When I think about time I feel a mixture of emotions. It is something that is often on my mind or in my conversations. Do you have time, how long will this take, I’m running late, I’m running out of time! So much of what we do is based on time and I believe it is our most precious resource, yet others do not value our time in the way they should.
Tradies, like accountants primarily sell one thing – time. It has taken them time to develop their specialised skills. If they choose to spend a moment of their precious time solving a problem for a client, they deserve to be compensated for it. It is the same for any skills-based profession, however I feel that tradies, like accountants often get a bad rap for the time it takes them to do a job.
Why is this? Like tradies, accountants provide a service that is typically not a choice, nor is it exciting. Accountants fill out forms to advise the authorities of the position your business is in and calculate the amount of tax needed to be paid. No one wants to pay tax so often we are the bearers of bad news. Your company has done really well this year, you have made a really good profit and now you have some tax to pay! How often do I have to explain to clients that this is a good thing. You have made a profit. I am sure you did not get out of bed each day to run your business at a loss. Yet the words profit and tax often provoke fear and sadness in business owners. The fear and sadness is amplified when we dare to send an invoice for the time it took for us to prepare the accounts, analyse, minimise and calculate that tax position.
Tradies often face the same challenges, particularly if they are working for the public. Clients do not choose to have a blocked drain, a broken car or an electrical fault. The fact that you are solving a problem for your client can be forgotten when the invoice is raised. But you just did this? How hard can it be? How can it be so expensive? Hey there, you asked me to use my skills to solve your problem, skills I have trained in and developed yet my value should not count?
Tradies (like accountants) also have to contend with those who look for the cheapest option or think they can do the job themselves. We are then called in to fix the problems that these cheap or DIY alternatives cause. The old saying you pay peanuts, you get monkeys is very true when it comes to skilled professions. Solving this problem and explaining the value of your work can be difficult.
Another parallel between tradies and accountants is the “head in the sand” customer. For tradies, it is the client who knows there is a problem but leaves it so long to get it fixed that the problem becomes critical and much more expensive to resolve. In the accounting world this is the client who has not lodged tax returns or BAS’s for a long period of time. We try to help them, and they sometimes expect a discount because they are providing us with a “bulk” job to do. We rarely discount these types of jobs. We do not want to encourage this sort of behaviour.
So why does this lack of value of our time frustrate us? It is because time is a limited resource. As I write this I am currently 50 years old and I have a life expectancy according to the OECD 2017 (Table S6.2) of 84.5. Based on this, I am due to die on 19 September 2053. Let’s see how accurate that is! What is important to me is based on this information I have 300,852 hours available to me and every single second this clock is ticking down. I could die tomorrow, or I could live well beyond my expected date of death. The clock keeps ticking down and those finite hours are precious. If I chose to spend my precious hours helping a client I need to be compensated for it.
How do we value our time? There are a few concepts you can use. The first is what I call the thirds model (I am sure there is a more sophisticated name for it). This model takes the base salary of an employee and effectively times it by 3. 1/3 is for the salary, 1/3 is for overheads and 1/3 is for profit. This works perfectly if the employee is 100% productive however that is the seldom the case. In accounting we adjust the salary to their productive salary (eg they are productive 65% of the day so we gross up their base salary to reflect this) and then use the 1/3 model.
Business owners typically work more than the standard 38 hour week and as such, their charge rate needs to reflect more than this. There are two other concepts I want to raise, both are economic concepts; opportunity cost and supply and demand.
Opportunity cost is the value of what you could otherwise be doing with your time. If you are working on weekends or getting called out at night you should be applying a factor to your charge rate for the opportunity cost of not getting to spend time with your family. If you must stop one job to attend to an urgent job, you should be factoring in the opportunity cost of potentially losing that first client because you were not able to serve them in the way you wanted to. The opportunity cost of our life clock clicking down is that we probably have things we would prefer to do with our hour than work and there should be value placed on the choice we have made to work rather than enjoy time with our family or friends.
Supply and demand is an interesting and relevant concept. This is the first economic theory we learn in high school and is fundamentally basic, yet we challenge it all the time. The price point of a good or service is determined by the supply available on the market, and the demand for the good or service.
Media will tell you that plumbers charge more than doctors for their time. I don’t believe this to be the case, doctors still earn very good money, but this notion is based on supply and demand. Society in the more recent years has valued a university education above that of a trade. Kids are leaving school and without any idea of what they want to do in life, head to uni to study something that may lead them in the direction of a career in the future. I believe the smart ones are those like my son, who really does not have a head for study, and has decided to be an apprentice. Not only do they start to earn money from day 1, they are gaining skills in an industry that has high demand and low supply. This equates to a higher price point.
Even within the industry, there is a difference in skill levels. If you are providing an excellent service and the phone keeps ringing, you are in high demand. You are only human, you can only spread yourself so thin and you may well be covering that increased demand by forgoing the opportunity to spend time with your family. You deserve to charge a higher price and you should proudly say how much you are worth.
We all have one life to live, one clock that is ticking down. Let’s value our most precious resource and be brave in confronting those who challenge our value.