knew you needed to charge that much, it still took you six months to get there. Do you know why?

  Jacob: It was just my own internal things. It was previous advice I'd had from other people saying I should be charging this, or this is what we charge. But you don't know their story, their numbers. They're just saying, this is what we charge, so you should too.

  John: The main thing that stops most tradies charging what they should is they don't want people to say they're getting ripped off. It's a poverty mindset. It comes from not wanting to upset people. What I do to help people get to where they need to be charging is I've got a very basic formula. If you're in business, you should have a net profit between 10 to 20%. Anything under 10% is not worth the time, effort, stress and risk. Anything over 20%, you're probably working too hard and heading toward burnout. At the end of the year, after you've paid yourself a proper wage and proper superannuation, if you haven't made a 10% net profit minimum, you're ripping your family off. You're not ripping other people off. You're ripping your family off. 10% to 20% is not taking the piss.

  Jacob: What a lot of people also fail to understand is your business isn't gonna be at your funeral when you kick the bucket. When you're injured and on the couch, your business isn't gonna be there for you. So if you're not setting things up in a way that you have money aside or the business is generating money while you're not there, there will come a time when you hurt yourself significantly, or maybe you want to go on a big holiday, and the business isn't making money. Those things were big factors for me that really started to drive home that I'm not doing the right thing by my family. If you're sacrificing your time to go to work, it's gotta be worth it. If you're sacrificing your time at home when you should be relaxing, kicking your feet up, and you're doing quotes, invoices, chasing money, you gotta make it worth it.

• How much does it actually cost to be in business?

  John: Do you remember what some of the questions were that you asked me at the start of our coaching?

  Jacob: I think it was definitely, is this the correct amount to charge? And there were some growth questions in there. How to get more clients and things like that. All the very common stuff that most business owners think about day to day.

  John: How much does it cost to be in business? What did you mean by that?

  Jacob: If you think about what your yearly expenses are. Insurances, car rego, your own wages, because if you're not paying yourself a wage as a business owner you're just doing yourself a dirty. You've gotta put all that together and think about how can I pay that off in a year and still make profit for the bad times as well. Because business isn't straight, it's ups and downs, peaks and troughs. If you're always thinking the sun's gonna be shining and you're gonna be hitting $40K a month, the next month you might only hit $10K. And it happens. We had a bumper couple of months, then a really flat one, then another bumper one, then another flat one. You can't guarantee this. You can forecast a little bit. But how often has a job you thought was coming up all of a sudden been delayed?

• Breaking the feast and famine cycle

  John: One of the main reasons businesses at this level have up and down months is because when you've got no work or very little work, you panic and do all the stuff to generate some work. Then you get so busy doing the work, you don't have time or you forget to do what you did to get the work. So you run out of work and do the work again to get the work. You go around in this continual cycle. How do you break it?

  Jacob: It's hard when you're by yourself, you can only focus on so many things at a time. You've gotta chase the work for a little bit, then do it, then chase it, then do it. You just gotta keep doing that until you can put on a staff member, or you can lean on subcontractors to do more of the work while you chase more of the work. You have to find your own balancing act. Some people don't like to chase work, they just wanna do the work. But you've definitely gotta slowly build up to the point where you have staff members that can take the load off and take some of the hats, because as everyone knows, as a sole trader you wear all the hats until you can start leveraging other people's time.

  John: You're a hundred percent right. But there's one more thing. There's a period of time where you just have to work really hard. Long hours to break that cycle, because you've gotta go out there and find the work, get your guys to do the work, and also do the work yourself. As long as you've got an end in mind when you're doing that, it'll be okay. But if you get stuck in there, life and business becomes very, very difficult. So many guys get caught in that, get the work, do the work, get the work, do the work, and they have these peaks. The only way to iron it out is to have a period of time where you're doing the work and also doing what needs to be done to get the work.

  Jacob: I think it's also good to have a clear goal and an exit, because it can't be a forever thing unless you're gonna pass the business on and pull wealth from it. Having an exit in mind, whether you sell it off or whatever it might be, can really help give you a clear direction.

