Turnover is Vanity, Profit is Sanity: Why Your £100k Year is a Lie
Celebrating a six-figure turnover? Hold the champagne. We strip down the numbers to show you what you actually take home, and why 'busy' doesn't mean 'rich'.
We all know that one bloke down the pub. 'Yeah, business is flying, mate. Turned over £150k last year. Bought a new Ranger.' Six months later, he's selling the Ranger and asking for a subbie wage.
There is a massive difference between the money that flows through your bank account and the money that stays in it. Turnover is just a measure of how busy you are. Profit is a measure of how smart you are.
The £100k Illusion
Let's take a typical sole trader builder. He hits the magic number: £100,000 turnover. He feels rich. He feels successful. But let's strip that number down and see what's actually left.
Where Does the £100k Go?
Breakdown of a typical £100k turnover sole trader business
Materials (£45k): Almost half your money goes straight to the merchant. You never really owned this money; you were just holding it for them.
Overheads (£15k): The van, the fuel, the insurance, the accountant, the phone, the tools. These eat a huge chunk of what's left.
The Taxman (£12k): Don't forget him. He wants his cut of the profit.
The Reality (£28k): That 'six-figure business' is actually paying you a salary of £28,000. That's about £13.50 an hour. You could earn that driving a forklift with zero stress, zero risk, and a warm cabin.
Why Tradesmen Go Broke While Being Busy
The danger comes when you confuse the bank balance with profit. You see £10,000 in the account and think, 'I can afford that new DeWalt kit.' But £4,000 of that is for materials for next week, £3,000 is for tax, and £2,000 is for your van insurance.
If you spend it, you enter the cash flow death spiral. You have to use the deposit from the next job to pay for the materials for the current job. You are effectively borrowing from your future self at a very high interest rate (stress).
How to Fix It: Price for Margin, Not Volume
The goal isn't to increase turnover to £200k. The goal is to increase the percentage that you keep.
- Know Your Numbers: Use software like PriceM8 to track your actual profit on every job. If a job type only makes 5% margin, stop doing it.
- Separate Your Cash: Open a second bank account for Tax. Every time you get paid, move 20% of the labour element into it. Do not touch it.
- Charge for Overheads: Ensure your day rate covers your van and tools, not just your labour. If you don't charge for them, you are paying for them out of your £28k salary.
Stop chasing the big turnover number. It's an ego metric. Chase the profit number. That's the one that pays your mortgage.
Price your next job properly.
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