Balancing the Mix of Tradies and Support Personnel
25 November 2021
One of the biggest mistakes a trade business can make is getting the mix of tradies (or productive employees) and support personnel out of whack. Too many support personnel and your profits suffer. Not enough support personnel - you and your team will likely crash and burn.
So, what is the right mix? It depends on your industry, mix of work and your growth opportunities but the general rule of thumb for business is a ratio of three productive staff for every non-productive or support staff member and you will be making money. The really good ones can get up to four to one.
However, the key for any business, especially a small and growing trade business, is to plan for growth and right size your business.
To illustrate the challenges trade businesses face, here is a typical growth journey and pitfalls you should try to avoid.
Start-up: From one to four employees
You are off to a flying start. Word of mouth is building, and you have a team of four. The profit is healthy, but cracks are starting to show. You are flat out pricing, trying to help the team out when you can and still find time for all the paper work and admin. Costs are low as you are probably operating out of your garage and you have no support staff!
Pitfall to avoid: As you are growing to a team of four, hold off hiring an apprentice until you have two or three qualified tradesmen. An apprentice needs your time, energy and focus which will mean you are less productive. It also means you’re tied to being on-site to help them out.
Building: From four to seven employees
At four staff you were flying, but you and your staff were screaming out for support. So, you hired a full-time admin role and couple of tradesmen. You are now the salesman, the project manager, the foreman, the people manager and the business manager and your productive time on the tools is limited. You have more personnel and revenue has increased, but you were making more profit when you were a team of four. What the heck?
Pitfall to avoid: Start off by hiring a part-time administrator instead of a full-time role. An administrator will always find work to do, but does it add value? This will enable you to move into a full-time sales and manager role. Alternatively, you can hire a full-time administrator and capture chargeable work from you and your sales role.
Growing: From seven to 12 employees
You start to hit a sweet spot at 12 staff. With nine productive employees (including apprentices), a full-time administrator, a sales representative and you - profit is tracking well, and your personnel is at a healthy mix. Employees are busy but things are manageable. You are now starting to see the benefits of scale as there is more revenue to cover the fixed overhead costs.
Pitfall to avoid: Don’t bring in your second administrator too soon. At this size, the business can afford to have another part-time support role if you are squeezing out some productive time.
Growth does often happen organically but when you plan for growth, it can help you to avoid the key pitfalls that many trades businesses experience.
The Ultimate Guide to attracting and retaining tradies
A retention strategy is one component of HR practice that underpin successful trades businesses. To help your business attract and retain employees, we’ve created The Ultimate Guide to attracting and retaining tradies.
This playbook will teach you how you can invest the time and effort to create an environment that will help enable your people to be aligned around a common purpose and vision so your hard work pays off in spades.