The finances / income of self employed sole traders

[Moonshine]

Can anyone shed any light on the finances of tradies.

I was thinking about this the other day and got interest but can't find anything on line really.

Say a trade charges £200 a day, works 48 weeks a year and has a revenue of £48k a year.

There maybe additional income like marking up materials, but what is the range of out goings like van, tools, insurance, tax

Also the extra hours going and pricing up jobs.

Really interested to know how it stacks up as a annual take home

 

[nod]

I would take 200 day rate as a minimum now Buy and run a van and also buy tools No sick or holiday pay 

Probably a lot higher in the South East 

Most price work trades are hitting around 75 K now

You will always find jobber trades that will work for less But productivity and usually quality will be less 

 

[SimonD]

2 hours ago, Moonshine said:

Can anyone shed any light on the finances of tradies.

I was thinking about this the other day and got interest but can't find anything on line really.

Say a trade charges £200 a day, works 48 weeks a year and has a revenue of £48k a year.

There maybe additional income like marking up materials, but what is the range of out goings like van, tools, insurance, tax

Also the extra hours going and pricing up jobs.

Really interested to know how it stacks up as a annual take home

 

 

At those rates you're most likely to find a grumpy and bordering on broke tradesperson, depending on where you are in the country, of course. At that rate, take home pay after costs is going to be pretty lousy because to run a trade business successfully you can't just be on site to earn your money. The tax situation would depend on whether they're sole trader or Ltd company, and if they opted to be voluntarily registered for VAT. So many variables, it's difficult to provide a generalised figure.

 

As @nod suggests the sensible ones do priced work as that can much better cover all the overheads without customers questioning the day rate (as many like to do).

[Susie]

Don’t forget liability insurance and either premises or if none then the garage becomes the business storage location. If more than just an office at home you need to inform your insurance company you run a business from home. 
vehicle breakdown cover for business use.
no holiday pay has already been mentioned but chances are even when you are on holiday customers will be on the phone.   
The tradesman’s quote includes many overheads generally the customer will not consider. 
 

[Redbeard]

And if you are really good and thorough your clients will get used to the fact that they effectively get a project management service for free. One of my long-standing clients (ex-clients, I am not contracting anymore) said 'we love working with you, as we don't have to worry. You do all the worrying for us!' 

 

[nod]

The Brickies I borrowed from my mate Wouldn’t do any loading or clearing up 

I’d to do all the setting out and lay the foundation blocks and load all 9000 blocks 

Two Brickies and a young lad would get through about 2k worth of work 

Saturday and a Sunday 

Start at 9 am away for 230 

Very quick and neat 

The Brickies dad and uncle where my Tuesday and Wednesday gang 

Age 67 and 73 Old school 

730 am start 430 finish 

[Dave Jones]

wont find a decent trade on day rate.

[dpmiller]

On 07/03/2023 at 18:48, Moonshine said:

Really interested to know how it stacks up as a annual take home

 What is your motive for asking tho? Are you trying to second-guess a prospective contractor's own pricing structure, or thinking about going self-employed yourself?

[Moonshine]

2 minutes ago, dpmiller said:

 What is your motive for asking tho? Are you trying to second-guess a prospective contractor's own pricing structure, or thinking about going self-employed yourself?

 

Just interested in how the finances work out, being on £200-£300 a day seems to equate to mega money a year, and wanted to know if I am under estimating the costs that eat into that.

[gaz_moose]

for perspective my barber charges £15 for a 15 minute hair cut, they are open 7 days a week and have 4 barbers in total. they are always booked solid 2/3 weeks in advance. if you want fancy stuff its even more time or money.

[ProDave]

12 minutes ago, Moonshine said:

 

Just interested in how the finances work out, being on £200-£300 a day seems to equate to mega money a year, and wanted to know if I am under estimating the costs that eat into that.

I will answer, but bear in mind the way I operate is VERY different to most sole traders for a variety of reasons.

 

For a start I charge by the hour, not by the day.  I might work full days from time to time but it is VERY rare for me to work a full week.