  John: When you talk about having an exit, what do you mean by that?

  Jacob: What's your retirement gonna look like? I would love for my business to be passed down to my daughter. Maybe she takes the reins, maybe she doesn't. I'd love to be involved with it till maybe 65 and then have an early retirement. Do more travelling with my wife and family. My end goal is either to sell the business at the end as a turnkey operation that someone else can just take, with all the processes already in place, or that I can just keep pulling an income from it.

• Goal setting for trade business owners

  John: One of the things with goals that I found to be true is most people underestimate their 10 year goal but overestimate their one year goals. I always set goals at the start of every year, and I'd get to the end and be like, what was I thinking? There's no way I could have achieved that. I always have a revenue goal, a gross profit, a net profit and a cash goal to start with those four. My long-term 10 year goal was to build a business that worked without me. I gave myself 10 years to do that. I got it done in five.

  Jacob: It's funny. I like overestimating my goals because I'm a really driven person. If I want to achieve something I'll do everything I can to make it happen. Overestimating goals, saying something too big, just gives me a bigger push to drive for it. Last year, hitting $30K months, I had August, September, November at $28K, $35K and $32K. And then December falls off and January, but then this month we've hit $28K again.

  John: So you do the kindy pickup every day?

  Jacob: Yeah. Family comes first. It's very rare for me to take an unknown caller at dinnertime. Those are my core values, family dinner time, sitting down.

• When to put your first employee on

  John: You've had consistent months at or around that mark. What's stopping you from employing an apprentice?

  Jacob: Cash flow. Yeah. Once again it's my own reserves, my own kind of fear holding me back. Similar to the charging thing. But I don't wanna rush it. I don't want to hit it too early and then sink myself. There's a much bigger mortgage now, a family, cars and everything else. I don't wanna lose any of that.

  John: How much do you think you can make per month by yourself?

  Jacob: I think $30K is pretty good. $30K per employee would be great.

  John: If a first year apprentice costs you four or $5,000 a month, how much do you think you could charge extra to cover that?

  Jacob: I don't think it's charging extra because we work off menu pricing. If you want a power point, it's gonna cost you X. If there's 15 metres of cable involved, it's gonna be X. It's not necessarily charging more, it's just increasing my efficiency and what I can get done in a day. At the moment an EV charger install takes three to four hours. With an apprentice, that extra set of hands, I can probably get it down to two, which means I can get more done in the day. But that doesn't always work. People get sick, cars break down, you can't guarantee smooth sailing. And you obviously have to teach them, which slows things down. But it's all about passing on knowledge.

  John: What about a qualified tradesman instead of an apprentice?

  Jacob: A qualified tradesman is just gonna be too much of an outlay of cost. The car, the ladders, stocking it, all the other stuff that goes along with it. Whereas I can lower my risk with an apprentice. Next year, if things go really well, I'd love to put a tradesman on, and then put the tradesman with the apprentice, and then I can go do more boss things. More winning jobs, selling more work, building business relationships.

  John: When do you think the ideal time to put a tradesman on is?

  Jacob: There's never an ideal time.

  John: That's a good answer. What happens when you're growing a business is there isn't a point where you can say, okay, I've got enough work for this person now. You get to the point where you've got some work for them, you've gotta bring them in, and this is what people who don't own businesses don't understand. You've gotta have some balls and back yourself. If you're consistently hitting $30,000 months, that's probably all you're gonna make until you take the next step.

  Jacob: It's the flea in the jar situation. You set your own ceiling.

  John: So I'm certainly not saying rush out today and find another tradesman. But for a lot of people in your position it's the fear of what if something goes wrong, not the excitement of growing the business. At some point you've just gotta back yourself. And one of the things you realise down the track is, you know what? That wasn't actually that much of a risk. Glad I did it because now I've got someone to help me.

  Jacob: Yeah, a hundred percent. But it's also another mouth to feed. It's now no longer finding eight hours of work a day, it's finding 16.

