Have you ever wondered how much revenue your trade business should be generating? It’s an interesting question. And if you can answer it, you can find out how you stack up against the competition.
Trading businesses, such as plumbing, roofing and electrician companies, are in high demand. Homeowners and firms need them to keep their properties ship shape. Without their services, they’d be stuck.
But how much revenue should these types of businesses actually be making? Let’s find out.
Top Line Revenue Figures
In accounting, top line figures refer to income statistics before taxes, expenses and other costs. You might also call them your “gross” earnings, in-house.
These vary considerably. However, research puts them at around $46,978 per year for non-employers (trade business people who work for themselves out of a van).
While this is a decent income, people in the trades are rarely millionaires, even if they diligently save and invest their money.
The amount the employing firms generate in revenue is much higher. Those with two to five employees earn around $387,000 per year in revenue while those with between five and nine employees bring in a whopping $1.08 million.
As you add more employees, the numbers keep going up. Businesses with less than 19 employees generate an average of $2.16 million per year, and those with less than 99 bring in $7.12 on average.
Selling Your Business
These statistics are critical to the every day running of your company, but they also matter when you come to sell. As sites like https://australia.businessesforsale.com/australian/selling-a-business explain in more detail, the more revenue your business has, the higher the selling price, on average.
When you think about it, this makes a lot of sense. Assuming constant margins, businesses with higher revenues generate more profit. This then increases their value to any potential buyer.
The number of high-revenue firms in the trades is increasing. There are between 35,000 and 36,000 firms making more than $1 million a year in the sector.
Small Business Growth
Small businesses with less than around $5 million in sales are also seeing fast growth. In fact, areas such as construction are experiencing a boom, leading to more demand for staff and workers.
The household income of small business owners is around $50,000 per year. That includes wages earned through trades businesses plus any additional income from spouses, pensions and other companies owned.
The vast majority of small business owners make less than $100,000 per year income, so if you’re not above this threshold, you’re not alone.
Failure Of Trades Businesses
Trades businesses don’t usually fail outright, like startups, according to https://www.pmmag.com/. However, they can suffer from chronically low revenue, particularly if they attract negative reviews online.
Failure of businesses is the result of multiple smaller problems. These include a lack of money, oversaturated local markets, and heavy seasonality (such as people not wanting to build extensions to their homes in the winter). In most cases, the main issue is a lack of money, not the business idea itself.
When businesses start to lack money, they will need the help of alternative financing options, such as loans, to stay afloat. However, if a business is not generating enough revenue to repay these loans, it will eventually default, and the business will fail.
Loans can come in a variety of ways, such as government loans or loans from investors. When a business approaches investors, it must have a strong business case to get the investment. This will usually involve having a product or service that is in high demand and has the potential for growth. For example, when you pitch your business to top fintech venture capital investors, you will have to show them that your product or service is unique – what makes it stand out in the fintech space?
Government loans are usually given to businesses that are seen as necessary for the economy or have social value. For example, businesses that help with the transition to renewable energy might be eligible for government loans.
Eventually, if a business is not generating enough revenue, it will run out of money and fail. This is why businesses need to focus on generating revenue from the start.