Why do small trade contractor jobs cost so much?

Smaller trade contractor jobs often cost more than we expect and here are the reasons why costs may seem high for small jobs. 

• Cost of training and certification
• Tools and Equipment
• Overhead and operational costs
• Time, Labour, and Hidden Factors
• Liability and Risk
• Economic Factors
• Customer Expectations and Satisfaction
• Geographical Variations
• Labour costs

With the modern economy the way it is, the cost of small trades jobs often raises customers eyebrows. From fixing a leaky faucet to repairing electrical wiring, homeowners and businesses alike find themselves scratching their heads at the seemingly disproportionate pricing for what might appear as minor tasks. However, beneath the surface, a variety of factors contributes to the seemingly high costs associated with these trades’ jobs. In the following article we get into the reasons why costs may seem high for what might seem like a small job.

1) Supply and Demand Dynamics:

One reason for a seemingly high price for what may appear as a small job could be the local supply and demand of tradespersons. Where there are fewer electricians available to choose from there could be less competition between companies and therefore prices tend to be slightly higher than in areas where there is a greater density of electrical companies competing for the work. 
There is also the supply and demand of various products which can drive the overall costs for a job upwards. Where materials are hard to source or there is a lack of products on the market that fulfil a particular purpose, the supply costs are likely to be higher.

2) Cost of Training and Certification:

Becoming proficient in a trade often requires years of training, apprenticeships, and certifications. The costs associated with acquiring these skills are typically passed on to consumers. Tradespeople invest significant time and resources in obtaining the necessary qualifications to perform their jobs safely and effectively. Moreover, ongoing training and certification maintenance add to the overhead costs for trades businesses, which are reflected in the pricing of their services.

Electricians in particular have to take ongoing courses to continually update their qualifications, continued professional development is now a pre-requisite for registration on competent persons schemes such as the NICEIC and NAPIT (UK) as I am sure it is in the USA and CANADA. 

There is also the cost of training and certification for members of staff that work in the company. Higher wages need to be paid every time the minimum wage requirements are increased and this costs have to be passed on to the customer. 

3) Tools and Equipment:

Small trades jobs necessitate specialized tools and equipment tailored to each trade. From power drills, cordless power tools to sophisticated electrical test equipment, these tools are essential for completing tasks efficiently and to a high standard. The initial investment in acquiring these tools, as well as their maintenance and replacement costs over time, contribute to the overall pricing of trades services. Furthermore, the use of high-quality tools often translates to better outcomes for customers, justifying their expense.

Electrical test equipment requires calibration, repairs, and replacement when regulations change and various testing procedures are added or changed in order to produce certification for electrical works.

4) Overhead and Operational Costs:

Running a trades business involves various overhead expenses, including insurance, licensing fees, vehicle purchase and replacement costs, vehicle maintenance, uniforms, marketing, and administrative costs. These operational expenses add up and are factored into the pricing structure of small trades jobs. Additionally, tradespeople must cover their own benefits, such as healthcare and retirement savings, as they are often self-employed or work for small businesses without extensive benefits packages.

5) Time and Labor and hidden costs:

While small trades jobs may appear simple on the surface, many tasks require meticulous attention to detail and significant labour input. Whether it's plumbing, electrical work, or carpentry, tradespeople invest their time and expertise to ensure that the job is done correctly and meets industry standards. The labour-intensive nature of these jobs, coupled with the need for precision and quality, contributes to the overall cost. 

From customer enquiry through to quote and sourcing and researching materials that would be suitable for the works, there are many hidden hours that go into producing a quote and carrying out the work. Many tradespersons will carry out some assembly off-site so that they are able to turn up and simply fit the products into your home. This time is often not seen or considered by customers that require works carrying out.

6) Liability and Risk:

Tradespeople face inherent risks and liabilities in their line of work. Accidents, injuries, property damage, and legal disputes are all potential hazards that trades businesses must contend with. To mitigate these risks, tradespeople carry insurance coverage, have professional terms and conditions drawn up, have to produce documents and risk assessments which adds to their operational costs. Additionally, adhering to safety regulations and building codes requires careful planning and execution, further influencing pricing considerations.

7) Economic Factors:

Economic factors such as inflation, fluctuating material costs, and changes in market conditions can impact the pricing of small trades jobs. Increases in the cost of raw materials, fuel, and utilities directly affect the operational expenses of trades businesses. Moreover, economic downturns or periods of high unemployment may lead to greater competition among tradespeople, influencing pricing dynamics in the market. Where the economy enters a recession and wages stagnate whilst prices rise there can be a great disparity between the figure written on the final quote and the affordability or financial situation of customers.

