Aussie Painting Contractor Magazine February 2022

Keep Avoiding Your Bookkeeping

3 Reasons the Sh#t Will Hit the Fan How to make the most of

YOUR 24 HOURS Understanding QLeave Queensland’s portable long service leave scheme

Update Your Business Plan for the New Year

www.aussiepaintersnetwork.com.au

From the

Editor

Hey Everyone, Welcome to 2022!

I would like to start with welcoming Cain to our team. Cain has come on as a new trainer with APN, He is a second-generation painter that has moved interstate to join our team and make a career in sharing his knowledge with those new to our industry.

APN have been dealing with Covid the same as everyone, my family and I have had a week in isolation, as well as some office staff. We have already had 30+ students through our new training facility in Salisbury and have had to deal with those challenges. Mick and Cain have already been out and about seeing employers and apprentices and getting them going for the start of the year.

We have launched The Painters Podcast. We have done this as we have been asked how else we might be able to share information in different ways. Painters don’t always have the time to sit and read a magazine or a how-to business program so, we decided to find another way to share the knowledge of those in the know. One thing painter’s do is drive and spend a lot of time listening to the radio etc. So, we decided to bring you another way of upskilling yourself and finding out what’s happening within the industry and other painting businesses. We are getting great feedback from those that have taken the time to listen.

Now is the time more than ever to get an understanding of your business. Because of your workloads and the work booked in you should take the time to invest in your business’s future. Book out a day to work on your business not in your business. The old saying “If you keep doing the same thing you get the same result, if you want a different result do something different”. Hopefully you have increased your prices with the increased workloads to make your business more profitable. Now’s the time to confirm what you have done with your expenses. Work out your cost and do a comparison to your charge out rates. If you do this now, when we finally have a downturn in the industry You will be ready

Remember Aussie Painters Network is here for you and your business needs.

'Til the next issue... Happy Painting!!

Nigel Gorman

nigel@aussiepaintersnetwork.com.au

07 3555 8010

CONTRIBUTORS

• Helen Key • Jim Baker • Leo Babauta • Monroe Porter • Richard Holden • Robert Bauman • Sandra Price • Saul Eslake EDITOR Nigel Gorman GRAPHIC DESIGNER J. Anne Delgado

Advertise with us...

1800 355 344 07 3555 8010 info@aussiepaintersnetwork.com.au www.aussiepaintingcontractor.com

Contents 06

3 Reasons the Sh#t Will Hit the Fan

If You Keep Avoiding Your Bookkeeping

09

Bullying at Work in the Trade Professions

14

Vital Signs. The 3 problems with fines for not reporting positive COVID tests

18

How to make the most of YOUR 24 HOURS

22

Understanding QLeave Queensland’s portable long service leave scheme

24

36

Update Your Business Plan for the New Year

40

How to Measure a Room

44

Post-pandemic, ‘small business fetishism’ could cost us jobs, wages

50 52 53

Cutting Your Price

A Tradies Guide Workers Compensation v Income Protection v Personal Accident Insurance

Does it really help you make the sale?

Industry Idiots Important Contacts

Opinions and viewpoints expressed in the Aussie Painting Contractor Magazine do not necessarily represent those of the editor, staff or publisher or any Aussie Painters Network’s staff or related parties. The publisher, Aussie Painters Network and Aussie Painting Contractor Magazine personnel are not liable for any mistake, misprint or omission. Information contained in the Aussie Painting Contractor Magazine is intended to inform and illustrate and should not be taken as financial, legal or accounting advice. You should seek professional advice before making business related decisions. We are not liable for any losses you may incur directly or indirectly as a result of reading Aussie Painting Contractor Magazine. Reproduction of any material or contents of the magazine without written permission from the publisher is strictly prohibited.

3 Reasons the Sh#t Will Hit the Fan

If You Keep Avoiding Your Bookkeeping If you ask any Painting business owner what their least favourite job is, chances are good that bookkeeping is at the top of the list. It’s an annoying and frustrating chore that takes up a lot of time and is easy to put off until tomorrow.

Avoiding your bookkeeping is dangerous and a surefire way to end up in some serious sh#t. Not knowing your critical numbers can result in silly mistakes that could ultimately cost you your business.

Here are our top three consequences of not keeping up with your bookkeeping.

1. You’ll

make poor decisions

You can only make informed decisions about your business when you have a full picture of your current financial situation. This Includes how much money is in your accounts, what your cash flow forecast predicts, and how much money you owe. Without that information, it’s much more difficult to know when you can afford to spend money or when you need to hold back.

You cannot make decisions solely based on what is in the bank on a particular day. You may have just finished a ripper month and decide it’s time to hire new employees only to find out you don’t have enough

6 | Aussie Painting Contractor

money in the bank to pay them. Waiting three months to hire employees might be more profitable for you in the long run, but you won’t know that because your books aren’t up-to-date.

Maintaining your books ensures you have your company’s full financial picture available to you so you can make smart decisions.

2. You’ll

make financial mistakes

Your employees, contractors, and lenders all rely on you to make your payments on time, every time. Payroll itself requires considerable attention to ensure your employees receive the correct payrate and allowances for example. Not being across your obligations wont save you when Fair work come calling.

Leaving bookwork to the last minute can result in expensive errors being made, BAS not being lodged on time incurring unnecessary penalties and fines and suppliers relationships tested by underpaying or not being paid at all.

3.

You’ll lose money

In addition to losing money unnecessary fees and fines, not being up to date makes It very difficult to tell who owes you money and who is late.

You won’t know which of your clients aren’t paying you on time, you can’t follow up with them or add interest charges for their late payments. A simple process that is regularly monitored and implemented can make a huge difference in your cashflow.

Final Thoughts We get it, Bookkeeping might be a business owners least enjoyable task, but it’s an important one. If you find yourself putting off bookkeeping or dreading doing it, it’s a good idea to look into hiring someone to do it for you. Bookkeepers are trained and knowledgeable in the process, and they can save you valuable time and money in the long run.

Otherwise, be prepared to set aside time regularly to do your books yourself and don’t let yourself put the task off. It’s too important to the future of your business.

Want to get your books in order without adding more work to your plate or just chat to about your current processes? Book a strategy session with Sandra today by clicking HERE.

Sandra Price

www.tradiebookkeepingsolutions.com.au Facebook : Tradie Bookkeeping Solutions

2021 December Issue | 7

Listen to everything going on in the Painting Business World. with

Nigel Gorman

thepainterspodcast.com.au

Bullying at Work in the Trade Professions

Many people in trades have to face from time to time the issue of bullying in the workplace and the issue is now more highlighted than even before in the times we live in where there is overall a greatly increased awareness in the public domain of mental health.

If you are an employer (or an employee) in the trades industry the question arises as to what your options are to deal with an allegation of bullying or where you know bullying has occurred and or is witnessed.

As an employee it is a difficult situation if you are being bullied at work and there often will be no easy so-

lution, particularly when the person doing the bullying is your boss. But there are certainly legal ramifications if the issue is unaddressed, primarily on the employer but also potentially on fellow employees. And there are obviously potential health impacts on the employee which back up the assertion that the issue must be resolved.

