To all The Newbies Starting Up Their Own Business - Contractor Talk - Professional Construction and Remodeling Forum

dirt diggler · 03-18-2007, 09:36 PM

Shelf - any others

im very guilty of making snide, bitter and sometimes offensive comments towards people just starting up.

im green too.

But ... here's my take on it

Ah... starting your business ... That FIRST day where you're sitting there at your desk - or that FIRST shipment of business cards or that FIRST advertisement in the phone book.

and when you get your first client. My first client was about a 30 minute job and I turned it into a 2 day event, lol. I even had him sign a contract (the job was for $160). Cute ... at least his wife thought so.

No traffic jams. Stay up as late as you (have to) want to. Take off mid day for lunch with a friend. Go grocery shopping at 3 PM. Coffee n smoke breaks when you want. Go to the bathroom anytime. Shower at 2 PM. Play guitar for 15 minutes while waiting on a fax. Ah, freedom.

So then the honeymoon's over ...

Man!! now 2 months into it all, you find that your "capital" has been spent on business cards, phone bills, t shirts, truck payments, rent, FOOD, gas, health insurance ... office supplies ... tools that you bought that you really didn't NEED at the time ...

and now you're out of capital ...

Then the bills come. You think "well ... I'll wait out 30 days ... something's bound to come along - after all, the new phone book just came out" .... Next thing you know ... you're 90 days behind on your phone bill and it gets cut off on the morning you're meeting with a prospect. Wonder what they'll think when they call and here "this number is not in service"

so you get a prospect... you think "well ... i'll have this done by XX amount of time and I'll get XX"

Then XX comes and suddenly you realize you (from inexperience) underbid your project. You didn't lowball ... you seriously just underbid it. You weren't realistic. You rushed an estimate. And NOW -- you're in the hole

so you take another job ... this time maybe even purposely lowball it just so you can "get the job" so you can pay your way out of the Project One.

Oh wait --- you were counting on that first one to pay the 90 day overdue bills .... and XX amount of time has gone by and NOW you are being sent to collections. Your credit score - gone

GREAT!! --- you got the second job .... you use the down payment to pay off the first project. Clients are happy --- you did great work!!!! Things will be fine now, right??

Sh*t -- second job (which was on the low end) has a couple problems. One of your suppliers raised their rates from last quarter ... and you misunderstood one of your subs and now you're paying him more than you thought. Not only did you lowball it - but you lowballed with last quarter's rates. OOPS!

Meanwhile -- you've got a stack of bills.

In a humble-panic --- you explain to one of your subs that you're in a cash crunch. He's not happy - but gives you 30 days cuz you're an idiot and knows that's the only way he'll get paid.

WHEW!!!! You thank him - you can sleep tonight

so you take the money you were to pay him --- and pay down some of that debt that has been in your stack for 90 days

Customer #3 was referred to you by #1 --- and they want to start NOW. You take them --- you NEED the money ... right???

so you take the DOWN PAYMENT and use that to pay off the rest of your bills.

Whew!!! --- ok, debts are gone -- but you're seriously behind on Project #2 ... fortunately - you figure you can do what needs to be done in order to get to the next installment. You're just a couple tasks away from payment.

You work a weekend ... dawn to dusk ...

uh-oh ... flat tire. You find out that you need 4 NEW TIRES. You need about $1,000 for this

you can't afford these new tires. Because you have no money. You borrow a friend's car --- but it took you all day Saturday to track him down --- and you HAVE to finish by Sunday evening because HE NEEDS it to go to work on Monday.

So you scramble ... you get a bit sloppy. But you finish.

Customer on Project #2 doesn't like what she sees. You don't either - but you NEED her payment. But you're a good person ... and you tell her you will "tear this out and have it replaced"

Only thing is ... it's Sunday evening.

Your friend needs his car back
You need $1,000 to get new tires
You owe your sub his payment
You SPENT the third project's down payment - so you will NEED XX AMOUNT of dollars to even START that project now

and -- you are 3 weeks away from owing THIS MONTHS bills

AND --- you have to eat tonight, right?

