Taking the plunge
Whether you're just starting out in Carpentry or you've been a sole trader for years, you may be thinking about taking the next step and becoming a Limited Company subcontractor. There are many advantages to forming a Company, one being you can protect yourself and personal assets from any potential financial issues that may arise. Having a company creates a more "professional" look to your business, and you're more likely to be taken seriously by contractors for larger projects. Also having a separate business bank account helps control finances, keeping them completely separate from your personal money. Taking on larger projects as a company, and taking on subcontractors or employees of your own, will open doors to create much larger profits and can allow you to take a step back from the tools and focus on running a successful business. There are downfalls to consider, however. I have owned and managed a carpentry subcontracting company for 8 years, and in that time have lost £80,000 due to larger contractors going into liquidation mid way through contracts. Most contractors will set out 30 day payment terms, with a month in arrears. This could mean that you will be funding anywhere between 4 and 7 weeks of your Carpentry package until you get your first payment. Depending on how many guys you have working for you, this can add up to very large sums. At one point I had 22 carpenters, and my weekly wage bill was roughly £16,000. So cashflow is key, if you can keep on top of your wages and other company overheads such as insurance, vehicles, tools and office time, and if you can manage these expenses until you start getting payments coming in, then you can start to see profits jump. I would take precautions on who you work for, do credit checks and try to get references from other subcontractors that have worked for them before. If they are good financially, and have a history of paying well and on time, then you can have confidence that they will pay you, as long as your standard of works remain high. Reputation is a key factor in construction!