But there are options...

What I am about to say has relevance not only to employees but it is good for employers to know what options there are generally but also for the employer to know what options they have as an employer.

2021 December Issue | 9

Firstly, employees often have the option of free confidential workplace counselling programs, often titled EAP (employee assistance program). The author has himself utilised such services in the past and they can be great for getting a raft of strategies for dealing with the problem. The limitation of EPA programs is that they are generally only free of charge up to a set maximum amount of sessions. The EAP ‘facilitator’ can sometimes act as to the go between, between the perpetrator and or employer and the particular employee to assist with a resolution to the problem.

At this stage and in fact all the way along where the bullying allegations are just that, allegations, it must be remembered that the perpetrator has a right to what is called procedural fairness so that the allegations should at some point be put to the alleged perpetrator to give them a chance to respond to the allegations. Not only that, but if the allegations are to be responded to in writing, a reasonable time should be given to the perpetrator to make those written submissions.

HR departments (that is, if the particular business has a HR department, which may not be the case in many if not basically all small businesses) should not be discounted out of hand. HR departments though are employed by for and therefore paid and financed by the employer but when all is said and done, if a resolution can be reached through a HR department (again, if one exists in the business) then all the better.

Employers need to be most concerned about, from their own perspective at least, with alleviating or removing the legal risk of a legal claim arising from an O, H & S perspective. The duty on an employer to provide and healthy and safe workplace is not delegable to a third party and it is a very strict duty so that an employer has a duty in and of themselves only, to prevent a risk to health and safety and if a risk arises to deal with it. Bullying in the workplace places the health and safety of potentially all employees at risk, not only the ‘victim’ but also sometimes, the perpetrator but also potentially witnesses to the bullying as well. The author has witnessed bullying in the workplace and it is not pleasant!

Non-legal options

Other non-legal options for employees and employers to deal with workplace bullying including frank open and honest communications about what is going on with the victim, the perpetrator (it is acknowledged that the victim often finds it very difficult to

10 | Aussie Painting Contractor

discuss the situation with the perpetrator direct) and the employer and discussing the issues with counsellors outside the workplace. Discussions with friends and family and perhaps with other colleagues may also be useful. Some employers have formed at the workplace an ad hoc role, person or committee at the workplace so that anyone in the business can raise with that person or persons on a strictly confidential basis not only bullying allegations but also, if they wished, other workplace issues where confidentiality is key. The author has been in the past a person to whom confidential issues could be raised.

Bullying was a common theme unfortunately at that organisation.

Legal options

As far as the legal options are concerned, an employee has the option of making an application to the Fair Work Commission for an ‘order to stop the bullying.’

What will result from that application if successful is in the form of a preventative order from the Commission, to stop the bullying occurring any longer.

It is critical to note, as this is a common misconception, that monetary compensation cannot be ordered in this forum.

Implied into the fact that what is applied for is in order to stop the bullying is that there must be a likelihood, on the basis of evidence on the balance of probabilities of the bullying continuing and in addition, that the employee must be still currently employed in the organisation. So many unfair dismissal and similar cases in the Fair Work Commission where the author has acted for an employee the employee raises the fact that they were bullied whilst employed there. But it is too late at that point to raise these allegations as the employee is no longer employed there and so the fact there was bullying is now just background facts to the matter.

Don’t just quit

Unfortunately, on a different note, it is all too common that the employee believes that they have or have had no alternative but to resign because of the bullying. This should generally (but not always) be viewed as a failure in the organisation and may give rise to a case of constructive dismissal (which is where the employee resigns but it is in law deemed to be a termination where the employee felt that they were forced by the employer’s conduct to resign.)

2021 December Issue | 11

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Breach of an ‘anti bullying order’ by the occurrence of further bullying at the workplace will often result in the employer and or the perpetrator coming back before the Commission to explain the default which can cause obviously much added stress, time and cost to the employer.

The author has acted in quite a few ‘anti bullying applications’ and his experience is that the process works very well, and in every case, the matter has been resolved at the mediation process which is a mandatory part of the procedure. In none of these cases has there been a necessity for the matter to come back before the Commission and the parties have been able to move on.

Finally, important to note are the three critical elements of an unlawful bullying are that the conduct must be repeated so that one off instances are not sufficient, it must present a risk to occupational health and safety and it must be likely to occur again.

To finish off this article, it is worthwhile keeping in mind exactly what is unlawful workplace bullying and what is not. Unfounded allegations of workplace bullying unfortunately occur far too frequently. Just because someone is upset by what someone at the workplace said or did does not automatically mean bullying in terms of the legal definition has occurred.

The far most common ‘defence’ to a bullying action by an employee is what is termed ‘reasonable management action.’ For example, an employer is sometimes entitled to have ‘harsh words’ with an

employer in the context of performance appraisals, discussions addressing underperformance and misconduct, investigating these things, refusals of leave requests, and modifying employee duties and hours. Even swearing at or near or directed towards an employee is not on its own necessarily workplace bullying even if the employee may be upset by what has happened.

Typical Legal Disclaimer!…

Unfortunately, there is never a ‘one size fits all’ formula to apply. Every situation is unique and it can be tricky to wrap your head around some areas of the law. To ensure you are setting yourself and your business up for success, it is always best to consult a legal professional with expertise in the field.

If you require any assistance with with your business legals or any other commercial legal issue, please do not hesitate to contact me.

P: 1300 064 707 | E: helen.kay@riselegal.com.au

2021 December Issue | 13

Vital Signs. The 3 problems with fines for not reporting positive COVID tests

The NSW government this week decreed that anyone returning a positive COVID-19 reading using a rapid antigen test must report their result (through the Service NSW app or website). Failing to do so can result in a $1,000 fine.

The new rule came into effect on January 12 (there will be a one-week grace period). In the first 24 hours more than 80,000 people registered positive tests (recorded since January 1). In one sense that’s a lot. But since we have no idea of the total number of tests taken – let alone the number with a positive result – it’s hard to calibrate.

1. Fines act as a disincentive Economists view these rules through the lens of the field of “contract theory”.

Rules create incentives that encourage or discourage certain behaviours. In this case, suppose you test positive. If you self-isolate as result, because that’s the right thing to do even without rules, then truthfully reporting the result is of no consequence to you (as long as it’s easy to do, which it is for most people).

The fine threat raises a number of questions, with the first being how will the government know if you test positive and don’t record it? On Wednesday, NSW Premier Dominic Perrottet admitted that it would be a hard law to enforce, saying:

But if you wouldn’t isolate, then truthfully reporting the results is of consequence. In NSW you face a $5,000 fine for failing to comply with obligations to self-isolate when diagnosed with COVID-19. Your choice is the low probability of a $1,000 fine for not reporting the result or the higher probability of a $5,000 fine for failing to isolate.

there are obviously areas right across the state where there are laws that are harder to enforce than others, this is clearly one that will be harder to enforce, there’s no doubt about it.

