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How Much Do Tradies Make?
How Much Do Tradies Make?
There’s a lot going on here and I’ll try to make it clear. It starts when newspaper articles put out surveys of what different trades ‘make’. The ranges are large (aren’t they?) and it’s not clear who makes what – they seem to mix up charge-out rate and profit and salary or wage.
So let’s spell it out – the reason I’m doing this for you (because I really think you probably understand it) is to help you be clear on your costs and margins and be ready to defend your pricing when questioned by someone who doesn’t really get it.
Charge Out Rate
The charge out rate is the hourly rate the business charges for its skilled tradespeople. If the business does fixed price quoting (it should), this might not be very visible. It might be wrapped up into a fixed price or even a price list.
An hourly charge out rate here in Australia for a plumber or electrician is between $90 and $120 per hour. A carpenter is $80 or $85 and it’s more for a project manager or site manager. Gardeners and painters seem to be a bit lower – $75 – $80.
When I’m trying to understand what a rate really means, it’s useful to think in terms of what someone can ‘make’ in a year. If one of your employees, or you, is charged out at $100 an hour, they can potentially make $100 x 40 hours a week x 52 weeks a year.
Well, no they can’t actually (that would be $208,000 by the way). Because nobody can sustainably work 40 hours on the tools every week.
We get smoko, days off, holidays, public holidays, etc. There’s time spent on Toolbox Talks, in traffic, talking to customers, buying materials, all sorts of things.
So even if your charge out rate is $100 ph, it’s a mistake to think that’s $4000 a week – every week.
So, if we count our tradie’s holiday (4 weeks or 20 days) and public holidays and sick days, he’s probably ‘making’ more like (7 hours x 5 days x $100) x 44 weeks = $154,000.
I usually correct for that time spent not on the tools , say 80% charge.
We’re down to $123,000 – still not bad money.
Recommended Reading: Know Your Numbers (Episode 3) – Understanding Your Business Costs
Now, if that person is self-employed, they have to pay for insurance, vehicle, tools and membership of their professional association and fuel, etc.
But they get to charge a margin on materials.
I would guess that a self-employed tradie could make around $125K once everything is paid. If they’re busy most of the time.
If they’re working for someone else (maybe you) then they ‘make’ you $123,000 from their labour if we apply the same rule of thumb.
You probably pay them between $60,000 + $100,000 pa, don’t you?
You probably make a margin on the materials on top of the money you ‘make’ on their labour ($123k minus what you pay them).
And you have business expenses too – vehicles, insurance, marketing, admin people, premises, software, accountant, bookkeeper, business coach.
So for your tradesperson that ‘makes’ $125k per year, you might be making $25k (that’s 20% and I’m winging it – the numbers vary a lot).
So a tradie doesn’t really ‘make’ $100 an hour, $125k per year. For a busy, self-employed tradie, it’s more realistic, less for someone employed.
For you as a business owner it’s more risky. Say, you’re making that $125k on your own and you start growing and hiring. You might start making $25k off every tradesperson you hire but supporting them and doing the sales & admin takes time. You can either spend less time on the tools yourself or work more hours for the same money or hire people in the office . Whichever way, you reduce your effective income, don’t you?
So, as a trade business owner, you don’t start making much more money when you start hiring people and growing.
By my little made-up maths, 5 tradespeople replace your wage and you can afford to be off the tools and supporting them or on the tools some with someone in the office.
Now, everyone’s business is different.
You all pay different people, different amounts and charge different amounts and margins but this number isn’t too far from the truth. If a self-employed tradies makes $125K and an employed tradie makes from $60k – S100k, then a trade business owner should be on around $125k (that’s your money – salary, drawings or profit) but that probably won’t grow much until you have a few people on board (5 or more by my bullsh*t maths).
So next time a customer or some smart arse on the internet calls out your massive hourly rate and is secretly comparing it to the sh*tty one they get (but for 40 hours a week, 52 weeks a year), remember this.
This was a short informational video about knowing your numbers – which is an important part of growing your business past where you are making more money than you did when it was just you (assuming you were always busy).
Don’t rely on my numbers – I was approximating.
Do your own numbers. I’ll help you if I’m your business coach.
Or come to a Tools Down Workshop and I’ll show you that structure from start to finish.
There are four ways you can engage with me:
1. Subscribe to these emails and get them once a week in your inbox so you never miss a video from me.
2. Join the Trades Business Toolshed Facebook Group where you can watch these videos, ask me questions or talk to your peers.
3. Attend my next Tools Down workshop.
4. Book yourself a 10-minute chat with me. We’ll talk about whether coaching is right for you now and if it is, we’ll go further into the process before you have to make your mind up.
See you later.