Do You Understand Business Finance Vs. Personal?

mahlere

It seems like a mean question, but having read through this site for awhile, it appears that many? most? contractors here view their business through personal finances.

What I mean is this:
-There appears to be no understanding of business debt vs. personal debt
-Leasing of commercial equipment is constantly confused with personal vehicle leases
-The seems to be a complete lack of understanding how to get capital

I'm not trying to start anything, but it seems that there is a great opportunity here for education of contractors. Nathan, maybe you have some connections?

I see the same questions posted over and over:
-How do i figure out what to charge?
-How do I do this project if they won't pay me a deposit so I can buy the material?
-How do I get more work? What do I do when their is no work?

It's just an observation and I don't have all the answers, but there are people on this board, and others, who know way more about this than I do. Seek them out.

If you are going to be a contractor, this is important information.

Good luck.

Melissa

I'm actually thinking of some classes that I can take to gain some more knowledge. Mahlere, (what does that stand for anyway? ) How did you gain your knowledge?

mahlere

it's secret code....last name and first initial. Heck, it's easy to find me if people get angry at me.

I'm unlucky enough to be born into this mess. But I learned most of my basic business knowledge at Rutgers University (Finally got a good football team ) But most of my knowledge for successful contracting can be credited to the individuals that write the columns for this fine publication www.pmmag.com (No, it's not **** )

I've learned more from plumbers than any other trade about how to run a successful business.

But mostly I hate doing the actual work, and I love the business side, so that's where I focus.

Double-A

Excellent observation. Many folks are smaller, one or two person operations, so they don't see a real need to do much more than get a company checking account.

This will never replace doing a proper set of books so one has access to financial information in short order. This information is invaluable in determining proper cash flow projections, true financial status, etc.

Many smaller operaters just look to see if there is money in the checking account and act accordingly.

If this is the way they are running their business, its no surprise when they ask questions like how to set a price and how much the 'going rate' is.

Some excellent, easy to read and understand books are out there for the curious.

"Markup and Profit, A Contractor's Guide" by Michael Stone, "Where Did the Money Go?", by Ellen Rohr, are two excellent books and a great place to start.

Some of you may say, "Baloney! I don't need some over-priced salesman Guru, want-to-be telling me how to run my business!" Well, fine, but if you're on this site, you're here to learn, or so I would assume. So, these are two good places to start.

You've already shown that you're smarter than most in our trade by reading these forums and trying to learn from the mistakes of others, so what if Micheal and Ellen get paid for their words of wisdom? Does that make them any less wise?

We also have the likes of Bob Kovacs on the forum, although his brain hasn't been picked much.

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

mahlere

Ellen is one of my favorite sources. I don't personally know Bob, but he definately has more knowledge than I do, so I read what he says and learn all I can.

The information is out there, but what you do with it is up to you.

dirt diggler

Mahlere I agree with you

unfortunately ... I do not have much expertise to offer hahahha

I think another problem is that few really understand how much they ACTUALLY make....

was it you that was talking about the plumber who grossed (or netted even, can't remember) a million working 20 hours weeks??

mahlere

yep. but mind you, he is running 25+ trucks, spends about $1mil/yr on advertising, etc. But, he did not start with money. He started and failed at something like 9 businesses before this one. Now, he comes in at 5:30A, see reports from the day before and is out the door between 8:30 and 9:30a. End of day.

Do you think he got that way by paying cash for everything? Or getting a deposit in order to cover the material?

dirt diggler

alright, ill segueway here ....

why does anyone ever front their own money??

why??

why??

why??

mahlere

we never front our money. we front OPM. We use our suppliers money, our vendors money, other people's money. We use AMEX's money too. They give it to me free for 30 days.

But, with the projects that we do, we work it 2 different ways.

With residential service, it's all COD. Most jobs are =/-$500, +/- 2 hrs, and are payable upon completion.

With commercial, sometimes there is a deposit, sometimes there aren't. But there is payment made before our supply bills are due. The only thing that we sometimes have to front is payroll for a week or two. But as I said, that's the game.

Good luck

dirt diggler

the most ill buy past a draw (in other words, buying materials for a phase not paid for yet) would be incidental items that i'll need anyways.

i see the risk thoough on the commercial ... not getting a deposit ...

mahlere

The other thing to remember with commercial is this, while we have contracts that state certain requirements (payment schedule, etc) any unscrupulous GC that you may deal with probably knows all the laws and how to get around them.

My attorney has, in the past, advised me not to bother filing a lawsuit for under $25k. So, while the contract may call for a payment, what recourse do you really have if the GC holds up a $5000 payment? Lein? Small claims? He'll usually eventually pay you, but it's a hassle.

thom

actually mahlere if the GC isn't paying on a commercial job, just talk to the business owner/manager. Don't be threatening or angry, just explain that the GC isn't paying, and that will force you to file a lein. Generally, the owner/manager will do your work for you, unless he isn't paying.

Remember, there is a small claims court in most jurisdictions. Generally you can sue for $10,000 or less without a lawyer. The first time you do it will take some time to educate yourself. Consider it an investment in your future. Sue that GC. Don't sign a contract that says pay if paid or pay when paid.

mahlere

good points.

Bob Kovacs

Careful- there's not much left to pick after the week I had....lol.

Bob

mdshunk

Yes, I've done this several times now for people that I felt never intended to pay in the first place. One $600 judgement was ordered to be paid in $10 a week installments. One $1200 judgement was ordered to be payable when the person's tax return was received, but no later than April 15th (this was last December). It's kinda frustrating. I didn't do the work in 10 dollar installments, but they got to pay me that way. It only takes about 10 minutes to file at the district magistrate's office, and the hearing is only about a 15 minute affair (not counting drive time for each). I generally let the smaller one's slide, and just phone them every once in a while. There are a few that I just had the gut feeling that they never intended to pay anyhow, and they're the one's I'll take to the magistrate's office.