You talk to your friend ... he agrees to let you drop him off at work and pick up at 5 pm. So you get to use his car.

A week goes by --- you had to tear out on project 2 and replace... whew - you get paid.

immediately, you go buy your new tires - pay your sub - pay your friend for gas

oh wait - a warranty situation comes up on Project #1. You need to fix this.

Next thing you know ... Clients from Project THREE leave a message. OH MAN!!!! It's been nearly a month since you took their down payment and NOTHING has happened. Only they do not care that you fell behind in your schedule - or that you had flat tires.

They want to know WHEN THE F**K ARE YOU GONNA START MY PROJECT

"Right away!!!" you tell them.

Oh no ... you spent their down payment nearly a month ago ...remember??? you had to pay all those bills off???

Where are you going to come up with the money now???

You spent the Project 2 Draw/installment on warranty from project 1, new tires, and your sub

and now you don't have enough to even get to the next draw on project 2. And you have no money to even get started on Project 3

Now you're stuck --- but you're in luck. Cuz Project 4 just signed their contract .... WHEW!!! right??

this is not a totally fictional story. And it shows you how SEEMINGLY small "day-to-day" decisions can literally put you into a vicious cycle that is like a centrifigal force and you can't easily get out.

it is NOT fun. it is NOT glamorous.

and it all started with ONE underbid project and a couple bills that you "let slip for a month".

my point is ... this is real and CAN happen to YOU ...

it's not something you read in a book
it happens from a lack of experience and business sense.

and ONE bad decision - even if it's harmless at the time - CAN create such a chain reaction that it CAN take several years to get out of.

It's an awful feeling. There's worse things that can happen too - this is just one story.

I still haven't gotten to write the end to this one either .... I'm only here NOW because I didn't like the ending that someone else might have written for me ...

dougchips · 03-18-2007, 09:49 PM

Good post Dirt. You left out the drugs and drinking in order to cope with all of the stress.

Norrrrrrrrrrrrm · 03-18-2007, 09:51 PM

I think that is the longest post I have ever read. It made me frantic just reading it!!!

4theroc · 03-18-2007, 09:54 PM

wow, u went through that dirt? When i started out, i just paid $40 per week to advertise in the newspaper. The add always paid for iteself. never got into any trouble. everything paid 4 cash

dirt diggler · 03-18-2007, 09:56 PM

Quote:

Originally Posted by Norrrrrrrrrrrrm

It made me frantic just reading it!!!

try livin it ...

point is newbies - go slow ... think ... ask questions ... maybe start going to church

it is a fast ride that goes up and down

there is no crying
no feeling sorry for yourself

balls to walls

every day's a title shot

RobertCDF · 03-18-2007, 10:39 PM

I want some royalty money for using my story there Dirt.

Its close to what I went through... I am still paying off some of the first projects I did. Used my personal credit cards because I wanted to look big... I dont need weekly draws or more than material up front... BIG mistake! That money goes quick when your like... Well I need this and this and this tool and I want to go out to eat whenever I want....

My advice is this:
1. Keep a part time job or even a full time job as long as you can! I had a part time evening job that I kept for a while. It did not pay a lot but it helped get me barely by. My wife had a job as well. If not for that I dont think I would be here now.

2. Do what you say you will do. You need those first few clients to love you for refrences and hopefully referals from thier work and neighbors.

3. When you make a bid see if you can run it past some people. Look the things over 4-5 times. Go through each step. EX: if your building a deck first draw the plans. Then start adding it up, make your take off. I start at the bottom and work my way up. How many piers? And then figure everything you need for those piers and write them down including the time it takes to dig them. Work your way through the plans.

4. REPEAT step 3! again and again till you go though the list and its the same as the last time. Then maybe you will have not forgotten anything. Then add 15% to the cost of the materials JUST FOR FORGOTTEN ITEMS AND PRICE CHANGES.

5. MARKUP your material. EVERYONE DOES IT! you dont go into a store and expect them to sell it to you for what they paid for it do you?