8) Customer Expectations and Satisfaction:

Customers often have high expectations when hiring tradespeople to perform small jobs. They expect prompt service, quality workmanship, and excellent customer service. Meeting these expectations requires trades businesses to invest in staff training, customer communication systems, and service delivery infrastructure, all of which contribute to the overall cost of services. Moreover, customer satisfaction is essential for generating repeat business and positive word-of-mouth referrals, further justifying the investment in delivering exceptional service.

Many enquiries are dealt with outside of normal operating hours in a small business. Working hours tend to be used to carry out work and not to produce quotes, estimates, deal with emails and other forms of communication. As a small business owner there are many unpaid, unconsidered hours and hidden work that goes on behind the scenes in order to produce the correct customer experience and deliver time after time. As I type, the time is 2:13 AM on a Sunday morning. This is necessary in order to maintain the website and produce helpful content for customers to understand what a small business needs to do in order to maintain a great service.

9) Geographical Variations:

The cost of small trades jobs can vary significantly depending on the geographical location. Urban areas with high living costs and greater demand for services tend to have higher pricing compared to rural areas with lower overhead expenses. Trades businesses must take these factors into account when determining their pricing strategies.

The cost of works in a capital city where materials may be more expensive, delivery charges may be more expensive and the cost of parking, parking fines, and transport will be high. There is also the consideration that many trades persons make when taking on a job such as the access to the site, the available parking on site and the distance required in order to get the materials and tools to the job. These factors can increase the cost of a quote as more time and general aggro is required in order to be able to carry out the works. 

In some instances, I have declined to quote a job based on the actual location of the site. In some circumstances it is not feasible to carry out the works when parking is not guaranteed close to site as most jobs always require several trips back and forth to the van for materials, tools and sundries which can become very time consuming when the vehicle is parked far away. 

10) Labour costs:

Where a construction estimate is requested through a real estate agent (such as a landlord requiring works carrying out), there is often additional labour costs to consider. The real estate agent often adds on their fees to the total cost of the job in order to cover any administration costs.  

11) QUESTIONS ANSWERED

11.1) What is a minimum charge job?

There are some trades people (myself included) that will not carry out works below a minimum charge. This minimum cost may be higher than some customers expect but is generally arrived at through calculation of all operating costs, wages and required profit to keep the company in business. 

Once these variable costs have been calculated, the minimum charge figure is arrived at and the actual fee can surprise some people. Nevertheless, the minimum charge is the lowest possible figure that the company can charge for a small job and still remain profitable to continue to trade year after year. 

The minimum charge is sometimes the same as the hourly rate for most construction companies. Some companies charge a higher rate for the first hour and then drop the rate for subsequent hours. This is more common where emergency works are required and less common when quoting for a fixed price job.

11.2) Is there a shortage of skilled tradespeople?

There is generally a shortage of skilled trades people, or at least, good ones. The construction industry provides many good jobs, apprentice programs for young people and career paths for those wanting a well-paying job in the trade business. 

Skilled trade workers are often difficult to come by especially in the more technical trades such as electricians and gas engineers. These trades require a technical education and a good degree of mathematical understanding and without this, it is unlikely that workers in this industry will fully grasp the regulations, complexities and concepts require to succeed in skilled trade jobs. 

These jobs are often seen as dirty jobs by younger people thinking of entering into construction jobs and this has contributed to the high demand for and shortage of skilled trades workers. 

11.3) What is a general contractor pricing guide?

We have all done it. We want some work carried out in our homes or business and don’t know what we need to pay. So, we get online, fire up the search engine and check what we should be paying. 

There are number of problems with this approach. The articles on price tend to be outdated, not written by tradespeople and therefore inaccurate. A contractor will have a standard outline for their pricing and will be able to give a general rough price on smaller jobs over the phone normally before visiting. It is often a prudent approach to ensure that customers know what kind of ball park they are in before the contractor visits to quote. When running your own business, this is sometimes necessary to avoid wasting time quoting jobs where price expectations do not align with the business’s quotes. 

We could not possibly quote every small job enquiry that comes in so we try to be as helpful as possible and get the customer a rough idea on price before agreeing to come and see the job to get more detail. This can save valuable time and costs which would otherwise further increase business costs.