Trade Services
Examples:
Mechanics, Electricians, Plumbers, Drain Layers, Machinery Operators, IT Services etc
INDUSTRY DESCRIPTION
The Trade Services sector is very broad and covers various sectors such as all the building and construction trades as well as automotive services etc. Its core business model is to hire experts/technicians, charge them out for more than what you pay them to cover overheads and profits. Then add products onto your services that you on-sell for a margin. Operators can have either a business-to-business service or a business-to-customer focus and many operators have both. Business success and scope for growth is largely linked to how the owner views their role. They’ll either identify themselves as someone who is on-the-tools or, as a manager/director who’s job is to provide sufficient work to their team and then make sure it’s done to an acceptable standard with a profitable outcome.
A typical life cycle for a Trade Services business is often beginning as an individual that breaks away from a larger organisation by taking a few key clients with them. Alternatively they are started from scratch or purchased from a retiring business owner. How far the business expands will depend on the interest and intentions of the owner to add a team. Often this will depend on what size of job or type of customer has been secured. When larger jobs or customers are added, this will often trigger the need for more staff. Trade Services businesses get into trouble when they “gear-up” for larger jobs and/or customers, but find difficultly in maintaining workflow when larger jobs finish or when key customers switch to buying from a competitor.
When this happens the additional staff and associated equipment becomes an overhead that doesn’t have the revenue to support itself. Many Trade Services business owners experience this issue where they don’t want to let go of staff and equipment (because finding good staff is difficult, training takes time and equipment has often been purchased on credit) but they can’t find sufficient work to utilise the capacity they’ve created. Many businesses can last for a while like this by adjusting their pricing on quotes to “feed the business”, but eventually realise they were making better money when the business was smaller. Hence some operators end up going back to the cycle of “do the work” then “chase the work” and being on the tools. Many trade services businesses stay at the 1-3 staff level when this is the case.
If the business gets sufficient workflow by niching or successful prospecting, they will begin the process of scaling up. This usually starts with splitting their workers into more teams and allocating a team leader or foreman. Admin support can also assist for invoicing, scheduling and maintaining “jobbing” systems. Many business owners hesitate to expand their businesses when they experience staff recruitment and retention issues or suffer from debtor management issues.
Trade Services businesses struggle when they have insufficient work whereby they need to work on marketing and sales systems for the right type of work or customers. Alternatively they’ll have too much work whereby their marketing needs to focus on attracting people to work for them (as opposed to marketing for customers, they’re effectively marketing for staff).
When to get help
Owners of Trade Services businesses will tend to need help from a Business Advisor when they are either too busy and therefore need help to coordinate and improve the productivity of their team, or too quiet where they’ll need direction on how to break the cycle of “do the work” then “chase the work”. Typically we assist Trade Services businesses with an initial assessment of the capacity currently being utilised. Then we’re able to assist on how to optimise the current workflow before engaging in sales and marketing activities to drive profitability.