Why the best subcontractors treat their business like a business

As a subcontractor, labour is the backbone of your business. It’s your biggest cost, your biggest variable and it’s where profit on projects is won and lost. Which is why treating a subcontracting business like a business and optimising labour is what separates the subcontractors who scale from the ones that don’t. It could even be the difference between success and insolvency.  

As a subcontractor, insolvency almost feels like it’s part of the business model. A job goes south and you realise (way too late) that the project didn’t make money. And you’re not alone – the construction industry accounts for nearly 1 in 5 of all business failures in Australia. But insolvency is almost never about your skill as a tradie – it’s about your mindset as a business owner.

What does it mean to have a business mindset?

Treating your business like a business is about three things: pipeline (what confirmed and possible projects have you got planned?), profitability (are you making money on every job?) and process (can your business run without you?).

1. Successful subcontractors think about potential projects as a proper pipeline  

Having a strong ‘sales pipeline’ sounds like some kind of awful corporate buzzword, right? But it actually comes from construction. And, like a continuous piece of underground pipe, having a constant stream of opportunities flowing through your business is what we’re all aiming for.  A good pipeline looks like:

• A simple forecast of confirmed and possible projects
• Data about each opportunity (company info, problems you can solve, deal size, where they’re at in their buying journey, how likely they are to go ahead)  
• Clear actions and stages to move a prospect from ‘possible project’ to ‘confirmed client’  

“When I decided to scale, I didn’t have a crystal ball, so I took a gamble. I had to ask myself: have I got the pipeline to support the revenue I need to run the business and deliver?”

– Daniel Ouliaris, Neo Founder and CEO and ex-subbie

2. Successful subcontractors control labour to control profitability  

When you lose money on a job, it’s almost always because you’ve overspent on labour. Because it’s almost impossible to manually estimate labour and productivity on a per-square-metre basis.

“When you lose six, seven figures on a job, the only reason you lose that much money is because you spend too much money on labour.” 

- Steve Sarris, Managing Director, PCF

Treating your business like a business means taking control of labour so it doesn’t control you. Which means finding some sort of subcontractor software so you can see planned labour versus actual labour output in real‑time and make crew changes as you go.  

Controlling labour costs is about:

• Monitoring labour and adjusting crews daily (weekly isn’t often enough to stop issues compounding)
• Going digital (it’s quicker and easier to see patterns and spot problems what data is digitised)
• Using data (not intuition) to quote for jobs  

3. Successful subcontractors have processes nailed  

Processes sound boring and admin-heavy, right? But processes also put you in control. And guide your crew when you’re not around.  

Most subbies don’t have systems or processes for collecting information or for measuring productivity. So, if that’s you, you’re not alone. But without processes and data, everything’s in your head and you might not realise you’re losing money on a job until it’s too late.

Taking control of your processes is about:

• Keeping it simple. Pick one area you want to get under control first (e.g. labour).
• Getting your process out of your head and onto paper (are you reviewing triplicate carbon copy timesheets every week? Or logging worktime from 5 sites on a giant spreadsheet?) Writing your process down can help you spot inconsistencies and improvements.  
• Researching digital tools that could save you time and improve productivity.

Thinking like a business and focusing on pipeline, process and profitability will help you win the right projects, make more money and maybe eventually scale your business.

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Running a subcontracting business FAQs

What does it mean to run a subcontracting business like a business?

Running a subcontracting business like a business is about building a strong pipeline, knowing your numbers and being profitable, managing risk before it becomes a problem and building processes so everything works when you’re not around.

Why do some subcontractors struggle to scale even when their work is high quality?

Scaling a construction business isn’t just about high-quality work, it’s also about optimising productivity and labour costs. And to do this, you need detailed (and ideally real-time) labour data so you can manage crews carefully and make money on every job.

What systems do successful subcontracting businesses have in place?

Successful subcontracting businesses are good at managing sales pipeline, cashflow, operations and productivity. Systems might include a CRM system to manage clients and potential clients, a forecasting tool and some sort of construction management or labour optimisation software to manage timesheets, operations and productivity.

How do you move from working in the business to working on it as a subcontractor?

Like any business that started with you, it’s hard to shift from working ‘in’ the business to working ‘on’ it. Blocking out non-negotiable time each week to improve processes, trial new systems and review data will help you prioritise working ‘on’ your business. And bringing in a business partner with a different skillset and expertise can help you divide and conquer.

What’s the difference between a good tradie and a good business owner in construction?

A good tradie and a good business owner have a lot in common – they’re fastidious about quality, they put the customer first and they’re good at communicating. But where a good tradie is brilliant on the tools, a good construction business owner also needs to be brilliant on the business and ops management tools too.