3 Small Mistakes Costing You 30% Profit

Andy
Well, what if I told you that if that job was making a 30% gross profit margin, that a 10% discount can wipe out roughly a third of all of that profit?

Angela
Oh, ouch. And that’s the bit most business owners don’t see. It’s not the big obvious stuff that always hurts, it’s the little things happening every day.

Andy
A discount to a customer, a job running over, a quote that sits untouched for three days, or one bit of overtime you probably didn’t need. Individually, none of them feel disastrous, but stack them up across a year and they can absolutely hammer your profit.

Angela
So today we’re breaking down three small mistakes that can cost you 30% or more of your gross profit, and more importantly, what to look for in your own trade business before more money disappears out the door.

Andy
You’re listening to The Tradie Show. This is the podcast for trade business and contracting bosses like you who wanna lead with confidence, make more profit, and create a better lifestyle.

Angela
We’re your hosts, Andy and Angela Smith, husband and wife team and co-founders of Lifestyle Tradie. Are you ready to have some fun?

Andy
Hell yeah. Want to cut your business costs without cutting corners? Buy for Tradies makes it simple. This is a buying group built by tradies for tradies, plumbers, sparkies, solar and air con techs, landscapers, just to name a few.

Join for free and unlock trade-only deals on materials, fuel, tools, finance, IT, and heaps more. There are no contracts, no sign-up fees, just real savings with trusted national suppliers. So if you’re ready to keep more cash in your pocket and less in your overheads, jump on to buy4tradies.com.au. That’s buy, the number four, tradies.com.au, and join for free today.

All right, it’s time to kick things off with some hell yeah wins from our amazing Lifestyle Tradie members

These are the legends who’ve been smashing it in their businesses, proving that small changes can lead to massive results, and hopefully these give you some inspo on what you can do in your business. Ange, what do we have this week?

Angela
We have some great hell yes to share today, Andy. First up is a big shout-out to Courtney, who runs a building company in Queensland with her husband James, and she shares, “We had a fantastic meeting with an old friend who’ll be helping out with socials while we’re on a family holiday.

She commended me on being so organized and professional, saying she wished that all her clients were like us.”

Andy
See, this is the thing, Ange. That is a big hell yeah, and that organization comes with the clarity of actually knowing what they need to do. That is awesome. Well done, guys. Who’s next, Ange?

Angela
Next up is Andrea, who operates a plumbing business in sunny Queensland with her husband Matt, and she shares, “We redesigned our organizational chart to detail the specific positions so our staff can clearly see a path for progression and to attract new candidates. We have some solid experienced guys starting in the next few weeks. Super excited.”

Andy
Yeah, that’s a big hell yeah as well. Making sure your staff know where they’re going and where they see their self in the business in the long term is certainly super important. Hell yeah. Last but not least, who’s up next, Ange?

Angela
Okay, so this is Nick, who operates a plumbing company in Victoria, and he writes, “We had our first team meeting after the Manly Reignite and Reunite event, and we focused on getting our seamless sales system perfect from start to finish. We ironed out a lot of little creases, and now the team has a hell of a lot more clarity around who’s responsible for which part of the business. Feels like a huge step forward.”

Andy
Yeah, that’s definitely a huge step. Getting your team to know exactly what needs to be done and everyone doing the same thing every single time is huge. Hell yeah. And that’s what we’re talking about here, helping tradies like you take control, make changes, and see the wins roll on in.

All right, let’s get into this because I reckon this is one of those episodes where a lot of tradies are gonna start asking questions about their own business and perhaps question their own daily habits

Angela
So we’re talking about the everyday decisions that barely register in the moment. On their own, they actually don’t feel like much, but profit gets chipped away bit by bit, and you’re left saying to yourself, “We’re busy. We’re actually doing really good revenue, but where the hell is the money?”

Andy
And that’s why this subject is so important. Three small mistakes that are absolutely hammering your profit right now. Number one, giving away your margin. Number two, letting labor bleed profit, and number three, saying yes to the wrong work or losing the right work.

Angela
Yes. So we wanna cover some detail about each one of these because when you understand the maths behind them, they can be costing you tens of thousands a year in profit. We’ll show you where you should be looking and what to do to start to fix them.

Andy
The thing is, to be more profitable, you might not need more work. You might just need to stop giving away the profit from the work you’ve already got.

Angela
Okay, let’s get started with mistake one, giving away your margin.

Andy
Let’s talk pricing, but more to the point, discounting. Say you’ve got a job worth 1,000 bucks. For simplicity though, let’s say it costs you $700 to deliver.

