How hipages enables tradies to become financially confident
With five interest rate rises already in 2023, and the consumer price index rising 1.4% in the March quarter, it’s unsurprising that we’ve seen a decline in new building and major renovation jobs in Australia. Homeowners are experiencing significant financial pressure, and fewer potential new homeowners can afford to enter the property market.
However, Australian homeowners are house proud, and what is clear from the behaviours we are observing across hipages and Builderscrack, is that home maintenance and improvement jobs remain a priority, even in a downturn.
For trade business owners, this presents a challenge and opportunity. Adjusting business operations to reflect macroeconomic conditions is a key trait of successful businesses, and tradie businesses are not exempt. hipages was four years old when the GFC hit, and managing a business during a recession was riddled with hard choices. However we came out stronger having learnt valuable lessons around agility.
hipages ‘Know your home’ report reveals the best tradie job opportunities
Earlier this year, we undertook research for a more precise understanding of the types of home improvement work homeowners are planning.
Our recently released ‘Know your Home’ report reveals where the tradie job opportunities are, based on homeowners’ plans over the next 12 months. We believe we are witnessing the home improvement industry’s version of “the lipstick effect”, a phenomenon frequently observed during times of economic upheaval, where cosmetics sales unexpectedly rise despite significant tightening of household spending.
During tough economic times, people still need certain luxuries to help them feel better.
While we anticipated painting (58%), repairs and odd jobs (54%), and landscaping and gardening (53%) would remain priorities for households, it was interesting to see in the face of a potential downturn, the majority of homeowners (58%) will be embarking on freshen-up projects this year. The main driver for this illustrates the lipstick effect in the home improvement industry, wherein 49% of homeowners are planning to engage professionals to increase the enjoyment of their home, at an average of $3,000 over the next six months.
While the housing market continues to fluctuate, renovations are more desirable than buying a new property for 73% of homeowners.
The construction industry writ-large is extremely vulnerable to change in market conditions. In a recent survey with trade business owners and decision makers, we found that the majority (59%) of trade businesses are concerned about their job pipeline. With shrinking margins a further 63% of trades agree that they could go out of business unless they increase prices.
While both consumers and businesses are struggling with the increased cost of living, it’s important to acknowledge that 82% of Australian homeowners understand that increasing tradie costs are a result of the rising cost of living. Hence, transparent and two way communication is important, and can lead to better business outcomes.
Helping tradies develop great business management skills
There are limits to what any government can do to improve the sustainability of tradie businesses in the current economic climate.
The funding for training-up new apprentices backed by financial supplements, like the Trade Support Loans announced last December, improves labour affordability in the industry while generating local jobs.
What’s missing in this training are some of the business management skills that people in other industries learn while gaining their qualifications – and continue learning and developing on the job.
Learning the business management side of the trade shouldn’t be left to chance. TAFE courses generally offer rudimentary training on financial subjects and barely touch customer service.
There’s an opportunity to expand the training for trade businesses with a bigger focus on fundamentals including:
- Cashflow forecasting and management
- Customer acquisition (marketing and networking)
- Customer relationship management
- Project costing (materials, fuel, labour)
- Effective pricing (including package pricing and value- based pricing)
During times of potential downturn, the ability to pivot your business and meet consumer demand will be crucial for small businesses. For trades, having the right tools and skills to win more jobs through efficient marketing, quality customer service and effective and transparent pricing, is fundamental.
Upside in an economic downcycle
Through adopting a proactive and strategic approach to business, small businesses can find an upside. Building strong customer relationships, leveraging business management software, providing fast and accurate quotes, delivering excellent value for money, and offering assistance with maintenance planning are all ways businesses can act on this.
Personally, as a homeowner I’ve recently benefitted from my electrician having a great sales funnel plan: he ran the numbers on all the callouts for smaller jobs and showed me how I can save money this year by pre-booking periodic maintenance instead. Plus, he’s budgeted a plan for upgrades to make my home more energy efficient.
By encouraging me to buy into his mindset – shifting from reactive repair to proactive maintenance – he’s improving my home with more efficient light and saving me money on my electricity bills.
On his side of the bargain, he’s booked a bigger $2,300 job for this quarter. As he successfully encourages more customers to adopt the same mindset, his business is becoming more predictable and sustainable.
I hope more small businesses can achieve the same.