12th February, 2018

What you need to know before starting a trade-based business

While every trade is unique, career progression for most tradespeople is remarkably similar.

Life begins with an apprenticeship, which is followed up by gaining experience by either being employed by a business directly or working as a subcontractor.

After that, the next logical step for most tradies is to take it to the next level with your own outfit – and that means starting a business.

But how do you know you’re ready to start a business? What do you need to get going? Most importantly, is the life of a business manager really for you?

Life as a subby: A taste of managing your business as a subcontractor

With an apprenticeship under their belt, people who work in trades can be employed in a variety of ways and each will have pros and cons.

Bret Stafford is a carpenter who’s gained experience both as a subcontractor trading as Stafford Building Solutions, and while working directly with building companies.

He advocates any tradesperson to have experience subcontracting before setting up a more complex business model.

“After achieving accreditation at the end of their apprenticeship, many chippies would go out and get their ABN and begin subcontracting through the business they apprenticed with,” Stafford told The Pulse.

“But I would recommend they get better experience by going out and trying to get experience with other builders as well.”

Subcontractors that take this approach will not only gain invaluable experience from engaging with more businesses, they’ll also learn more of the business basics that come in handy later on.

“As a subcontractor, you may not always have to compete for a tender, but you’ll still need to pay your own taxes, superannuation and public liability,” he said.

On the other hand, accredited tradespeople can also consider taking on life as an independent contractor, which will require them to bid for tenders – a situation that may have greater rewards, but comes with less support.

Building a business through subcontracting

Having gained experience as a sole trader either as an independent contractor or a subcontractor, the next phase most people consider is setting up their own business.

An arborist by trade, Aaron Littlepage is the founder of Treescene, a growing company that has developed from subcontracting specialist work.

He said starting a business in a trade industry is similar in many ways to starting a business in any industry, and it mostly comes down to having a point of difference.

READ: 4 ways to be a standout tradie

“When I started working as an arborist full-time, I began to see the value that people place on the difference between someone who can do a job to a very high standard versus one that simply gets the job done,” said Littlepage.

“I’d been working for the company I started with for a few years when a colleague pointed out to me that the only reasonable way forward was to take on a partner, invest in some equipment and a truck and begin taking on the excess contracts that my then employer wasn’t able to resource.”

Littlepage has been developing Treescene as a business in its own rights ever since, and just as in any other business, growth comes at a cost.

“Because we place such importance on both the aesthetic quality and practical aspect of each of the jobs we do, it’s not particularly easy to just put on more staff,” he said.

“Each job we do has to be completed to the standards that I set, so it’s been a real balancing act to ensure we’re not taking on too many jobs at any one time as we slowly build out the roster.”

The four key requirements for starting a trade business

  1. Experience – Use your ability to contract or subcontract with multiple businesses in order to learn the business basics of paying your own tax, super and liability cover. You’ll need to do this on a company-wide scale if you to start your own business.
  2. Accreditation – Depending on your trade, you’ll need to make sure you hold and maintain qualifications and accreditation in whatever you practice, as well as permits for the types of jobs you’re undertaking.
  3. Partners – Before starting your own business, consider whether you really want to go it alone. Bringing in a partner can bring more startup capital, expertise and dedication to the cause.
  4. Capital and costs – Striking out means having enough money to cover your costs while you drum up business. Employees, tools, machinery and software are all going to need to be factored in so be sure to build a comprehensive list of potential costs to your business before you get started.