That leaves you $300 of gross profit. Customer say, “Can you do any better on the price?” And you go, “Yeah, all right. I’ll knock 10% off.”

Angela
So instead of $1,000, you’re charging 900, but your costs actually haven’t changed. It still costs you $700 to do the job. So what was $300 of gross profit is now only 200.

Andy
Which means the 10% discount you gave actually just wiped out a third of the gross profit on the job.

Angela
Ouch, a third of your gross profit.

Andy
Yep, you thought you gave away 10% of your gross profit, but you didn’t. You gave away $100 out of the $300 that was left after the direct cost of actually doing the job. That’s 33% of your gross profit gone.

Angela
And that’s before you’ve even paid all the other costs of running the business.

Andy
Exactly. Office wages, vehicles, software, insurance, rent, all of that still has to come out. So when you start discounting, you’re eating into the money that was meant to cover those overheads and eventually become your actual net profit.

Angela
And if the margin was tighter to start with?

Andy
Even worse. If there was only $200 of gross profit in the job and you gave away $100, you’ve just wiped out 50% of it.

It happens all the time, right? Tradies are worried they will lose the job, so they just give a discount.

Angela
You know what? It’s often something as simple as the customer hesitating or maybe asks one of these standard questions. They ask you things like, “Hey, can you sharpen the pencil?” Or, “Can you just knock a bit off so that we can get the job across the line?”

And guess what? Your immediate reaction is just to pull the first lever, which is price

Andy
But every time you do that, you’ve gotta understand what it actually means because the discount is coming straight out of the gross profit that was supposed to be yours.

Angela
And it’s not just discounts either. There are four or five things sitting inside pricing that can quietly smash you, like tradies with really old rates.

Andy
If your charge out rate was built 18 months or two years ago and wages, vehicles, materials, insurance, and everything else has gone up since then, I bet you’re already undercharging before you even start.

Angela
Yeah. So then there’s also markup versus margin. We still see business owners mix these two things up.

They’ll say, “I put 30% on it, so I’m making 30%.” No, you won’t. A 30% markup actually equates to 23% gross profit margin, and that difference matters when you’re trying to quote properly.

Andy
Then you’ve got variations, and this one is huge. You know, tradies get asked, “While you’re here, can you just have a look at this or that?”

And because it might only take 10, 15, 20 minutes or so, nobody bothers charging for it. But do that over and over again across a team, across a year, and you’ve got thousands and thousands of dollars disappearing every single time.

Angela
Well, especially if your team thinks they’re actually just being helpful.

Andy
Exactly. They’re trying to do the right thing, but helpful doesn’t have to mean free.

Angela
There is one overarching thing that discounting breeds, which is a discount culture. If everyone in the business knows they can just knock off 5 or 10% just to get a yes from a customer, eventually that becomes the sales process.

You haven’t actually trained the people to sell value. You’ve trained them to cut price.

Andy
So to fix this, I suggest you go back and look at the last 20 jobs you’ve done, not just the big jobs, 20 normal jobs, and ask this: Did we discount any of them? Were there variations we didn’t charge for? Did we actually achieve the margin we thought we would?

Are our rates current? And if you haven’t reviewed your pricing in 12 months, do that as well because honestly, you can be flat out and still going broke if the price is wrong.

Angela
All right. Let’s move to number two of the three small mistakes that can cost you 30% or more of your profit. This one is all about letting labor bleed profit.

Andy
Labor. Okay, so this has got to be the biggest cost you have, the team’s time In a trade business, time is money. So if you’re paying for time that isn’t producing billable value, that’s where the leaks start. There are a load of things we can talk about here, but let’s cover the top few starting with overtime.

Angela
Overtime. Okay, now I wanna say there’s absolutely a place for overtime. Sometimes a job just has to get finished or maybe you’ve got an emergency, but I still ask the question, why are we doing the overtime? Is it because the workload genuinely required it, or is it because the day was actually poorly planned, or did the tradie simply just take too long?

Andy
Or the tradies are just taking the piss. You know, that sneaky half hour here because they know you’ll pay it, and it helps bump up their pay packet.

Angela
Mm. You can’t just shrug and go, “That’s tradies.” If overtime is becoming a common thing, you actually need to ask why. For instance, if a particular type of job should take four hours and it consistently starts to take six, then maybe you’re actually quoting wrong to start with.

Andy
Or the skill level isn’t there and it’s actually a training issue, or maybe the jobs are being scheduled badly because an extra hour here and there adds up bloody quick across a team of five, eight, or 10.

Angela
Yes. So another time issue is how the scheduler is booking jobs, and hence how it’s affecting travel.