6. Figure your overhead. Read any book you can at the library (its free) Your overhead needs to include everyday expenses that you need to keep the business running. License, insurance, truck payment (if its paid off then you still need to put aside a payment worth to buy a new one with later or for repairs), fuel (keep in mind you may be running to HD 2-3 times a day because you forgot something), paper, tools, rent, more tools, office supplies, etc, etc.

7. Make lists before you go to the store and even every night so you know what you will need the next day.

8. Be professional... Dont mess up the clients bathroom, kitchen, driveway (if your truck leaks put something under it or park on the street).

I have more but this is about all I am going to write for now. I am sure some others will add to this.

**Ed the Roofer** · 03-18-2007, 10:43 PM

These words he speaks are true, we all were and sometimes still are in that kind of situation if you do not budget and plan.

If you fail to plan, then you are planning to fail!

Its not how many times you get kicked in the teeth and get knocked down, it's how many times you get back up to try tio do it again.

Hopefully, each next time with a little more experience.

Ed

shelf guy · 03-18-2007, 11:17 PM

dirk, thanks for your words, i take it all seriously.

i know i have a lot to learn, thats why i registered here!

Magnettica · 03-19-2007, 01:00 AM

Only 15% markup?

Go for 40%.

CheckmateOhio · 03-19-2007, 05:52 AM

reading that makes me glad I started out for a builder.

I actually started framing houses on the weekend for a builder. The other trades could not believe their eyes monday morning when there would be a house standing monday morning where there was just a foundation friday afternoon. We would leave regular work friday and bust ass all weekend long, then just have some punch out and windows for monday evening. The builder was so impressed that he pulled us in and bumped out his main framer who had his son runnin the business and quality was slackin off.
We were rollin in the $$ for the first year and a 1/2. My business partner and I both made around 100g the first year. Too bad year #2 slowed down and suprised us. We got through it, but cut back from 18 guys to 5 or 6. The builder stopped payin his bills so we got out of there after year 2, but things worked out okay. That first year let me buy all the tools I needed. It IS amazing how fast tools break though when you start getting tight with money.

RobertCDF · 03-19-2007, 07:48 AM

Quote:

Originally Posted by Magnettica

Only 15% markup?

Go for 40%.

Thats not a markup... That is an pricing error / forgotten materials buffer.

The markup is a seperate thing and can vary depending upon the items. I cannot markup composite decking 40% but I can markup a $2.30 item 40-50%

Mud Master · 03-19-2007, 08:00 AM

Murphy's law...Everything will happen when you don't need it to.

Same Old · 03-19-2007, 08:29 AM

I thought I was the only one that started out that way.

I think it's almost inevitable to get in that "I need to get this done to get paid, NOW!!" situation at some point early on in your business.

I feel I am a professional landmine sweeper now. Especially being a general, your main job is to recognize potential problems and avoid them. It gets easier, the more problems you see and solve, to tackle the next ones.

I once read an article where they interviewed a large number of self made millionaires. 3/4 of them had some college but no degree, most of those dropped out because of their first business took too much time. ON AVERAGE it was the FIFTH business venture that they made money on. AVERAGE!
Now I'm not suggesting that people should bankrupt 4 companies before they get a system that works, but it says something about tenacity in building a successful company. Everyone went through tough times, But you have to stick it out and learn from the mistakes.

I like to give new contractors the benfit of the doubt and save my indignation for the HOs that think they can call up a bunch of subs as easily as I can.

dirt diggler · 03-19-2007, 08:42 AM

Quote:

Originally Posted by Same Old

Now I'm not suggesting that people should bankrupt 4 companies before they get a system that works, but it says something about tenacity in building a successful company. Everyone went through tough times, But you have to stick it out and learn from the mistakes.

.

great point Same Old

yeah, you don't need to go get bankrupted 4 times (imagine the credit scores ...)

and like i said - they DEFINITELY skipped this kind of stuff in every "Business for Dummies" book out there

and the above story - it's not something you get into on purpose. Really - it starts with one simple decision (which might even be a good one at the time)

but it's a heck of snowball that can be built - and it just takes gravity

the old saying "whatever doesn't kill you makes you stronger" .... i hate cliches - but that one's true.