So there’s an individual disincentive to even taking the test at all – which is, after all, optional for most.

This means fewer tests will be taken, the opposite of what authorities want.

Given this, it’s hard to know what the point of the announced penalty is. Indeed, both the economic theory and behavioural research research suggests it will achieve the opposite of its intention.

Read more: It’s still not too late to fix the rapid antigen testing debacle. Why the national cabinet decision is wrong and must be reversed

14 | Aussie Painting Contractor

From the perspective of contract theory, therefore, this $1,000 fine is likely to reduce tests by those who are not willing or not able (perhaps because they have to work for financial reasons) to voluntarily isolate.

So you can bet that these folks will be calculating the odds of getting caught. This is the way some people think about parking fines, or thieves think about stealing bicycles. It’s a calculation involving the size of the penalty and the probability of getting caught.

2. Fines can turn off good behaviour Some scholars, such as Harvard philosopher Michael Sandel, argue the very act of putting a dollar value on things causes people to think of them in a transactional way. It’s no longer “wrong” to park in a nostanding zone, there’s just a kind of fee for it. In other words, fines can destroy civic virtue.

Read more: What to do with anti-maskers? Punishment has its place, but can also entrench resistance So, too, it might be with this week’s $1,000 fine rule.

In the unlikely event of getting caught, some might see the fine as just “the cost of doing business”.

3. Fines can make a mockery of the law A final consideration about the $1,000 fine for failing to report a positive RAT tests concerns the problem of laws that cannot be enforced. The NSW government concede the new rule will hard to police and is mostly about messaging.

“If we didn’t put a fine on it then people would say you’re not taking it seriously,” the minister for customer service said. But this is just turning a law into a bit of a joke. Laws being openly “mocked” damage the rule of law itself.

Getting rules right

These three complementary perspectives all point to the $1,000 fine for failing to report a positive rapid antigen test being a bad idea.

It’s good to make it convenient for people to do the right thing (that’s what the Service NSW app does).

It’s good to encourage people to do the right thing. It would be really good if there were lots of RATs available (ideally for free or close to it) so people can have the information to empower and protect themselves, their families and their communities.

A classic example of this comes from a study by behavioural economists Uri Gneezy and Aldo Rustichini on ways to encourage parents to pick up their children from child-care centres on time.

Parents being late meant staff had to stay behind.

The study involved some centres introducing fines to deter late pickups. But the fines actually led to more late pickups. Parents no longer felt so guilty. Being on time was no longer a social norm but a transaction.

They could pay to disregard the expectation.

This does none of these things. It’s bad to enact a rule that makes a mockery of the law and likely to be counterproductive.

--------------------------------------------------------------------------------Richard Holden Professor of Economics, UNSW

2021 December Issue | 15

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How to make the most of

YOUR 24 HOURS So many of us feel a scarcity of time: we feel rushed, like there’s not enough time to do everything, always behind, never feeling like we’re doing enough.

This problem is called “time scarcity,” and it’s one of the most common stresses in our society.

So how do we deal with this? Unfortunately, there’s no easy answer — but there are a few things I’ve found to be really powerful.

Let’s talk about the problem before we talk about the solution.

Here’s the first thing to realize: there’s always a fresh supply of time. We get the same amount of time no matter who we are, and we get a fresh batch of 24 hours every day, no matter how terribly we spent the previous 24 hours. It’s a fresh start, over and over, a chance to try something new.

Here’s the next thing to realize: it doesn’t matter how much you get done, doing more doesn’t solve the problem of not enough time. I have had fantastically productive days, where I’ll get 20-30 tasks done with zero procrastination or distractions … and I still feel like I need to do more, and that I wish I had more time.

The Problem of Time Scarcity Most of us feel some kind of time stress: I’m not making the most of my time, or there’s not enough of it to get everything done, it’s slipping away too fast, I’m overwhelmed by it all.

And here’s the fourth thing to realize: these hours really are precious. They are a gift. We take them for granted, and don’t appreciate them to the fullest. We go through our days doing routine things, not really paying attention, and because of that … the hours slip through our fingers, and we wonder where it all went.

The feeling is that there’s not enough time. With a feeling of scarcity about time, we stress that we won’t get everything done. We feel behind.

So with these things in mind, I’ll share the three most important ways to make the most of our 24 hours.

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4 Ways to Make the Most of 24 Hours These work for me. Your mileage might vary widely, but I hope you’ll try them out.

First: be intentional at the start of each day. With a fresh 24 hours before us, it’s easy to just get started in our usual way. But to make the most of this new batch of hours, I’ve found it important to take a few moments at the start of the day to refect on what I want to do with them. I might not end up doing things exactly as I plan, but I’m much more likely to spend the hours wisely if I set intentions at the start.

I make a list of what I would like for the day.

Second: don’t shoot for doing more, do what matters. As I said, even doing 30+ things in a day won’t get rid of the time scarcity — in fact, it often makes the stress even worse. Having a list of 30 things to do each day also gives you a feeling of stress and scarcity. So what if you had a list of 3 important things?

You’ve probably heard this advice before, but do you follow it? If you could only put 3 things on the list, you’d choose carefully. Btw, after you do those 3 things, you can still do others, but I wouldn’t expect yourself to do all the other things. As you do each of the 3 things on your list, do each thing as if it were the only thing that mattered. (See next item.)

Third: create moments of transcendence. Rushing through tasks and chores like we need to get to the next thing only creates an experience of life that blends together in a dull soup. But what if we could elevate the moments of our lives to something special, sacred, alive? What if cooking soup for dinner

became a transcendent experience? A moment of transcendence is something each of us has experienced: when we feel incredibly connected to the world around us, when we lose our sense of separate self and feel a part of something bigger. It’s that moment when you’re at the top of a mountain looking with awe on everything around you, or looking up at the stars, or floating in the ocean, or having your breath taken away by a sunset or field of flowers. We can intentionally create these moments, with practice, in our everyday lives. As you’re doing everything on your list, as you’re washing the dishes or having a conversation, driving home or eating kale and beans … you can elevate that moment into one of transcendence. Try it. And if you could create multiple moments like this throughout your day … time feels less scarce, and incredibly abundance. This is by far the most important thing on this list, btw.

Fourth: reflect with gratitude. At the end of each day, take a few moments to reflect back on your day and think about what you’re grateful for. Such common advice, I know, but combined with the other things on this list it’s ridiculously powerful. Try it.

So those are the four ways. Together, they are a way of being in our lives that is radically different than most of us experience our days.

Leo Babauta ZEN HABITS 2021 December Issue | 21

Understanding QLeave

Queensland’s portable long service leave scheme What is QLeave?

QLeave is the Queensland Government authority that administers the portable long service leave scheme for the State’s building and construction industry. QLeave helps industry workers get the long service leave they’ve earned, regardless of how many employers they’ve worked for. Since 1992, the QLeave levy has been used to pay over $1.1 billion in long service leave claims to building and construction workers.

How does portable long service leave work?

Employers in Queensland’s building and construction industry must register with QLeave and report service for their workers by 31 July each year. The information provided by employers is used to produce long service leave statements for workers so they can easily keep track of their entitlements.