Like scheduling a tradie to drive 45 minutes north, then sending them back south, and then sending them north again. It’s not the tradie’s problem. This is actually a planning problem.

Andy
And you’re paying wages, fuel, vehicle costs, and losing billable capacity while they’re just sitting in traffic.

Angela
Yeah, exactly. We see this often when new members start with Lifestyle Tradie. Their schedulers need a solid education.

Andy
Another issue where we bleed profit is waiting for materials. I mean, this one drives me nuts. The tradie turns up, they’ve got the wrong fitting, they’re missing a part. They’ve gotta do a supply run, half an hour here and there, half an hour back.

You’ve just lost an hour on that job. Multiply that across a team and it is enormous.

Angela
Yeah, ouch. I can feel your pain about that. And another one is actually callbacks. So this is so expensive because you’re doing the job twice and getting paid once, and to make it worse, while that tradie is doing the callback, they’re not doing the next profitable job.

Andy
So it hurts twice. There’s the actual cost of fixing the problem, and there’s the opportunity cost of what they could have been doing instead. I’ve seen them all in our trade business and pretty much in every member’s business that we work with as well.

Angela
Yeah, callbacks seem to be a thing across every trade, hey?

It’s why we taught the members of Lifestyle Tradie how to actually close the gap on costly callbacks. What a difference that made to their numbers.

Andy
It’s a small thing on their own, but put it all together over 12 months and it could wipe tens of thousands of dollars off your bottom line.

Angela
So I’d suggest going back and taking a look and ask yourself these sort of questions.

How much overtime did you pay last month? How much of it was genuinely necessary? How many callbacks did you have? How often are jobs going over the allowed hours? How much unproductive travel is happening? You don’t need to fix everything tomorrow, but you do need to know where your hours are going because it’s affecting your gross profit more than you realize.

Andy
Okay, let’s change tack and talk about the third small mistake that can cost you 30% or more of your profit. This one is all about saying yes to the wrong work.

Angela
Yes, and this one’s interesting because most tradies think sales problems mean not enough leads, but truthfully, the bigger problem is what happens after the lead comes in or what you’re actually saying yes to.

Let’s start with slow response times.

Andy
Imagine this, a prospect calls three plumbers, one answers, one calls back tomorrow, one calls back in three minutes. Who do you reckon has the best shot?

Angela
Well, the one who gets back first.

Andy
Exactly. There’s a heap of good work being lost because nobody owns the lead. It’s not just phone calls because lots of inquiries come through a website or other means of communication as well.

The problem is someone in your team thinks someone else has got it and half a day passes before anyone realizes.

Angela
Yes, your slow response time just cost you the job. Prospects are impatient, and if you don’t reply, they’ve moved on to the next guy already.

Andy
Then there’s slow quoting. You go out, spend an hour looking at the job, get all the details, drive home, and then the quote sits there for three or four days.

Meanwhile, someone else has quoted it that night, or better still, on the spot in front of the customer.

Angela
It’s already cost you money to acquire the lead. You’ve actually even spent time on site, often for free, and then you lose it because you were too slow to get the quote out.

Andy
Your gross profit is leaking before the job has even started.

Angela
Exactly. Or perhaps you did get the quote back quick, but that’s where you stopped. There was actually no follow-up.

Andy
And this is probably one of the easiest wins in most trade businesses. Quotes go out, no reply, and everyone assumes the customer has said no.

Angela
And guess what? They didn’t say no. They just didn’t reply. Or maybe you sent the quote to the wrong email and you don’t even know it.

Andy
Ouch, that hurts. Or maybe they’re busy, or they’re comparing quotes, or maybe they just had a question, but if nobody follows up, you walked away from work you already paid to generate.

Angela
You know what though? It is fair to say that not every job is worth chasing because the other side of this is saying yes to the wrong work.

Andy
Very true, and this is why making sure you have quoted well with a strong gross profit margin is super important because you can fill in your whole calendar with low margin work and feel successful because everybody’s busy. But if every van is tied up doing average jobs, what happens when the profitable jobs come along?

Guess what? You’ve got no room to fit them in, and potentially you miss out on them.

Angela
Well, you’re actually left in a situation where you either say no to the profitable job or you delay it so long that the customer goes elsewhere, or you’re now paying overtime to squeeze it in.

Andy
That’s why watching revenue alone is a real dangerous measure.

You know, a million dollars of bad revenue could be worse than $800,000 of good revenue with a strong profit margin.

Angela
Exactly. You need to know which job types are the most profitable so you can prioritize them and which customers are the easiest to serve, and build systems to ensure all the team know their job is nurturing the prospect to make a buying decision.