A.W.Davis · 03-19-2007, 09:01 AM

Heres my advice from what I have learned and examples to hopefully help others who are newbies such as myself

1) expect to work long hours
I work probably 13 hours a day, 8 hours at work, then usually around 5 hours at home working on estimates for jobs and just studying products that I will be recommending to HO's

2) Include everything in your estimates
It usually takes me 3 days of writing down material lists for jobs I am bidding on to make sure I wont be spending my "capital" on material I didnt account for....and always mark up the material.

3) Go the extra mile for customers
I will usually take extra steps and go the extra mile to make a homeowner happy. That doesnt mean doing free work for them because your time is important.....little things like bring them there paper from outside when you show up at 7:00.....when you stop at a donut shop...get enough for them! Offer to pickup lunch......I am generally a nice guy and as long as I know the HO isnt trying to take advantage of me I will be very gracious! I love letting the HO's take the first swak at there nasty old tile countertop before I demo the whole kitchen....sometimes I take a picture of them doing it and give it to them at the end of the remodel......it really puts a smile on there face!

4) Be patient
There will be times when the phone never rings......try not to stress.....your building a business, and its very slow in the begining. I had a very dry spell, with nothing scheduled.....I was off for a few days, what did I do...I went to tile stores, and lumber yards, and cabinet showrooms. I went to appliance centers and just talked with everyone, I got to know people, got referances, that way I had people I could direct my prospects too when looking for ideas, the point is even though I wasnt working...I was still working on my business!

5) Be clean
A homeowner can tell a lot by his worth ethics based on how clean the jobsite is....take a little extra time to keep things clean and tidy.....your business depends on it! I am a very neat organized person....and have recieved lots of compliments of how clean I am.

6) Be accountable with homeowners
self explanatory

I think thats it....I have my wife to thank for pimping me out to her co-workers, that helps a lot too!!

tom m · 03-19-2007, 09:20 AM

I wish this site was around 15 years ago, although I was warned about business I didnt listen and you just need to find some things out for yourself, and I myself dove in too fast. The rollercoaster never ends. I am going through my first work drought in all these years--3 months of time wasting shoppers, the bills are piling up. Now I read these posts and think Im going crazy, questioning everything I do as if I brought this on by mismanagment, and lack of advertising or planning. On the otherside of the coin if dont dive in you might not ever and I dont think I can live any other way.

Forry · 03-19-2007, 10:20 AM

I might've gotten lucky... only too 8 years to pay off the first 2. Better now...The above are good business models for the beginner.

elvinstheman · 03-19-2007, 10:42 AM

Wow dirt – one of the best post I’ve read anywhere!! EXACTLY what I needed to hear as I get ready to get my thing going. I was riveted from reading the first sentence.

If you ever need a change you should write thrillers!

For all us newbies, I really want to thank you and everyone who has followed up. This wisdom is invaluable and I’m going to take it to heart.

Susan Betz · 03-19-2007, 12:02 PM

Great post, dirt.

One of the most serious problems for new companies in undercapitalization. The more money you have in the bank, the better. Make good choices about what you'll buy. The six-year old computer that still works? Don't replace it. Drive your old grimy truck another year to keep higher payments away. Run your office out of your home rather than leasing space (if possible) - I know a guy that runs a painting business and needs more space than he has at home, but he rents one of those self-storage bins and keeps everything there. One phone line will do for now - teach the whole family to answer "Company XYZ, this -nam-, how can I help you?" Family and friends will understand.

You need the business cards and you need the tools. You need to advertise, you need to pay for materials, and labor, and costs, and you need to make a profit. Profit is your paycheck! Remember to pay yourself!

stonemountain2 · 03-19-2007, 05:15 PM

the country needs more contractors... as long as they learned from the pros, paid some dues and can handle it...they are in...

In Canada tax payers are funding education and jobs for newbies...desperately need skilled people in Ontario since everyone is in Calgary for a while