How to Tell if Your Business is Actually Sustainable
We’ve spent the last few posts talking about the Tax Vault and why you need to Stop Guessing Your Pay.
But let’s be honest. Your first reaction is probably -
"If I move my tax money away and pay myself a proper wage, will there be enough left to run the business?"
That question is the ultimate truth test.
If you implement these systems and find that things feel tight, the system didn't create a problem.
It simply showed you where the business model needs a tune-up.
The Three-Legged Stool
A business should be able to do three things at once -
- Set aside tax and super (including the new weekly Payday Super).
- Pay all business bills (suppliers, rent, insurance).
- Pay YOU (a fair, industry-standard wage for the work you do every week).
If you have to skip your own pay to cover the GST, the stool is off-balance.
The Quick Health Check
If the bank account feels thin, don't panic.
It just means there is a leak somewhere in the system.
This is where that "one degree off" rule really bites—a tiny error today can land you miles away from your goals a year from now.
Here are the three areas where most trade businesses find their "aha" moments -
1. The Pricing Leak (Markup vs. Margin)
Most of us were taught to use a "blanket 30% markup." But the math is misleading.
- Markup is what you add to your cost.
- Margin is what you keep from the sale.
The Trap: If you buy a part for $100 and add a 30% markup, you sell it for $130. You kept $30, which is a margin of only 23%. If your overheads are 25%, you are actually losing 2% on that sale. You are paying the customer for the privilege of doing the work.
Read more about Markup and Margins here 'Why Your Pricing Might Be the Real Problem' and 'Busy Isn't the Same as Profitable'.
2. The Efficiency Leak (The "Magic Number")
Every employee has a cost that goes far beyond an hourly wage.
- The Math: A tradie on an $80k salary actually costs the business about $125k a year once you add Super, WorkCover, a van, fuel, insurance, and factor in leave and holidays.
- The Number: To cover that cost, plus their share of the office overheads and a bit of profit, that employee needs to generate roughly $5,500 in revenue every week. This is an example - your 'Magic Number' might be different, but you need to know what it is).
- The Opportunity: If that employee is generating less than that, it’s a sign that the behind-the-scenes systems need a tune-up—things like travel, scheduling gaps, or ensuring every small part used is actually being captured on the invoice.
Read more about the efficiency leak here 'Why Your First Hire Might Make You Broke' and 'Why Your Wages Might Be Eating Your Profit'.
3. The Overhead Leak (The "Asset Trap")
The P&L can be a liar. You might buy an expensive ute on a loan. On your Profit & Loss statement, you only see the interest and the running costs. It looks like you're doing fine.
· The Bank Account Truth: Your bank account is struggling because the principal repayments (the actual loan amount) are being sucked out every month. These don't show up on a P&L, but they are very real.
· The Reality Check: If you are skipping your own pay just to keep up with a vehicle loan, that "asset" is actually an anchor. You are working long hours a week just to fund a piece of metal in the driveway.
Read more about the asset trap here 'Why a New Ute Might Be a Business Trap'.
Stop Subsidising the Business
The hardest truth to face is that many businesses only stay open because the owner is subsidising them with their own stress and free labour.
If you take no pay to keep the lights on, you are hiding the truth from yourself. You deserve a business that can afford you.
I’m a big believer in the KISS principle—keeping it simple—because simplicity gives you control.
But I also know that simple isn’t always easy to do on your own.
Start with the Truth Test.
Move your tax, pay yourself a fair wage, and see what happens.
If it’s tight, that is a win.
It means you’ve finally identified exactly where to focus your energy to make the business stronger.
Reports don’t change profit—using the data to make changes does.