Every day that’s recorded for a worker equals one service credit added to their QLeave membership, up to a maximum of 220 service credits per year. If a worker is full-time and earning 220 services credits each year, they’ll have 2,200 service credits after 10 years. This is enough to take 8.67 weeks of long service leave paid by QLeave. Workers can choose to take their leave all at once or take it in smaller portions.

How much does it cost?

Portable long service leave is free for employers and workers in Queensland’s building and construction industry.

The scheme is funded by a levy placed on all building and construction work that occurs in Queensland with a total cost of $150,000 or more (excluding GST). The

22 | Aussie Painting Contractor

levy is paid by, or for, the person for whom the work is to be done and is paid in conjunction with the Work Health and Safety levy, and Construction Skills Queensland levy. QLeave collects these funds and uses a portion to pay workers’ long service leave claims.

How can I access my QLeave membership?

Workers and employers can access their QLeave registration by logging in to QLeave’s secure online services at www.qleave.qld.gov.au. Workers can make a long service leave claim, keep their details up-to-date and check their service credits online while employers can submit their worker service returns, keep their details up-to-date and submit employer claims via online services.

Can I claim interstate service?

Portable long service leave schemes for the building and construction industry exist in all states and territories in Australia. All schemes have entered a national reciprocal agreement allowing work performed interstate to be counted when a long service leave claim is made.

You can find more information about how this works, including contact details for each scheme at www.ausleave.com.au.

Want more information?

If you have any questions about portable long service leave or your membership you can contact QLeave on 1300 QLEAVE (1300 753 283) or by email members@qleave.qld.gov.au. You can also find more information on our website www.qleave.qld.gov.au

A Tradies Guide

Workers Compensation v Income Protection v Personal Accident Insurance Here’s a quick summary of the three different types of cover.

Workers Compensation: • Typically administered by the state and territory governments • Mandatory if you employ staff • Designed to cover your staff, not you as the • company owner (some exceptions) • Typically not available via insurance brokers • (depending on your state) Income Protection: • Offered by life insurance companies • Distributed via financial advisers and planners • Can replace up to 75% of your income whilst unable to work due to injury or illness • Is mandatory for self-employed workers on certain worksites • Only covers your own income, and not your workers • Typically has a lot of different options and can be very comprehensive Personal Accident and Sickness: • Offered by general insurance company • Distributed via insurance brokers • Can replace up to 85% of your income whilst unable to work due to injury or illness (depending on options) • Is mandatory for self-employed workers on certain worksites • Only covers your own income, and not your workers • Typically has fewer options than income protection, and less comprehensive overall What does each policy cover?

If you’ve already read through our 30 second version

24 | Aussie Painting Contractor

you should be familiar with the basics, but we’ll now go into greater detail on each cover and how they work for a tradie or trade business owner.

Workers Compensation

Workers compensation is a mandatory form of insurance that must be taken out by employers across Australia.

The policy is designed to protect your employees in the event that they suffer an injury or illness that is related to their work.

Typically we think of claims involving injuries suffered at work, but it can cover injuries away from the office or worksite if they still relate to the work.

As workers compensation is managed at a state government level, the rules and coverage do vary from state to state.

Broadly speaking, workers compensation will cover the following: • • • •

Weekly benefits for lost income Lump sum payments Medical expenses Death benefits

Weekly benefit

The weekly benefit provided by workers compensation will vary from state to state, but it’s generally not going to cover 100% of your income, and it certainly won’t last forever.

It’s a little difficult to find reliable information on just how long wokers compensation payments can go for, and it does vary by state, but a common timeframe mentioned online is 130 weeks, which is around 18 months.

Lump sum payments For serious injuries or illnesses, especially where the worker is unlikely to return to work after the weekly benefits have been exhausted, the worker may receive a lump sum amount.

This amount can vary greatly based on the state as well as the seriousness of the injury or illness.

The amount will vary depending on the injury. For example a lost thumb might pay a small amount, whilst the loss of two full limbs would pay a lot more.

Each policy will have a range of options for the benefit period, waiting period and benefit amount.

Medical expenses

The benefit period is the maximum length of time you will receive monthly benefits for whilst you’re unable to work. This could be 2 years, 5 years or all the way through to age 65. The longer the benefit period, the more the policy will cost.

Depending on the state, workers comp will generally cover all reasonable medical expenses sustained by a tradie on the job.

The waiting period is the length of time you must be unable to work for before you are able to claim. There can be a wide range of options, but common waiting periods include 14 days, 30 days and 60 days. The longer the waiting period, the less the policy will cost.

One of the major benefits of workers compensation, and what really differentiates it from income protection, is that it covers medical expenses.

Death benefit

The worst outcome for any workplace incident is death. Workers compensation will generally pay a lump sum in the event of the death of a worker, which the amount varying depending on the state.

Income Protection

Unlike workers compensation which pays benefits in a variety of different ways, income protection is a more pure form of income replacement insurance.

Income protection insurance can replace up to 75% of a tradies income whilst they are unable to work due to injury and illness.

Some policies might also include an option known as “specified injury benefit” where the policy will pay a lump sum for certain injuries.

The benefit amount is how much you will be paid each month. This is generally capped at 75% of your income, and you will need to provide evidence of the income in the form of tax returns or similar.

Income protection is never mandatory at a government level in the same way that workers compensation is, however many building contractors will have their own requirements.

Some building companies will require that all subcontractors and self-employed tradespeople on their site hold their own income protection insurance.

You’ll need to show them evidence of your insurance in the form of a certificate of currency.

2021 December Issue | 25

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Personal Accident and Sickness

This form of insurance comes in many different names, but it’s generally referring to the same thing.

Some of the names include personal accident and sickness insurance, accident and illness insurance, illness and injury insurance etc.

It is very similar to income protection insurance in many ways. It will have a waiting period, a benefit period and a benefit amount.

Broadly speaking it will be less comprehensive than income protection, and it will also have reduced options for the benefit period. Whilst income protection can pay up to age 65, personal accident will generally be no greater than 5 years.

Whilst most policies will cover both injury and illness, there are options to cover only injury, which will result in a lower premium.

Personal accident insurance can also include a lump sum option, sometimes referred to as “capital benefits”.

This allows a tradie to choose a lump sum amount that they will receive in the event of a critical injury or death.

Pty Ltd company with no employees besides yourself: • Workers compensation requirement will vary depending on the state • Could have either income protection or personal accident, but not both* Pty Ltd company with employees: • Workers compensation will be mandatory • Could have either income protection or personal accident, but not both* * Although you wouldn’t generally have both income protection and personal accident cover, there are strategies that involve both covers. We’ll cover this in more detail later in this guide.

For other business structures, such as partnership and trusts, we recommend speaking with one of our team for more personalised advice.

Which policy is right for me?

This depends a few different factors: • Your business structure (sole trader, company, etc) • The state your business is based in • The level of importance you place on protecting yourself The previous section covered the requirements for the various business structures.

