You know how it is if you ask five tradesmen for a quote. Three will never get back to you, the fourth one does, but cannot fit you in this year and you have no choice but to go for the fifth one. What’s going on!
No, this piece isn’t about me having a pop at tradesmen. Most of them are genuinely doing their best and I certainly couldn’t do what they do. What I find intriguing is their apparent inability as a profession to adapt to increasing customer demand.
Supply and demand
As you know, supply and demand is an old friend of general economics. If demand for a product or service increases then normally so does supply. Often this is in the form of a business taking on more people or increasing production. When the business can no longer increase supply the big temptation is to increase its prices. Eventually, the price gets so high that other individuals or businesses take an interest and begin offering the same or improved service. This is basic market forces at work.
There is something’s strange happening in the trade
With tradesmen though there are three important components of market forces that appear not to function properly, at least here in the UK.
Failure to take on more people
Self employed tradesmen appear very reluctant to change into a limited company and take on more people. In many other consumer industries this would happen. A skill tradesman could employ a few ‘hands’ initially and then train them up. Traditionally, these additional employees would be paid a third of the revenue they help to bring in, generating a healthy profit for the original tradesman. What is there not to like? Well quite a few things apparently:
- The tradesman doesn’t want the hassle of running a limited company.
- Fear that in the next down turn employees many leave and end up taking business away from the original business.
- The trade is a type of industry that attracts people of lower than average drive.
- The people who end up being tradesmen would rather work on the own than to be responsible for man management.
- General lack of business acumen.
Failure of new competition to enter the market
Examples of where businesses have offered a tradesmen service that were new to the industry are rare. The only one I can think of is British Gas offering a tradesmen service to provide boiler and pumping care. Even then in recent times, they have relied heavy on outsourcing this service to local self employed plumbers. Notably, this doesn’t actually increase supply or capacity to the plumbing industry. Just think of the money to be made if some well organised and driven company wanted to break into a lucrative market like tiling for example. Easy money! What’s stopping them?
- Existing skilled tradesmen don’t want to work for a big corporate entity as they like the flexibility that self-employment brings.
- Tradesmen trained up by the corporate entity quickly leave and set themselves up as self employed.
- The idea to enter a market dominated by self employment puts new corporate competitors off.
Lack of supply of qualified people
Fundamentally, not many people set out in life to be tradesmen. For many, it is a default profession that they fall into when they don’t know what to be in life. For some it is a calling. ‘He’s good with his hands, he should go into the trade’ is a phrase heard often heard when summarising a teenager’s school report.
I cannot discuss lack of supply without addressing the chronic lack of women in the profession. Why is this the case? There is no fundamental reason why women couldn’t do the work. However, here are some of the factors that put women off working in the trade.
- The industry is self perpetuating in its gender makeup. ‘No women work in the trade’ becomes ‘The trade is no place for women’.
- Women are put off by the requirement to regularly enter customer homes alone, with no obvious safety measures accessible to them.
- Women are less likely to want to work on their own.
Brexit may not have helped either. No one knows how many tradesmen return to their home countries or what new barriers exist to put off self-employed tradesmen wanting to come over and work in the UK. The recent Australia-UK trade deal allows for free movement of citizens under the age of 35 years. Could you next tradesman be from down under!
To conclude then, we could be stuck in a cycle where demand regularly outstrips supply within the trade industry. This isn’t good for the economy as it encourages inflation, as tradesmen put up their prices. It isn’t good for the tradesmen either, as they could be making a lot more money in the good times, more than enough to cover the risks to their income in the bad times.
If in the meantime you think your business could do a better job of supplying trade services for the first time or you are good with your hands then go for it. And if you need any business or marketing advice to do this, then I encourage you to book a free 30 min 1-2-1-free-advice session with My Marketing Dept.