 

If you work 8 hours a day, 5 days a week on site, you will in fact be "working" a LOT more than 40 hours in that week.  Materials to order and possibly collect, jobs to look at and price up, even the time you spend on the jobs you don't get, so you spend time preparing quotes and estimates, for NO RETURN.  and you have to travel to get there so it has cost you money for no return.

 

Then you have to prepare and send your invoices, check payments, do at least some of your accounting yourself (I do all mine)

 

You have to maintain your tools, your vehicle, get it serviced, MOT'd, repaired when it needs it etc.  This is all time you spend on the business that you get no income for.

 

I recon as a rough rule for every hour I spend on a customers site working and being paid to work, I spend 2 hours in total on the business.  So for a start halve the hourly rate you are getting paid for being on site doing a job to get the hourly rate you get paid for "working"

 

Then there are a whole tranche of costs to deduct, various insurances, vehicle, tools, professional qualifications, membership of professional bodies to name a few.

 

And after all that has gone in the melting pot to work out your profit, the tax man takes his share.

 

So your guy working 5 days a week, 48 weeks a year for his "mega money" will probably be actually working 60 or more hours a week (i.e. a lot longer than a 9-5 employee) and will probably only be "earning" half what you think.  Someone prepared to work very long hours like that bloody well deserves to earn "mega money"

 

This is where my business differs to most.  I have been self employed for 20 years since leaving "proper employment" and at that point we were mortgage free for the first time and had money invested in buy to let, so self employment for me was something to do, but no need to earn mega money, indeed I don't want to.  So I have for the last 20 years been very much a part time worker, earning just enough to pay the bills and have more time to do stuff for me.  And as I get closer to retirement, I am working less and less.

 

 

[Moonshine]

@ProDavethanks for the insight

[Mattg4321]

You find a lot of people work themselves into the ground trying to keep up with the admin of running their business. These people usually jack it in after a few years and go and work ‘cards in’ for someone else - much less stress. 
 

People complain that tradies don’t get back to them quickly enough, or at all. I like to think I’m better than most at that, but it’s bloody hard work keeping up with a constant stream of emails/text messages/invoices/estimates etc etc. That’s without actually doing the job itself!

 

£200 a day is nowhere near enough to run a successful business these days. Certainly not as an electrician. The overheads are too high. Be earning minimum wage when all the hours are taken into account. 
 

My business (just me and apprentice and only 1 van, no premises) costs well into 4 figures a year just to service the fixed overheads. I’ve got quite a good deal on the van too as it was pre covid. 

[eandg]

1 hour ago, Moonshine said:

 

Just interested in how the finances work out, being on £200-£300 a day seems to equate to mega money a year, and wanted to know if I am under estimating the costs that eat into that.

£200/day is hardly mega money - after costs if you're earning that you'll be doing well to be on an average wage, while likely working more hours and while taking more risk. Certainly makes you think and I can understand why my cheap plumber spends half his time making phone calls and arranging his next jobs while I'm paying him. 

[SimonD]

So, to break it down a little, I've totted up what a basic one man band tradesperson non vat registered might just spend on a monthly basis, with some assumptions. These are the kinds of costs involved which obviously aren't exhaustive - e.g. no tools/plant/equipment/premises costs as that can be a bit more complex - but representative. You'll see that the total below is just under 1.5 weeks work per month for the basics at £200 per day so essentially after these costs it's a mere 31k/pa, minus tax and NI and to cover any sick leave. The other important thing to consider is cash flow. For example, for February, my expenditure is 3x my revenue due to work on a large project where I supply all materials and which has only just been invoiced - there's a significant cost associated with this which is so often overlooked by newbie business people, especially if and when customers are slow to pay up - this is why so many young businesses fail in the 1st 18 months!

 

In terms of estimating/quoting, I've recently spent several half to full days working things out because they're for large whole house heating system replacements that whether I like it or not require at least basic whole house heat loss calcs which I then caveat with a full calc included if they accept the quote. I'd say I spend at least 3-4 days per month just doing basic pricing work.