Broadly speaking, if you’re a sole trader then income protection or personal accident is what you need.

If you employ staff, workers compensation is mandatory for your staff, and either income protection or personal accident to cover yourself.

This can vary from state to state however. In Queensland for example, workers compensation does not cover directors of the company, even if they are actively working in the business.

You should refer to the individual policies for more information about the options for lump sum payments and when they are paid.

Do I only need one type of cover?

That depends on your individual circumstances and business structure.

A general rule of thumb would be as follows: Sole trader (with no employees): • Won’t require workers compensation • Could have either income protection or personal accident, but not both*

In that case, as a trade business owner in Queensland you’d also need your own income protection or personal accident to cover yourself.

In New South Wales on the other hand, working directors are covered under workers compensation, so potentially you could go without income protection.

That brings us to the third point, which is how important protecting your income is to you. If you want comprehensive protection, you’d never rely solely on workers compensation.

2021 December Issue | 27

Workers compensation won’t keep paying you each month forever, but an income protection policy with an age 65 benefit period will keep paying you every month until retirement age.

With regards to income protection V personal accident, it is generally considered that income protection is the comprehensive level of cover. It’s also the more expensive option in most cases, but that’s no surprise with the greater level of cover being provided.

There is no real right or wrong answer on whether you should have income protection or personal accident.

Income protection provides greater coverage, but personal accident can also be good value for money.

Either way, both policies are going to provide additional coverage compared to relying solely on workers compensation insurance.

Using income protection and personal accident insurance together

Usually you’d never have both income protection and personal accident insurance, as both policies cover essentially the same thing.

Importantly, income is something that you cannot double insure. For example if you have an income protection policy with a benefit amount of $4,000 a month and a personal accident policy for $2,000 a month, you will not be paid $6,000 a month in the event of a claim.

There are some strategies that do combine the two covers in a way where they don’t overlap however. It isn’t exactly common, but it is possible.

With personal accident insurance typically being cheaper and less comprehensive, you might have this type of policy setup for short-term claims, and a more comprehensive income protection policy setup for longer term claims.

Tradie Brands on Race Car - Trade Risk

For example you might have a personal accident policy with a seven day waiting period and a six month benefit period, along with an income protection policy that has a six month waiting period and an age 65 benefit period.

If you suffered an injury or illness that left you unable to work, you’d claim initially on your personal accident policy which kicked in after seven days.

28 | Aussie Painting Contractor

It would run out after six months, but then you’d claim on your income protection policy that had the six-month benefit period.

Why would you do this? There are various reasons, but a good quality income protection policy with a seven-day waiting period would be very expensive, whist personal accident insurance is not available with an age 65 benefit period.

By having both policies working together (but importantly, not overlapping) you can get the best of both worlds.

It does mean paying for two separate insurance policies however, so it’s really for those wanting a very comprehensive level of cover rather than someone with the primary objective of saving money.

State differences

Whilst income protection and personal accident insurance are no different regardless of which Australian state or territory you are based in, workers compensation is a completely different story.

For starters, the way that you obtain cover in each state can be different.

In Queensland for example the only way to obtain cover is via the government-owned WorkCover. In some other states, such as WA, you can obtain cover via an insurance broker or direct from an insurer.

So if your trade business was based in WA you could have a single insurance broker looking after all of your business insurance needs including workers compensation, whilst in Queensland you’d have WorkCover looking after the compensation and a broker looking after the rest.

The specifics of the cover will also vary from state to state. This includes the amount that is paid as a monthly benefit and the amounts that may be paid as a lump sum.

Finally, which companies need cover can also vary.

For example in Queensland, company directors are not covered by workers compensation, you only need cover for your company if you employ additional staff.

For income protection insurance you should speak with a financial adviser or planner.

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For personal accident insurance you should speak with an insurance broker, such as Trade Risk.

NSW is different however, where you are covered as a working director.

For workers compensation insurance it will depend on which state you are based in. We’ve put together this list of contacts which shows you who to contact in each state.

It’s best to check with the relevant authority for your state or territory. Check out this list of relevant contacts.

Common questions

This can be a grey area. If the subcontractor is a company, there is no requirement for workers compensation. The company that is subcontracting to you would have make their own arrangements for their employees.

Although this guide is quite comprehensive, no doubt plenty of trade business owners will still have many more questions.

As such questions come up, we’ll be adding them along with our answers below. If you have a question you’d like answered, please call us on 1800 808 800 or contact us online.

Here at Trade Risk we are insurance brokers, and therefore the only form of cover that we can provide advice and cover for is personal accident insurance.

Does workers compensation cover my subcontractors?

If the subcontractor is a sole trader, they could potentially be deemed as worker of yours and you may have to include them in your workers compensation insurance.

Have any questions? Call us on 1800 808 800 to speak with an expert or contact us online.

We do have a relationship with a financial adviser who can assist with income protection however, and we’re happy to point you in the right direction for workers compensation.

Does workers compensation cover me or only my workers?

This depends on which state you are located in.

In Queensland it will only cover your workers, and not you as a director of the business.

2021 December Issue | 31

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The wipes remove paint, oil, caulk and sealants. They are also safe on all surfaces including leather and upholstery meaning that you can clean up easily and safe in the knowledge you won’t cause any damage.

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SAFETY ON SITE

IT'S ALL ABOUT SURVIVAL As processes become faster, deadlines get tighter, and customers demand greater efficiency, the worksite has become a hectic hive of activity.

But these increased expectations can make it all too easy to cut corners, and the safety of Aussie job sites is now more important than ever before.

L-R: SURVIVAL's Director of Marketing & IT, Jordan Green, and CEO Mike Tyrrell

WORKPLACE SAFETY: WHY NOW? Organisations have become more accountable to their customers, shareholders, and employees.

Increased safety improves the bottom line, and the links between a safe working environment and enhanced productivity are proven.

Safer workplaces result in better processes, because it sets the standard for greater efficiency and increased ingenuity all ‘round.

Above all, it saves lives. Workplace safety increases productivity, makes organisations accountable, and protects the entire team.

SafeWork Australia recorded 194 worker fatalities in 2020 alone, with machinery operators and drivers representing the highest number of fatalities, and labourers, managers, and technicians and trades workers close behind.

That’s why SURVIVAL - a 33-year, Aussie family business is dedicated to ensuring every worksite has the right first aid equipment on hand.

“It’s clear that worksites need to ensure they’re never caught short, because when you’re in the trades industry, the chances of accident or injury are very real,” says SURVIVAL’s CEO, Mike Tyrrell.

“And despite the latest advances in technology and an increased awareness of the associated risks, these sobering stats from

SafeWork Australia show us that even more needs to be done.

“We know that providing immediate, effective first aid to people injured on the job can reduce the severity of their injury or illness.

“And even more than that – it can save your life, or that of a mate,” adds Mike.

SURVIVAL’s Director of Marketing & IT, Jordan Green, says the company is constantly looking at ways to make first aid more accessible for people in trades and other 'hands-on' professions.