Andy
It’s common to see a default mindset in tradies to believe, well, if there’s work there we should take it. But mature businesses get to the point where it says, is this the right work for us?

Angela
Okay, so I’m sure you’re all saying, I’ve got some work to do, things to investigate to see if you’re making any of these small mistakes that are costing you 30% or more of your profit.

Andy
And the big takeaway here is this. If you’re running a million dollar trade business and you feel like you should be making more money and your first instinct is thinking, we need more leads, we need another van, we need another tradie, we need to get to $1.2 million, and you know what? Maybe. But before you do anything to drive more revenue, I want you to know what’s happening to the revenue you’ve already got because adding another 200 grand of sales into a leaky business doesn’t necessarily fix the problem.

Sometimes it just gives you more work, more staff, more stress, and the same amount of money at the end.

Angela
Just ask yourself this one question. Where are we giving profit away without even realizing it? Because those little mistakes might look like 5% here or 10% there, one hour here, one misquote there, but when you understand what they do to profit, they’re not little mistakes at all.

Andy
It’s Tradie Dilemma time, brought to you by Buy for Tradies, the buying group helping tradies like you save serious coin on material, fuel, vehicles, tools, and other services. If you’re not using it, you’re probably paying too much. This is our Q&A segment where you let us know what you’re having trouble with within your business, and we’ll give you our best advice to sort it all out.

Angela
So today we have a question from Sam, who owns a landscaping business in sunny North Queensland, and he writes, “Hey, Andy and Ange. I’ve just hired my first tradie and he’s been with me for about two weeks. I’m interested to know, in your opinion, how quickly do you know if you’ve hired the right person or not?”

Andy
Yeah, interesting. Um, you know, listen, there’s always this gut feel and, and you hear about business owners going, “A gut feel.” Now, I’m a believer that you should take notice of your gut, but it doesn’t … It’s not always 100% right. But majority of the time, you gotta be thinking to yourself, “Why? Why does this guy, after two weeks, not seem like the right fit?

Is he nervous? Does he not wanna make mistakes? Is he lazy? Is he smoking? Is he vaping every two sec…” Like, what are the things that are really dragging this guy down? Because when you actually analyze it and you look at what you need, a bad hire is worse than no hire at all. So yeah, listen, um, with our business, Dr.

Drip, we used to hire fast, but geez, we used to move them on even quicker. You try and train them, you know. It’s the old saying, don’t blame them, train them. But if you get a real feeling they’re not the right fit in the very early days, it’s easier just to move them on. Too many trade businesses out there now, because we’re all so desperate to get staff on, we give too much slack, we let them get away with way too much, and now we’ve got a staff member that is constantly doing the wrong thing.

And it’s hard to change them back when they’re three months in, six months doing the same thing. It’s hard to get them to turn back to what you really want. So to me- Gut feeling’s a good thing, some structure around it, and make that tough decision fast

Angela
Here at Lifestyle Tradie we talk about this rockstar tradie that you actually wanna employ, and it needs to come with a list in your mind as to what attributes, what behavioral traits actually make up a rockstar to you, and literally write it down.

So after two weeks, you literally sh- could sit with that piece of paper and tick boxes about is this person the rockstar that you have. Are they taking feedback? Are they, uh, following the processes that you have set? When you’re asking them to do certain things, d- do they do it? Are they punctual? You know what I mean.

So write your list about what the rockstar needs to look like, double-check it against that guy, and as Andy said, move them on quick if you don’t think they’re the right person. Thanks for writing in your question, Sam. We hope this answer has given you some ideas about the decision that you need to make.

And remember, if you want Andy and I to answer your most challenging question, then send it our way to podcast@lifestyletradie.com.au.

Andy
Okay, team, if today’s episode has you thinking, “I reckon we’re leaking more gross profit than I realized,” and you feel like you might need some help working it out, where it’s all happening, then perhaps it’s time you book a game plan call with me.

We’ll look at where your business is at right now, what’s getting in the way, and where the biggest opportunities are to improve your profit, your systems, and the way the business runs.

Angela
And most importantly, you’ll walk away with a clear plan of what to focus on first to pull back the profit you are slowly giving away.

Andy
So if you’re ready to stop guessing and get some help putting a proper plan in place, head to Lifestyle Tradie and book your game plan call with me.

Angela
All right, that’s it for us today.

Andy
Catch you next time. Subscribe to The Tradie Show wherever you get your favorite podcasts. Rate and write us a review, or for more information about Lifestyle Tradie, head to

Angela
lifestyletradie.com.au