To give you a helping hand, below is a brief overview that you might want to work your way through:
Setting Up An Account With A Plumbers MerchantInsurance Cover
Pricing
Setting A Price Strategy
Quotes And Estimates
Purchasing A Van
Office Equipment
Tax And Accounting
Legal
Managing Your Time
Set Up An Account With A Plumbers Merchant
This way you will be able to purchase tools and materials at trade price. Some merchants offer reward points as an incentive. Shop around to see what is available.
Insurance Cover
Ask your insurance broker for the best deal. He will have a list of all the different insurance companies and will be able to find the best one suited to your needs. You will need to insure yourself with public liability insurance. As soon as you enter your customer’s home you need to be covered for any accidental damage you cause to that persons property. These can amount to tens of thousands of pounds so don’t take the risk of not being insured. If you set up as a sole trader or limited company, your customers will expect you to be insured.
The cost of public liability insurance for a plumbing and heating engineer has remained fairly static over the last few years and it is still possible to purchase £2,000,000 cover for under £300.00 per year.
Accidents can so easily happen and when they do it can leave a valued customer with a damaged house or possession and leave you with the bill for repairs if you have not arranged adequate public liability insurance.
These days you can easily obtain a quotation on line and then if you are satisfied with the premium and policy cover you can complete the process and arrange cover. Look at www.tradedirectinsurance.co.uk and follow the instructions.
Once arranged you will have the peace of mind that should an accident or loss occur for which you can be found to be legally liable, you will be protected up to the selected policy sum insured. There will most likely be a property damage excess in the region of £500.00 and you will be expected to pay this, with your underwriters paying any amount over the excess, up to the limit of indemnity. Bearing in mind that an average claim for water damage to a domestic property can easily run into several thousands of pounds you will soon see the insurance premium as money well spent.
Always remember to make a full disclosure of your business history and business activities so that underwriters are in possession of all material facts at the time of providing a quotation.
Let your customers know that you have Public Liability Insurance, that way you are demonstrating to your customer your responsible approach to your business activities and also putting yourself above other contractors who may be competing for the same contract but who do not hold public liability insurance.
As a self-employed contractor you will have to make business decisions every day on the best way to allocate your money to run your business. Paying a few hundred pounds a year for protection up to £1,000,000, £2,000,000 or higher should be one of the easier decisions for you to make.
For more information contact Trade Direct Insurance on www.tradedirectinsurance.co.uk
Pricing
Here are some hints from businesslink.gov.uk to help you set the price right.
We all know that one of the first things customers look at is price. As consumers, we are constantly on the hunt for good value or a bargain. Furthermore, we are often even more determined to scrutinise price when it comes to buying the services of a plumber - something we may not have necessarily budgeted for.
This is why, as a young business, establishing how to price your services is so important. Setting your price too high will probably mean that demand is limited, whilst making it too low could overstretch you and limit your ability to deliver, or even cause you to make a loss. With lots of sole traders running plumbing businesses, the price is often the only differentiating factor that the customer has to choose from.
Differentiating between cost and value is an important first step to understand the approach to take. The cost of your service is the amount of money you invest to produce it, whilst the price is the financial reward you receive for providing it. The value is the sum the customer perceives your service to be worth paying for.
Looking at these components individually will help you set your prices. For instance, a job you are doing for a customer may cost you £30, but the actual value of it to them could be higher than this, which means you can charge £50.
Setting A Pricing Strategy
To ensure you are making a profit and to achieve consistency, it is important to put a pricing strategy in place. Start by reviewing your costs to make sure what you charge is geared to cover your costs - both fixed and variable - enough to make a profit. Fixed costs are constant and are generally unaffected by how much you sell. Examples of this would be rent, or business rates. Variable costs are ones that differ depending on the job, such as the raw materials required for the job.
Another important step in establishing your pricing position should be to carry out some local market research. Find out what plumbers in your town or region charge for their services. Understanding this will help you gauge what customers are prepared to pay in your area, which will be affected by the demand in the area and the number of competitors.
Businesses usually implement cost-plus or value-based pricing. Cost-plus involves adding a percentage to the service cost to come up with a price that will provide profit. Value-based pricing is more common in the service sector. It is based on fixing the price at a level that you believe customers are willing to pay. This means it is more dependent on the market rate.
Also you must consider different tactics that will allow you to target, or attract different customers. This might include discounts for certain services, or even a loyalty scheme for customers who commission a certain amount of work.
Quotes And Estimates
Providing estimates and quotations is an everyday requirement for service-based businesses. Because individual jobs vary so widely, you will need to be able to provide an estimate or a quote for each and every enquiry you receive. This is an important part of securing business and worth investing time in.