“In addition to our line of first aid products, we’ve just released the latest update to our free iFirstAid app, which features step-by-step instructions and video resources to guide people, including trade professionals, through common emergencies,” says Jordan.

“Our SURVIVALSWAP audit compliance program also ensures worksites remain stocked and compliant – without the headaches or hassle.”

For the best first aid for your workplace, visit survival.net.au

Exclusive discount just for APN readers: get 13% off all SURVIVAL products sitewide!* Visit survival.net.au and use code 'APN13' at checkout. *Offer ends 28 February 2021. Excludes defibrillators.

Update Your Business Plan

for the New Year As another year begins, it’s a good time to reflect on your recent business successes – and consider what you’d like to achieve in the coming twelve to fifteen months. Think of the new year as a new canvas on which to draw your business success plan.

Start by defining your top three business goals for the next four quarters. With those in mind, do some research to help you decide on the best way to achieve those three goals – and a reasonable timeline for meeting specific targets.

These tips can help you with the process of making plans to help guide your business to greater success, especially in these uncertain times.

Think different

Set priorities It’s often difficult to narrow down your ideas from among all the exciting possibilities, whether it’s an opportunity to expand to a new market or choosing a better financial reporting strategy to make it easier to meet your QBCC reporting obligations.

As you update your business plan, focus on what’s most important for your business to achieve this year. Then break your goals down into smaller tasks, to maximize productivity and enjoy the little successes that lead to big changes.

36 | Aussie Painting Contractor

Your priorities in the coming year may be to hit a certain revenue target, launch a new product line or tap a completely new market.

An important thing to keep in mind as you make plans to move your business forward is how you’ll stay competitive. For instance, it’s important to review your pricing strategy on an annual basis, to ensure you continue to attract new prospects and retain customers.

As part of your overall business planning process, spend some time on competitive intelligence, too. Include in your plans how you’ll increase value for your offerings and continue to stand apart from the crowd.

Find money

Final tips

If scaling your business is on your agenda for the year ahead, and you don’t have savings earmarked to fund your ideas, you’ll want to make sure your business plan includes adequate financial planning.

• Review your business plan every quarter to ensure you stay on track with your goals and priorities throughout the year.

• Be realistic about opportunities and challenges as you plan ahead. Your accountant can offer business advisory services – and help you set meaningful short and long term goals.

• As alternatives to applying for a loan or line of credit, consider crowdfunding or angel investing to help you meet your business goals.

Applying to a lender for a business loan is one option.

In this case, you’ll want to include up to date cash flow reports, income statements, budgets and projections in your plan for a potential lender.

If your business doesn’t have a credit history, you may need to look at other options for financing your plans. Using a business credit card on a regular basis and paying off the balance can help you build a good credit rating, which will help you prepare to apply for a loan down the road.

Your accountant can also help provide additional financial advice and support as you update your business plan, based on your most current financial records.

If you need any support with reviewing your business systems and modeling tools, call my office on 3399 8844 and we will give you a FREE Business Planning Session. You can also visit our website at www.straighttalkat.com.au and complete your details on our Home page to request a free appointment.

With these business planning tips in mind, you’ll be well-prepared for a new year of growth and continued success.

2021 December Issue | 37

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o t w o H

Measure a Room

There are a few ways to arrive at pricing particular substrates. One of the most popular is by measuring the surface area; be it ceilings, walls, doors, frames, concrete floors, etc. Many painters do not know how to do this, but it is a simple calculation where you need to know four basic things to work it out: 1. The Area of the item to be painted.

2. The Time it will take to paint.

3. The cost and spread rate of the Paint.

4. The Hourly Rate you charge.

I will use an example of a room that is 5 metres long by 4 metres wide and 2.4 metres high. It has one window frame measuring 1.8 metres by 1.2 metres, a standard door of 2.04 metres high and 0.820 metres wide, the surrounding door frame and a skirting. It has no furniture or carpet and requires standard preparation and two coats of paint.

I will calculate the square metre area, the time it will take and how much paint you need for each substrate separately. The hourly rate will depend on the individual person as every business has different expenses. To make it simple, I will use $60 as an hourly rate. GST is not included in any of these figures.

Ceiling (Standard gyprock/plaster board) This is calculated by multiplying the length by width to give you the square metre area. 5m x 4m = 20sqm.

The time taken will depend on each individual painter as some are faster than others, but the standard area suggested a person can paint is around 14sqm/ hour. The material used will depend on the product, being a cheap budget paint to a premium line as the spread rate and cost will differ. Look at the back of the paint can and find how much it can cover per litre. I like to use the premium line so I will work on $11/litre and the spread rate of 15sqm/litre.

40 | Aussie Painting Contractor

There is 40sqm in total to paint (two coats, 20sqm x 2), divided by the suggested rate of 14sm/hr (again, this depends on your speed) which gives you a time of 2.86 hours. Multiply this by the $60 hourly rate and it comes to $171.60. The paint is calculated by dividing the spread rate, 15sqm/lt, into the ceiling area of 40sqm. This totals to 2.67 litres of paint required. The cost of the paint is 2.67 litres multiplied by $11/lt which comes to $29.37. Now add the labour and paint together ($171.60 and $29.37) and the total is $200.97 to paint the ceiling.

Walls (Standard gyprock/plaster board) This is achieved by adding the four walls together (called the perimeter) multiplied by the height. The formula can be either; length plus width, plus length plus width, multiplied by the height (5m + 4m + 5m + 4m x 2.4m = 43.2sqm) or, length multiplied by 2, plus width multiplied by 2, multiplied by height ((5m x 2) + (4m x 2)) x 2.4m = 43.2sqm). As we are painting two coats, the total to paint is 86.4sqm. You can take out an amount for the window and door openings but for this example I will leave it in.

The suggested rate for the time taken to paint a wall surface is the same as the ceiling surface (14sqm/h) and the spread rate, being a premium line, is also the same (15sqm/lt) but the cost of the paint will be slightly more expensive, so I’ll allow a slightly higher amount of $13/lt. We can now work out the cost of painting the walls the same way as the ceilings.

86.4sqm divided by 14sqm/h, multiplied by $60/hr which gives you $370.20 for the labour. The cost of the paint is; 86.4sqm divided by 15sqm/lt multiplied by $13/lt which equals $74.88. The total to paint the walls is again by adding the labour and paint together ($370.20 and $74.88) which totals to $445.08.

A Y E 0 5 ARS

O H

A P I N E S T ER U

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2021 December Issue | 41

42 | Aussie Painting Contractor

Door (Standard 4 panel, one side only, two coats).

ply by 2 coats which equals 3.4sqm. At a spread rate

2.04m high x 0.82m wide (1.67sqm) x 2 coats = 3.35sqm.

I will allow 6.7sqm that can be painted in one hour which includes time for removing and replacing the hardware. The labour to paint the door is 3.35sqm divided by 6.7sqm/hr multiplied by $60/hr which equals $30.00 for labour. The material for the undercoat and premium topcoat can be averaged at $13/lt (I calculate this from a 10 litre purchase. If you have to buy a 1 litre can specifically for the job, then the cost will be more). If the spread rate is 15sqm/lt, your calculation for the cost of the paint will be; 3.35sqm divided by 15sqm/lt x $13/lt which equals $2.86. This gives you a total of $32.86 ($30.00 plus $2.86).

