3 Key Differences Between Profitable and Struggling Trades Businesses

Why Some Trades Businesses Make More Money—and How You Can Too

If you run a trades business and feel like you’re working hard but not seeing the profits you should, you’re not alone. I’ve worked with many trades businesses, and I’ve seen clear patterns in what separates the most profitable ones from those that struggle. Today, I’m going to break down the top three differences between the most profitable trades businesses and the least profitable ones.

These insights are based on real businesses I’ve worked with, where I’ve seen the same patterns play out multiple times. Let’s get into it.

1. Pricing and Understanding Margins

The number one issue I see with struggling trades businesses is pricing—not just setting the right prices, but truly understanding margins. Most businesses that aren’t profitable are priced too low, but that’s not always the core issue. The real problem is a misunderstanding of gross and net margins.

Here’s where things go wrong:

• Some businesses set a gross margin target of 50% but don’t realize that’s not enough to cover all their expenses, leaving them with little to no net profit.
• Others assume that if they have a 50% gross margin, they can freely spend the remaining 50% of revenue, without accounting for operating costs, taxes, or unexpected expenses.

The profitable businesses? They ensure their gross margins are high enough to cover all expenses and still leave them with net profit at the end of the year. And more importantly, they understand that their gross profit isn’t actually their money yet—it still has to cover the cost of running the business.

2. Communication is Everything

If I had to pick the single biggest predictor of success for a trades business, it would be communication. Trades businesses are service businesses, which means that how you communicate with customers is just as important as the quality of work you provide.

The most profitable businesses nail communication in two key areas: congruency and honesty.

• Congruency: Your customers should feel like they’re dealing with the same company no matter who they talk to—whether it’s your office staff, sales team, or the people in the field. The best businesses do this by using a solid CRM system and ensuring their team communicates internally so everyone is on the same page.
• Honesty: When something goes wrong (because in this industry, things always will), the most profitable businesses make it right. In trades, you’re often working in people’s homes, and trust is everything. If clients see that you’re honest and transparent, they’ll come back to you time and time again.

Why does communication matter so much? Because it retains customers. And customer retention is the cheapest and easiest way to grow your business.

3. Efficiency: Profitable Businesses Don’t Waste Money

The third big difference is efficiency. The best trades businesses don’t just make money; they make sure every dollar they spend has a purpose and generates value.

Here are two big ways they do this:

• Vendor Negotiations: A simple but highly effective strategy is asking for better deals from suppliers. For example, if you run a painting business, ask your Sherwin-Williams rep for a discount—you’ll likely get one instantly. The most profitable businesses build strong relationships with their suppliers and leverage those relationships to get the best pricing.
• Employee Efficiency: Wasted time is wasted money. Profitable businesses have clear processes in place, so employees aren’t reinventing the wheel every day. They also automate whatever they can—whether it’s paperwork, scheduling, or data entry—to save time and reduce errors. The cost of automation is often much lower than you’d expect, and the time savings can be massive.

Final Thoughts

So there you have it—the three biggest differences between profitable and struggling trades businesses:

1. Pricing – Profitable businesses set margins high enough to cover all expenses and leave room for profit.
2. Communication – They ensure a smooth customer experience and build trust, which leads to repeat business.
3. Efficiency – They cut waste, negotiate smart deals, and streamline operations for maximum profitability.

If you’re running a trades business, take a step back and assess where you stand on these three factors. Even small improvements in these areas can have a massive impact on your bottom line over time.