 

And today, my afternoon was blown out because one customer wasn't there when I arrived for an appointment and then it took me 1.5hours just to get across town to pick up some bits for a job on Friday (To save time I mostly use a supplier that delivers directly to site either morning or afternoon provided I order before midnight or midday, but they didn't have the specific bits I needed)

 

Some basic monthly costs:

 

Accounting software 25 Customer Management app 25 professional insurance 35 professional registration 15 advertising 80 website 15 van 600 vehicle tax 12 fuel 300 accountant 50 equipment calibration 15 tyres 30 checkatrade 50 van insurance 40 bank transations costs 42 clothing 25 phone 35 IT 50       1444

[markocosic]

Second all of the above.

 

 

Overheads are significant. If you can buddy up with somebody else you're nuts not to.

 

Vans are a money pit. If you can get away with an estate car you're daft not to.

 

Non directly chargeable time can be. A 2:1 ratio for nonsense:paidwork is about right for the trades that need to design stuff / procure stuff rather than just rocking up and supplying pure labour.

 

Not worth getting out of bed for <£300/day gross / £150/day net if you can get an easy £30k job with paid holiday/sick leave and access to finance (good luck obtaining mortgages etc as self employed person) and zero risk (remember to keep a sizeable float for rainy days and late payments etc as a self employed person) as an alternative.

 

 

It's a bitter pill for non-trades to swallow though given that they've gotten used to 20 years or artificially suppressed pricing for trades in the UK thanks to the availability of suitably qualified folks from eastern europe. Many have headed back east as, adjusted for living costs, there's more money to be earned in the east now as an (above averagely paid) skilled person. That and many older folks semi retiring or fully retiring as lockdown gave them an early taste and they realised they liked it.

 

https://en.wikipedia.org/wiki/List_of_European_countries_by_average_wage

[Mattg4321]

That last paragraph is the key one. I was considering leaving the trade a few years back, as even in the south east the numbers were starting to not really stack up. 
 

It’s been much improved the last 5 or 6 years and rates are roughly back where they should be/used to be now imo. 

[LSB]

my brother and father are / were self employed all their lives, different industries, dad a shop, bro alarms / locks.

 

Both were raided, vans and shops, even insured the costs are not covered and certainly not the stress.

 

Bro chopped his finger off 2 days before his wedding, home owner complained about the blood and wanted to know how soon he could come back and clean up as well as finish the work, although she did put the finger on ice for him, it was reattached, but off work for 6 weeks.

He had to pay someone else to finish the job and a cleaning company to get rid of the blood.

He's also has other health issues, currently a knee, in total in 40 years he's probably had a year off sick.

 

No one seems to have mentioned pensions (no employer contribution) either and NI stamps to get the state pension.

 

He tried getting 'bigger' and sharing the load or employing, but it never worked as others didn't meet his standard and clients only wanted the boss.

And employees need paying even when there is no work.

Covid was dreadful for him, couldn't go into peoples homes.

 

His main business now is repos, sad, but a state of the economy where others can't pay.

 

Remember it may sound a high daily rate, but also consider all those people who are horrible to work for and think you are overpaid.

 

[Marvin]

On 08/03/2023 at 19:37, ProDave said:

If you work 8 hours a day, 5 days a week on site, you will in fact be "working" a LOT more than 40 hours in that week.

I used to work about 40 hours actual work, plus 5 hours doing quotes, plus 4 hours on material ordering, hours over the year doing paperwork, accounts, sorting out insurance, van alarms, van broken into and materials/ tools stolen, van rear ended and written off meaning no work for 2 weeks. No pension. Paying thousands to qualify to be gas safe (Corgi at the time), unpaid weeks of work to attend courses. At the time I made about £12 an hour for my wages.

[markc]

Our mobile engineers (plant fitters), one man in a van with tools etc.  cost us around £65k a year including van, fuel, salary etc. if we bring in any additional trades, welder, hydraulic fitter etc then we work on paying £500/day