Door Frame A standard door frame is 5.1m in length (2 sides and top) with a width of about 25cm but as we are only pricing for one side, it will be around 12.5cm. This will be a total of 5.1/lm x 0.125m x 2 (2 coats) which equals 1.275sqm. 1.275sqm divided by a suggested rate of 4.9sqm/hr will give you a time of 0.26hrs, multiplied by $60/hr is $15.61. The material is 1.27sqm divided by 15sqm/lt multiplied by $13/lt giving a cost of $1.10. The total to paint the door frame is $16.71 ($15.61 + $1.10).

You may have to add more to this price depending on which side of the door frame you are painting.

Window Frame (1.8 + 1.2 x 0.14) As with the walls, you add the four sides together.

1.8m + 1.2m + 1.8m + 1.2m which equals 6 lineal metres. I will use the standard width of 0.14m. This in square metres works out to be 0.84sqm (6m x 0.14m) or 1.68sqm for 2 coats. 1.68sqm divided by a suggested rate of 3.5sqm/hr will give you a time of 0.48hrs, multiplied by $60/hr is $28.80. The material is 1.68sqm divided by 15sqm/lt multiplied by $13/lt giving a cost of $1.46. The total to paint the window frame is $30.26 ($28.80 + $1.46).

Skirting (Standard height 0.10cm) The length of the skirting is the same as the perimeter of the walls minus the door opening of approximately 1 metre, so the length will be 17metres in total. The suggested amount of skirting (at the width of 10cm) that can be painted in one hour for one coat is 38 lineal metres. The labour cost will then be 34/lm (2 coats) divided by 38/lm (lineal metres) x $60/hr which equals $53.40. The square metre area is 17m x 0.10m multi-

of 15sqm/lt, the paint required will be 0.23 litres at a cost $2.99 (3.4sqm divided by 15sqm/lt x $13/lt). The cost of painting the skirting will then total to $56.39 ($53.40 + $2.99).

Summary The total to paint this room will be a cost of $782.27 plus GST. The price could vary if there is furniture in the room or down-time if you need to wait for the paint to dry and need to make an extra trip. You may need to add your ‘smoko break’ too.

If you would like to know more of the suggested rates for painting particular surfaces, you can find it in the membership area of the APN website.

You can also purchase ‘My Paint Costing Guide’ on my website which is a fully automated program where you just enter the measurements. If you would like to learn more about estimating, you can enrol online ‘Advanced Estimating Course’ through www.painters.edu.au which I will be your trainer.

------------------------------------------------------------------------------------------

Jim Baker

MyTools4Business.com

2021 December Issue | 43

Post-pandemic, ‘small business fetishism’ could cost us jobs, wages

Small business is “the engine room of Australia,” the “backbone of our economy,” the “hope of the side”.

Advocates point to the large number of people who work for small businesses.

They are the words used by the then treasurer and now prime minister Scott Morrison to justify special treatment for small businesses, an approach shared by leaders in every political party from Labor to One Nation to the Australian Greens

According to the Bureau of Statistics’ most recent count (in which small businesses are defined as those with fewer than 20 employees), they employed 4.67 million people as at the end of June 2020. That’s equivalent to 37.7% of total employment.

It’s a belief that underpins a wide range of grants and subsidies, free advice programs and preferential tax treatments, including

THE ‘ENGINE ROOM’ THAT SHEDS JOBS

• • • • • •

exemptions from payroll tax a lower rate of company tax discounts on personal income tax if unincorporated exemptions in prescribed circumstances from capital gains tax up-front tax-deductibility of capital investments less onerous arrangements for remitting the goods and services tax.

What is extraordinary about the “engine room of the economy” doctrine is the complete absence of any evidence for it.

44 | Aussie Painting Contractor

What is less often pointed out is that number – 4.67 million – is smaller than it has been in all but four of the past 13 years. At no stage in the past 13 years have more Australians been employed in small businesses than in June 2007.

Rather than being the engine room of job creation, small business has presided over job destruction, creating not one single net new job in aggregate in 13 years.

Employment in small businesses has declined 6.3% in 13 years in which employment in medium-sized businesses has increased by 46.4% and employment in large businesses has increased by 48.4%.

Nor has the “instant asset write-off” advanced to small businesses in the 2015-16 budget done anything to enhance capital expenditures by small businesses.

Gross fixed capital expenditure by small businesses fell 16.1% between 2014-15 (the year before the instant asset write-off) and 2018-19 (the year before the pandemic) – a much larger decline than in capital expenditures by medium-sized businesses (2.7%) and large businesses (6%).

Another pervasive myth is that small businesses are more innovative.

LESS PRODUCTIVE, LESS INNOVATIVE

While some small businesses undoubtedly are innovative, the ABS surveys of innovation activity have consistently found small businesses are less

likely to engage in any form of innovative activity than medium-sized or large businesses.

Productivity is lower at small businesses than at larger ones.

The ABS puts gross value added per person employed in small businesses at A$24,000, or 21% below the average for all businesses in 2019-20. Gross value added per person in large businesses was almost $41,000- 36% above the average.

Lower productivity might be one reason why, in 2019-20, small businesses paid their employees 35% less than the average wage or salary paid by all businesses. Medium-sized businesses paid an average of around 12% more, and large businesses paid almost 34% more.

2021 December Issue | 45

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The obvious conclusion outlined more fully in my new piece in the Australian National University journal Agenda is the widely held belief small business is the “engine room of the economy” is simply wrong – as is the corollary that increased assistance to businesses simply because they are small is a good way to boost employment, investment, innovation and economic growth.

LESS KEEN TO PAY TAX

One thing small businesses are not particularly good at is paying the required tax.

The Australian Taxation Office Tax Gap program finds small businesses (which it defines as those with incomes of up to $10 million per year) voluntarily paid only 86.3% of the personal and company income tax they should have paid if they had fully complied with its interpretation of the 2018-19 tax law.

This is larger than any of the tax gaps calculated by the ATO. The ATO finds high wealth voluntarily paid 91.4% of what should have been paid had they fully complied.

Large corporations paid 91.7%.

The Tax Office numbers suggest small businesses accounted for 49% of what it defines as uncollected money. Large corporations and high wealth individuals accounted for only 10% and 3%.

Again, this is strikingly at odds with the popular perception that small businesses are unfairly persecuted by the ATO and that all of Australia’s fiscal problems would disappear if only “the top end of town” paid its fair share of tax.

DURING THE PANDEMIC, SMALL BUSINESSES NEEDED SUPPORT

That’s not to say the substantial assistance provided to small businesses during COVID-19 were unjustified. Small businesses account for a disproportionately large share of most of the sectors that were hardest hit by the restrictions imposed in order to suppress COVID-19, hospitality among them.

Had governments not provided the extensive support for small businesses they did, it is highly likely the economy would have contracted by more, and the unemployment rate would have risen by more in the middle of last year.

