If you’re a tradie, you may have looked at what your boss charges customers for your time and thought, “Why am I not just doing this myself?”

It is an understandable question. If a customer is being charged $120 an hour while you’re earning $45, going out on your own can seem like an obvious way to earn more.

But as Pat from Latitude Accountants explains in the first episode of the Tradie Pat series, the difference between what a customer pays and what you earn is not simply money going into your boss’s pocket.

Running a trade business comes with fuel, tools, vehicles, insurance, super, tax, quoting, administration, unpaid invoices, mistakes, downtime and plenty of other costs that employees may not see.

More importantly, being ready to leave your job does not necessarily mean you’re ready to run a business.

Starting a Tradie Business Is More Than Charging More Per Hour

One of the biggest misconceptions about starting a trade business is assuming that a higher hourly rate automatically means higher personal income.

Your business needs to cover its operating costs before you can determine what is actually left as profit.

These costs can include:

• Fuel and vehicle expenses
• Tools and equipment
• Insurance
• Superannuation
• Tax obligations
• Business administration
• Quoting and invoicing
• Supplier payments
• Unpaid or late customer invoices
• Correcting mistakes or redoing work
• Non-billable time
• Business and professional expenses

As Pat puts it, sales are not the same as profit. A business can generate significant revenue without leaving the owner with the income they expected.

That’s why understanding your numbers before starting is so important.

Do You Want a Business or Just a Better Job?

Before buying a ute, leaving your employer, or taking on your first customer, ask yourself why you actually want to start a business.

There are strong reasons for making the move. You may want to:

• Build a team
• Create something of your own
• Provide greater financial security for your family
• Add value for customers
• Have greater control over your work
• Build a business that can grow beyond your own labour

These motivations can provide a stronger foundation than simply wanting to make more money.

There is also nothing wrong with wanting a better income. However, if money is the only motivation, it is important to understand that business ownership comes with considerably more responsibility.

And if your main reason is that you hate your boss, remember that leaving employment does not mean you stop answering to people. Your clients, builders and customers can effectively become your new bosses.

Being Good at Your Trade Isn’t Enough

Technical skill is essential, but it is only one part of running a successful tradie business.

You might be excellent at carpentry, plumbing, electrical work, tiling, or another trade, but you also need to manage the business side of the work.

As a business owner, you may need to:

• Quote jobs accurately
• Invoice customers
• Schedule jobs and employees
• Manage your diary
• Pay suppliers and other expenses
• Chase outstanding invoices
• Monitor cash flow
• Understand your tax obligations
• Negotiate payment terms
• Manage customers
• Make financial decisions

This means a business owner effectively has two jobs: doing the work and running the business.

You may expect to work 40 billable hours each week, but that is unlikely to be realistic. Time spent quoting, invoicing, scheduling, ordering materials, and handling administration is not necessarily billable.

Understanding this difference can help you set realistic revenue and pricing expectations.

Can You Handle Uneven Cash Flow?

Employment generally provides a predictable wage. Business income can be much less consistent.

There may be busy periods where your business generates strong revenue, followed by quieter periods where very little money comes in.

At the same time, your expenses may continue.

You may still need to pay:

• Suppliers
• Vehicle costs
• Insurance
• Wages
• Software and administration expenses
• Tax and superannuation obligations
• Other business overheads

Payment timing can create another challenge. Customers or builders may not always pay when you expect them to, while suppliers may expect payment according to their own terms.

Before starting, consider how you will manage the gap between completing work, receiving payment and paying your expenses.

Do You Have Enough Money to Start?

Startup costs can vary significantly depending on the trade and your existing equipment.

If you already have the necessary tools and vehicle, your initial costs may be lower. If you need to purchase a ute, tools and other equipment, the amount required can quickly increase.

You also need working capital to help the business operate while you build your customer base and wait for invoices to be paid.

Ask yourself:

• Do I already have the tools I need?
• Do I have a suitable vehicle?
• How much cash do I have available?
• Can I cover my personal expenses while the business gets established?
• Do I have enough money to handle a few slower months?
• If I need finance, what will borrowing cost me?

Starting with no financial buffer can put unnecessary pressure on both you and the business.

The Five Questions to Ask Before Starting a Tradie Business

Pat recommends asking yourself five key readiness questions before leaping:

1. Am I good enough at my trade to charge for it independently?

Being confident in your technical ability is important. You need to ensure customers receive enough value from your work to justify your pricing.

2. Do people already want to hire me?

Having potential customers or an existing network can give your new business a much stronger starting point than simply hoping work will appear after you leave your job.

3. Can I survive financially if the first few months are slow?

Consider both your business expenses and personal living costs. A financial buffer can give you more time to establish the business without immediately putting yourself under pressure.

4. Can I sell, quote, invoice and chase money?

Winning the work is only part of the process. You also need to price jobs appropriately, issue invoices and follow up outstanding payments.

5. Do I want to build a business, or do I just want a better job?

This may be the most important question of all.

If you want to build a business, you need to be prepared for the responsibilities that come with ownership. If you simply want more control over your work or a better lifestyle, other options may also be worth considering.

Ready to Take the Next Step?

Starting a tradie business can be an exciting opportunity, but it should be approached with realistic expectations.

The goal should not simply be to replace your wage with a higher hourly rate. You need to understand your costs, cash flow, pricing, tax obligations and the responsibilities involved in running a business.

And remember, there is nothing wrong with staying employed if that suits your lifestyle and goals. Business ownership is not automatically the better option for everyone.

If you have answered the five questions honestly and still believe you are ready, the next step is to start planning how your business will be structured and what you need to set up before taking on customers.

Frequently Asked Questions About Starting a Tradie Business

Is being good at a trade enough to start a business?

No. Technical trade skills are important, but business owners also need skills in quoting, invoicing, scheduling, cash flow management, customer service, administration and financial management.

How much money do I need to start a tradie business?

There is no single amount that applies to every trade business. Your requirements will depend on your tools, vehicle, equipment, insurance, operating costs and working capital needs. You should also consider how you will cover personal expenses while the business becomes established.

Why isn’t a $120 hourly rate the same as $120 income?

The hourly amount charged to a customer is business revenue, not personal income. The business must first cover costs such as fuel, tools, vehicles, insurance, superannuation, tax, administration and other expenses before determining its profit.

Should I start a business if I hate my boss?

Disliking your boss alone is not a strong business plan. When you become self-employed, customers, builders and other clients can place their own demands on you. Consider whether you genuinely want the responsibilities of business ownership.

Do I need an accountant before starting a tradie business?

Getting professional advice before starting can help you understand the financial and tax considerations involved, including business structure, cash flow and other obligations. Your circumstances will determine what advice is appropriate.

Ready to Start Your Tradie Business?

If you’re a tradie considering going out on your own, there’s more to starting a business than simply finding customers and charging for your time. Understanding your numbers, setting the right prices, managing cash flow and staying on top of your tax and financial obligations can make a big difference to your long-term success.

Latitude Accountants can help you understand the business side of the journey and give you greater clarity before you leap. Whether you’re still planning your first steps or you’re ready to set up your business, our team can help you make informed financial decisions from the start.

Latitude Accountants

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Get a free consultation for ABN holders and speak with the Latitude Accountants team about your goals, business structure, pricing, tax obligations and the financial foundations you need to build a profitable tradie business.