  John: Or four for you, eight for them. And then you can go off and do boss stuff to generate more work.

• How quoting on site changed everything

  John: When it comes to quoting, was that something difficult for you or was it natural?

  Jacob: I did it a lot, but I was never actually looking at the figures. I would go out and scope works for my bosses and kind of say, roughly it's gonna take me this long, this is the stuff I'm gonna need. What helped significantly for me was no longer going to a site, scoping it all out, then going home, typing up the quote, sending it off, and then never hearing anything again. I changed my process to quoting it on site and giving them the figure then and there. Having those conversations about cost and value with the client face to face is much easier for handling objections compared to them just writing things out on text or email. It's just smoke screens. They'll just pump me off and find the next cheaper person.

  John: Did you track your conversion rates?

  Jacob: Before December we were at about 60% conversion. February I think I'm down to about 50. It's been a bit tougher.

  John: That's still a good conversion rate.

  Jacob: Yeah. But it's still trying to weed through those bottom dollar clients that aren't worth your time and want to go with bottom dollar tradies, compared to someone who understands and respects value. I had an electrician call me up recently, he was having trouble with an EV charger. I rocked up and the first thing I did was ask how he tested it. He just stuck his multimeter prongs in the thing. I said, where's your EV testing device? Oh, what's that? I pulled it out. This is the $4,000 piece of equipment that tests the charger. All you've done is connected an oven and tested it. It has voltage out. You haven't turned the oven on. That's where the line starts to change. Your average person can struggle to understand the difference between a really good sparky who understands what a good fair job is, compared to someone just coming in at $500 to do an EV charger. It breaks my heart sometimes, but you just gotta let them ride their own course. Sometimes their budget's their budget.

  John: If you're doing the quote on site, what software do you use?

  Jacob: I got onto this really good software called Flat Rate Now. You just punch in all these different things. You go, okay, we're doing downlights, and then you flick through and they've got all the downlights. You pick what you need, it stacks on all these things. It works off averages. They've worked with sparkies and worked out on average what it takes per thing, per fan, per whatever, and it just gives you a price. It makes it really quick when you're walking around with a client, as they're talking about their house, you're just punching in as you go. Before you know it, you just show them the iPad and then wait.

  John: Once the job's completed, do you do a back costing to see how much profit you made?

  Jacob: I don't necessarily look at that. I know it all kind of calculates in my JMS software but I haven't studied that greatly. Our gross profit is at about 65% at the moment.

  John: That's very high. With low overheads, your net profit should be quite high as well. What are you doing with all your money?

  Jacob: Building my dream house. A lot of my cash at the moment is pumping into my renos. We bought an older house, she's an old girl, actually built the same year I was born. We're finding lots of things along the way. Mould damage, really strange things with old homes.

• Growing pains, finding good people and always be hiring

  John: Over the next couple of years, do you have any questions on how to take the business where you want it to go?

  Jacob: What were some of the biggest growing pains you had when you went from one to two to five to ten staff?

  John: The growing pains going from just yourself to other people is really the fear of what would happen if I didn't have any work, what would happen if I ran out of money. The best way to get past that is to stop thinking about what you don't want and start thinking about what you do want. As soon as I knew I wanted to build a business that had a management team that worked without me, everything I did factored in around that.

  Jacob: You can kind of reverse engineer it from there once you've got a clear vision.

  John: Yeah. One of the biggest challenges that almost anybody in a trade business in Victoria, even Australia, has is just finding people. I was talking to somebody recently and said I'm sure when I'm in my eighties talking to a young guy and I tell him one of my biggest challenges in building my business was actually finding people, they'll laugh. Because years ago when you advertised a role, you had dozens of people applying. I know businesses now who advertise a role and don't get anyone applying, or they get people who aren't qualified and aren't in the country. People who apply and set up an interview just don't turn up. They don't email, they don't phone, they just vanish. One of the things that my coach used to say to me that I didn't agree with for a long time was always be hiring. I thought, Steve, you're full of shit. What does that mean? But he was right. Always be hiring. One good example of what that is, there was a guy called Jimmy, my wife's friend's partner. We went out for dinner and he was just a really good guy, and I said to my wife, he's gonna work for me one day. What I did was every six months give him a call and say, so you ready to come work for me yet? No, not yet. Then one year I rang him and he said, not right now, but I think halfway through next year I'll be ready.

