3 finance and business tips for tradies
The number of tradies in training is on the decline, according to National Centre for Vocational Education Research (NCVER) data published this year. Construction enrollments are down by 11% while the number of other technicians and trades workers signing up are 14.7% lower than last year. While this isn't great news for the industry as a whole, it could provide more opportunities for existing tradies to grow their market share.
Whether you're starting out with your own trade business or you want to maximise existing profits, here are our three top tips.
1) Think like a business owner
Skills and knowledge are exceptionally important as a tradie, but so is business sense. Consider enlisting an accountant to make sure you set up your business properly and to benefit from their expert tax tips. Accountants can help you understand whether you should be operating as a sole trader, partnership, limited company or one of the many other forms of business. How you work out and file your taxes depends on how you structure your business, and an experienced accountant may find you a more streamlined way of operating.
Accountants also look at your business strategically, identifying ways to save costs, grow operations or improve efficiencies. For example, they might see that you're generating good levels of sales but struggling with cash flow because you have to purchase materials for each job in advance of being paid. They may recommend a solution such as invoice financing from an alternative finance partner. You receive a percentage of your outstanding invoices in advance, and repay when your clients settle their bills.
2) Prioritise equipment and technology
In this industry, you're only as good as your tools. You might be the most skilled or experienced worker in town, but if your competitors can do a job more quickly or undercut your costs because they have better equipment, you won't be the winning business.
If you're not sure you can afford a raft of new equipment, look at some alternative funding solutions. You could work with an organisation offering equipment or vehicle finance, for example. These products allow you to benefit from the efficiencies of new equipment, technology and vehicle fleets without having all the cash available upfront. You make regular fixed payments instead, enabling you to manage your cash flow. With the right plan in place, you also get to upgrade your equipment as technology advances.
Meanwhile, if you do buy new equipment outright, you might be able to benefit from the government's instant asset write-off scheme. Businesses that qualify can list any asset purchases worth less than $30,000 on their tax return, allowing them to claim a deduction.
3) Protect your business with insurance
You can't plan for every eventuality and sometimes, no matter how skilled your team is, things do go wrong. Getting insurance protects your business when you have unexpected costs to deal with. Note that some types of insurance are mandatory and you must have them in order to operate within your state or territory.
Types of insurance you should look at wherever you work include:
- Workers' compensation insurance - Covers any claims against you, by someone who works for or under you.
- Public liability insurance - Almost always mandatory for tradies, to pay out for injuries or damage sustained by a third party.
- Tools or vehicle insurance - Provides cover against lost or stolen tools, or vehicle theft and damage.
- Income protection - Covers income you miss while unable to work due to injury or illness.
Alternative finance with Classic Funding Group
Classic Funding Group offers a number of financial solutions to businesses of all shapes and sizes. Whether you need a way to invest in new equipment, or want to free up some cash to direct elsewhere, our expert team are bound to have the solution.