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From tradie to business owner: something you should know.

By Dennis Keay

I often speak with people who started their career as trades-people, then transitioned to become owners or managers of small-medium sized businesses. The majority tell me that they were ill prepared for the transition and found it MUCH more difficult and stressful than they expected. It’s not so surprising really, because when it comes to owning and managing a business, neither trades-school, business school nor uni adequately prepares you. There’s a bunch of ‘reality’ that normally doesn’t get covered!

The story usually goes something like this:

  • Tradie does a fantastic job – life is pretty easy, hours are predictable, work-life balance is pretty good, pay is ok and regular!
  • Tradie finds out how much the boss charges customers for their labour-hour and sees how much customers are charged for jobs;
  • Tradie concludes that the boss is making a killing (i.e. big profit) on all jobs
  • Tradie decides he or she should go into business and be their own boss, make great money, have flexible work-hours, and build a business nest-egg for themself.

From what the tradie sees, life as a business owner/manager looks like this:

But what they don’t see is:

  • The boss has to have a range of skills that the tradie doesn’t have to possess – e.g. sales & marketing; managing people; managing cashflow; managing a wide range of costs; dealing with customer issues; dealing with health and safety and a range of other legal compliance issues; dealing with supply issues; dealing with accounting issues and financing issues, borrowing money to cover premises and equipment; the list goes on and on and on!

  • The boss usually puts in enormous hours trying to juggle everything! Work-life balance is often trashed and family time and relationships are often strained.

 

From the business owner/manager’s perspective, life as a business owner/manager often looks like this:

I had with an owner of a small manufacturing business, he told me that cashflow is an ongoing challenge, and told me about one of the costly lessons he has learned. He’d purchased Trade Credit Insurance, which was quite expensive, but found that the insurer was specifically naming an increasing number of his clients as ‘exclusions’. In other words, his insurance wasn’t going to cover the risk that he wanted covered. So, he now uses an alternate process, together with a good quality construction lawyer and a big slice of caution, to manage that risk, and it’s saving him about $15k in insurance each year.

Another thing that this astute business manager is doing is to arrange agreements with suppliers where the supplier will hold stocks of raw materials for him and consult with him before releasing it to others. This is to manage supply-chain risk, which is a hot topic for many businesses these days, with many manufacturers running out of the raw materials they need. Quite similar to the way super-markets ran out of toilet paper during COVID outbreaks, even if the manufacturers of toilet paper had plenty in stock or in the pipeline.  Imagine if you had a supply agreement with your super-market that they would keep some aside for you to protect ‘your needs’ as a loyal customer.

 

Bottom-line is, if you’re looking to go into business for yourself, do yourself a big favour and do your homework first.  Here are some things you can consider:

  • Talk to people in your own profession who have gone through that transition…ideally people some distance away who won’t see you as a competitor. Get an understanding from their perspective of the costly hard-earned lessons they’ve found by trial and error, and the things that they might do differently if they had their time again;
  • Work your way up from trades-person to manager, either in your existing company or elsewhere, where you can ‘learn to swim’ before jumping in the deep end. That is, gradually take on more and more management responsibility and learn as you go, without having all the headaches and responsibility of ownership.  You may find you love it…or that you’d prefer to leave it.
  • Invest in your own education…for example, get yourself an experience business mentor (who has owned their own business), before investing in a business. It’s not something that non-business owners usually do, but it can save you heaps in the long run. There’s a saying: “If you think education is expensive, try ignorance!”  Smart people get it!

Hint: When investing in a business mentor, choosing one with experience across a range of industries, where they can draw on broad experience and bring new insights to the table, is likely to serve you well.