  Jacob: You're like the Jack Russell with the ball. Just keep pestering until you get what you want.

  John: Dog with a bone. Let's just say checking in every six months. That's one good example of what always be hiring looks like.

  Jacob: Did you find you had better success hiring people through recommendations or straight off online ads?

  John: Definitely a referral into the business. One of the things I did with a lot of success is when it was time to find a new electrician, I'd ask all my staff if they knew anyone that might wanna come work for us. No one really knew anyone until I said I'll give you a thousand dollars if they start. And I cannot think of a time where I made that offer that I didn't find somebody. When you think about it, if you're gonna put an ad on Seek, it's gonna cost you between $500 and a thousand dollars anyway.

  Jacob: Plus time.

  John: Plus time. Why not give that to one of your employees?

  Jacob: A hundred percent. They feel better for it. They're generally gonna have a big smile on their face. You got me through a group hire mob.

  John: Not the greatest of strategies.

  Jacob: But it paid off.

  John: Yeah. But it's not the worst either. You can hire people on a short term basis through labour hire and then pay it out over a period of time.

  Jacob: I've used some labour hire mobs in the past and you get a few diamonds in the rough, but man, there's just a lot of rough to go through first. It's horrific out there. Some of the people calling themselves electricians. Recommendations should always be considered top priority.

  John: It's like a referral for your business. If you get a referral from somebody, they're generally a good lead.

  Jacob: That first level of trust has already been set up, compared to going in fresh and they're like, I don't know you. Compared to, oh, John and Mary recommended you and we saw your work at their house.

  John: Have you gotten involved in a business networking referral group?

  Jacob: I haven't done any BNI or anything like that. It's been on my to-do list. But I just wanna get the kitchen done first. At the moment I'm going home and I'm plastering, I'm painting, running more cables at home, crawling in my own roof for once.

  John: I highly recommend business networking and referral groups like BNI. One of the challenges tradespeople have is that they're so good for tradespeople, but it can be very hard to get into them. It's really good for the beginning of business because they do pass referrals and you learn how to pass referrals as well.

• What Jacob would change about the industry

  John: We've got a couple of minutes left. Is there anything you want to talk about before we finish?

  Jacob: If you could change one thing to make the industry better, what would you change?

  John: I'd make people charge more. Two things actually. People charge more, number one. And number two, on commercial projects it is almost always a race to the bottom. The builder gets a quote for a million dollars and will ring around and find somebody to do it for $900,000. I'd stand out from that.

  Jacob: Similar vein. I just wish everyone charged a very similar amount. If there was something in the REC course, a business costings portion of it, just to set the bar a little better. Nothing's more heartbreaking when you go to a quote and they're like, I've already got a price here for half as much. And you're like, what are you getting for half as much? You're getting some cheap imported RCD that's probably gonna burn out in a year. They're probably gonna cut corners. If I'm making 10% off this job and this is how much I'm charging, what do you think they're doing to make 50% less than me? What corners are they gonna have to cut? It'd be great if everyone understood their costings and charged a similar level. So when clients call around, they're all getting prices within maybe a hundred bucks of each other instead of $500 or $1,000.

  John: Good. Well thanks for coming in today, Jake.

  Jacob: Pleasure. It's been good to catch up.

  John: Where can people find you and your business?

  Jacob: You can find us on Facebook and Instagram at Bang On Electrical Services. We specialise in EVs but we can also help you out with all your other domestic and commercial needs.

  John: Thanks for coming mate.

• Connect with the guest

  Jacob, Bang On Electrical Services
  Facebook & Instagram: Bang On Electrical Services