However, it will be important to ensure this support does not become entrenched.

Policies that serve to prolong the existence of small businesses – which, as noted, on average have lower levels of productivity than larger businesses – will slow down the rate at which factors of production can move to higher productivity uses within industries and across the economy.

2021 December Issue | 47

Post-pandemic, new businesses will matter most Ideally, existing schemes of preferential tax treatment and other forms of assistance to small businesses, simply because they are small, should be scrapped entirely and replaced with preferential tax treatment for new businesses.

There are at least five reasons for this: •

•

•

•

first, new businesses are more likely to be started in sectors of the economy with more sustainable economic prospects – whereas small businesses are typically in the sector they started in second, new businesses are much more likely to create jobs than small businesses – one recent study showed firms aged less than two years created 1.44 million Australian full time equivalent jobs between 2006 and 2011 while firms aged three years or older shed around 400,000 jobs third, new businesses are much more likely to innovate than small ones – indeed, the desire to introduce a new product or service, or to produce an existing product or service in a new way, is one of the principal motives for starting a new business fourth, since there is no way new business can prevent itself from eventually becoming older, as-

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•

sistance can’t be gamed by new businesses staying new in the same way as it can be gamed by small businesses staying small fifth, since almost all new businesses are inevitably small and most small businesses are not new, the budgetary cost of measures designed to help new businesses will be much less than the cost of measures designed to help small businesses, leaving more room to assist all businesses.

The Reserve Bank has repeatedly stressed the importance of lifting wages growth. The government in last year’s Intergenerational Report stressed the importance of lifting productivity growth.

We will emerge from COVID badly if we don’t take the opportunity to realign our programs in line with reality so they best achieve this.

------------------------------------------------------------------------------------------

Saul Eslake

Vice-Chancellor’s Fellow, University of Tasmania

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Cutting Your Price

Does it really help you make the sale?

There is no retail price for contracting. As much as we might think, as hard as we try, this is the case.

Yes, many folks quote square footage guidelines but are they really accurate? I say no and so will any other experienced sales/estimator. Square footage prices are averages. If I had one foot in a bucket of ice water and another foot on a hot stove, by average I would feel ok.

Too many contractors solution of having little work, is to merely cut prices. While at first glance this makes economic sense, the reality is that cutting your price does not ensure you will be awarded the job. However, cutting your price does ensure that if you get the job, it will not be profitable.

With consumer sales, let’s suppose a professional contractor that knows his or her costs price a job at $10,000. Others who estimate poorly or may not know what their overhead costs are may be $7000 or $8000 for that same job. So if you cut your price 10%, you still will not be low bidder. It only ensures that if you get the job, your company probably will not be profitable.

If your company did $1,000,000 in sales at 30% gross profit and your overhead was $300,000, you would need 100 jobs at $10,000 to breakeven. $10,000

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times 30% equals $3000 per job multiplied by 100 jobs and you have your $300,000. If you cut your price from by 10% to $9000, your gross profit would shrink to 20% or $2000 per job. You would now have to do 150 jobs to reach your $300,000 breakeven point ($2000 per job multiplied by 150 jobs equals $300,000).

One of the problems in cutting your price is that you also cut your price on customers who will buy the job anyway. Research shows that if you quote 10 jobs, 20% of those customers will probably buy from you as long as your price is within reason. In fact, some research shows that 1 out of 5 people only get one bid. So cutting your price on these two jobs, just ensures you will do the work at a non-profitable level. When bidding those 10 jobs there are another 2 or 3 jobs you had no chance to be awarded. The customer was not really interested, did not have the money to do the job or was just trying make sure the contractor relative he or she was going award the job to had a fair price.

Even cutting your price on commercial quotes does not ensure you win the contract. The CM or general contractor may have a favorite contractor that is asked to match the price or it may simply be a negotiation ploy and you are already the low price.

So what should you do rather than just lower your price?

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Be more strategic. Understand the segments of the market and the customer base where you are competitive. Stick to your core competency.

Don’t assume it is always about being low price. Ever quote a job where you were not low price and you were still awarded the contract?

Sure. You probably won the job because the customer thought you were more competent than the competition. What did they tell the other bidders; you were better? Of course not, they said they had a different price or had to think about it.

Qualify better. Ask the caller questions. Probe.

If they are getting 4 or 5 quotes, it is doubtful you will be competitive. Look up the property on Google Earth and see what the value of their home is. Is it a target neighborhood where you do a lot of work? When bidding commercial work, ask more questions rather than wasting the time to throw out a price on a job you have no chance of winning. In many cases the person looking for a price has nothing to do with the actual awarding of the job.

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Spend more time with jobs you have a chance to win. Sell better. Communicate better. Ask questions. Find out what the customer’s real needs are. Then offer product options and alternates that fulfill those needs. Get to know the customer and what they want.

Learn to be a better salesperson. Improving your sale skills is one of the few areas where you can increase profits without it taking more time and creating more stress.

Work existing customers harder and try to develop more referrals. Look for an in rather merely bidding public projects or blind internet calls. Build quality leads by working your customer base.

In closing, cutting your price is probably a knee jerk reaction of your not marketing and staying on top of your backlog. You may find it much more effective to merely cut overhead or lay people off than to create a pricing structure where it is not profitable.

Monroe Porter

is president of PROOF Management a firm that teaches seminars and runs networking groups for painting contractors.

www.proofman.com

2021 December Issue | 51

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IMPORTANT

Contacts

Aussie Painters Network aussiepaintersnetwork.com.au

Ph. 0430 399 800

National Institute for Painting and Decorating painters.edu.au

Ph. 1300 319 790

Australian Tax Office ato.gov.au

Ph. 13 72 26 / Ph. 13 28 65

Award Rates fairwork.gov.au

Ph. 13 13 94

Fair Work Building & Construction fwbc.gov.au

Ph. 1800 003 338

Mates In Construction matesinconstruction.com.au

Ph. 1300 642 111

Workplace Health and Safety Contacts Comcare WorkSafe ACT Workplace Health and Safety QLD Victorian WorkCover Authority WorkCover NSW SafeWork SA WorkSafe WA NT WorkSafe WorkSafe Tasmania

comcare.gov.au worksafe.act.gov.au worksafe.qld.gov.au vwa.vic.gov.au workcover.nsw.gov.au safework.sa.gov.au commerce.wa.gov.au/WorkSafe/ worksafe.nt.gov.au worksafe.tas.gov.au

1300 366 979 02 6207 3000 1300 362 128 1800 136 089 13 10 50 1300 365 255 1300 307 877 1800 019 115 1300 366 322

actcancer.org cancercouncil.com.au cancercouncilnt.com.au cancerqld.org.au cancersa.org.au cancervic.org.au cancerwa.asn.au

(02) 6257 9999 (02) 9334 1900 (08) 8927 4888 (07) 3634 5100 (08) 8291 4111 (03) 9635 5000 (08) 9212 4333

Cancer Council Australia ACT NSW NT QLD SA VIC WA

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