If you run a trade business, chances are you didn’t start it just for fun, you started it to make a living. But if you’re like most tradesmen, your pay probably fluctuates more than you’d like. Some months are good, others are barely enough to scrape by, and you’re never quite sure what you can safely take home.
Too many tradesmen either:
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Pay themselves whatever’s left after bills (if anything), or
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Pull out too much cash and starve the business of the funds it needs to grow.
The good news? With the right system, you can do both: pay yourself a steady, fair wage and build a financially strong business.
Understand Your True Costs First
Before you can decide what to pay yourself, you need to know what your business costs to run and not just the obvious stuff like materials and fuel, but the full picture.
Start by breaking your costs into two categories:
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Fixed costs: rent, subscriptions, admin salaries, insurance
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Variable costs: materials, subcontractor wages, job-specific costs
Don’t forget tax, equipment replacements, and debt repayments. When you know exactly how much your business needs each month just to stay afloat, you can calculate how much is actually available for you to take home.
This clarity alone is a game-changer for most tradies.
The Profit First Method Explained
One of the simplest (and most powerful) systems for managing pay is the Profit First method, popularised by author Mike Michalowicz. Instead of waiting to see what’s left at the end of the month, you flip the formula.
Here’s the basic idea:
Sales – Profit = Expenses
(Not Sales – Expenses = Profit)
You start by allocating a percentage of all income into separate accounts:
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Profit (your reward for being a business owner)
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Owner’s Pay (your regular wage)
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Tax (so you don’t panic at year-end)
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Operating Expenses (what the business can truly afford)
Even if you start small (say, 5% to each category), it forces you to build discipline, and you’ll likely find your business doesn’t need as much as you thought.
Avoiding Common Financial Pitfalls
One of the biggest mistakes trade business owners make is using the “whatever’s left” method. They pay bills, cover materials, take on unexpected costs, and then try to pay themselves from the scraps. This leads to inconsistent income and constant financial stress.
Another major pitfall is mixing personal and business accounts. When you dip into the business account for groceries or a night out, it becomes almost impossible to track actual performance. You lose sight of how the business is really doing, and you risk running short on cash when you need it most.
Fixing this starts with structure. Keep your personal and business finances completely separate. Set a fixed percentage of revenue for your own pay and stick to it, even if it feels uncomfortable at first. Discipline in this area leads to real financial freedom.
How Much Should You Be Paying Yourself?
There is no one-size-fits-all answer, but there are smart guidelines you can use.
A common benchmark is to allocate around 30 to 50 percent of your net revenue (after materials and job-specific costs) to owner’s pay. This figure will vary based on your trade, overheads, and how involved you are in day-to-day operations.
For example, if your business brings in £15,000 in net revenue per month and your costs (excluding your pay) are £9,000, you may be able to safely pay yourself between £3,000 and £4,500. What matters most is consistency and sustainability. If you’re paying yourself too much and struggling to cover bills, it’s time to adjust.
Using a percentage-based system helps you adapt even as your income goes up and down.
Managing Cash Flow Effectively
Paying yourself properly depends on stable cash flow. That means understanding what’s coming in, what’s going out, and when.
A monthly cash flow forecast lets you plan ahead. If you know your busiest months are spring and summer, you can spread that income to cover slower periods in winter. Rather than reacting to the ups and downs, you prepare for them.
Using accounting software like Xero or QuickBooks can simplify this process. You can also review your cash flow weekly to catch problems early. This gives you time to shift resources, delay non-essential purchases, or chase overdue invoices.
Controlling cash flow is not just about staying out of trouble. It gives you the confidence to pay yourself regularly and invest in your business without fear.
FAQs
Q: How do I know if I’m paying myself too much?
A: If your business struggles to pay suppliers, cover operating costs, or build any reserves, you might be taking more than the business can sustain. Reviewing your cash flow and setting clear percentages can help keep things balanced.
Q: What if my income varies from month to month?
A: That’s common in the trades. The solution is to create a “holding account” for income and pay yourself a consistent wage based on your average monthly revenue, not just your most recent invoice.
Q: Should I hire a bookkeeper or accountant?
A: Yes, especially as your business grows. A good bookkeeper will save you time and stress, and an accountant can ensure you’re paying yourself in the most tax-efficient way.