When communicating with potential customers, you should be clear on whether you are providing a quote or an estimate. It is wiser to start by providing an estimate - which is essentially an educated guess. Estimates are more flexible and can take into account changes to the work being done. A quote is a fixed price for a job and once you have agreed to carry it out, it cannot be changed.
Ahead of any work taking place, it is also good practice to provide your customer with a written quote or estimate. This will serve several benefits, such as eliminating any misunderstandings; reassuring your customers and ensuring all the details of the work are addressed.
Generally, it should include key information, such as the overall price, a breakdown of the cost, a completion date and other details such as payment terms. You should also make it clear that the quote is only valid for a certain time period. Ask your customer to read and sign the quote or estimate. This will mean both parties are clear and have agreed to the work and what it will cost.
All the factors above are important when it comes to deciding what prices to charge and how to communicate them with customers. Always remember that customers who don’t already know your business will probably make the decision of whether or not to employ you based on the prices you charge.
By thinking through the costs you need to cover, assessing the local market and communicating clearly and responsibly with your customers, you will be on track to setting the right price.
Purchasing A Van
It is a worthwhile investment to purchase a reliable van. Your van will be the life-blood of your business. If your van stops working so do you! Make sure you buy one with adequate space inside for tools and materials. Secure locking and an alarm are essential. You don’t want to find your van has been broken into and all your expensive tools have been nicked.
You might want to check out the auctions for good deals. Or perhaps, buy a copy of What Van? Magazine. It’s full of useful tips and tricks on van purchasing.
Office Equipment
As a busy plumber or heating engineer, you will probably need office equipment for the following tasks:
- Printing letters, estimates, invoices and receipts
- Ordering products from merchants by fax
- Filing invoices on your computer
- Printing high quality designs and layouts
- Creating duplicate copies of documents
We have compiled a list of basic office equipment you should have, some of which you may already own:
- Computer
- Word Processing Software and Spreadsheets (e.g. Microsoft Office)
- Printer
- Fax Machine
- Calculator
- Good Quality Copier Paper and Envelopes
- Plenty of Stamps, Pens and Pencils!
You can use your computer to design your company headed paper. This will give your company a good, professional look. You will need to shop around, but you should be able to find a NEW desktop computer for as little as £300. Some manufacturers offer financial payment plans, so you might not need to pay the total amount upfront, but instead will only need to pay approximately £10-£20 every month. Remember to have a good look at the small print and check out the interest rates before agreeing to anything.
You will need a reliable printer for your letters, invoices etc. There are some great deals on 'all-in-one' printers, which is probably going to be the most useful and cost-effective for a small business. The 'all-in-one' printer includes additional facilities of faxing, copying and scanning. Choose an established brand such as Canon, HP, Brother and Samsung. Before you make your final 'printer' purchase, check out the prices for replacing the ink cartridges so you don't get any nasty surprises later on!
There are several good on-line office suppliers that ensure your stationery orders arrive the next day, for example Viking Direct, Euroffice, UK Office Direct.
It is important to mention that whenever you write to your customers, you always maintain professional behaviour. For example, if you send an estimate on good quality paper you must make sure your customer's name is spelt correctly and that their address and postcode are right, otherwise you give a bad impression! Customers want to know that you take care.
Tax And Accounting
At the start of a new business it’s a good idea to do all your own accounting and paperwork. However, if this is too daunting for you, you may decide to employ a book-keeper to come in once or twice a month (depending on how busy you become). At least this will mean your accounts will be up-to-date and they will be able to take control of invoicing your customers, chasing payments and keeping an account of all your outgoings. This is important for taxation purposes.
You should get into the habit of reviewing everything each week. To keep on top of things, you could create a system of labelled envelopes with which to start off. Begin a new envelope for each week/month, in which you can keep your receipts.
Legal
Getting the right legal advice early on may seem an expensive outlay, but if you get things wrong it can cost you dearly and all your hard earned profit can soon disappear. You must make sure you have proper terms and conditions in place. You will be responsible for everything to do with your business.
Too many businesses fail in the early years through poor planning or failing to take appropriate advice. Peter Adkins at Shakespeare Putsman Solicitors specialises in helping plumbing businesses. For further information, contact 0121 237 3050 or visit www.sp-legal.co.uk
Managing Your Time
When you run your own business, time is money and so you must be a good timekeeper, especially where customers are involved. If you find you are becoming overwhelmed with work and struggling to get everything done on time, then you might want to get some help with time management. There are several books available that should help you to manage your time more effectively. For example, ‘Getting Things Done’ by David Allen has sold over 100,000 copies.
