The School Of Hard Knocks. What I've Learned While Running My Business

 
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Old 12-15-2015, 06:20 AM   #1
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The School Of Hard Knocks. What I've Learned While Running My Business


#1. This is not a hobby.

Congratulations! You've decided to start a business doing what you love and you'll be charging customers for this service. Most contractors go into business thinking I'll just charge more than X-------.

Not knowing the difference between fixed and variable expenses and how to pay yourself accordingly while generating a profit for the business can quickly turn your hobby into a nightmare.

What does a successful business look like? It generates enough revenue to pay all of its expenses while providing the business owner with a comfortable living wage (salary) and still has left over money to put in reserves.

#2. You're not an employee.

Many years ago before I went into business, I was an employee. A tradesman, my boss paid me an hourly rate to deliver a service for his company, and I was good at it.

When starting out, I dreamed of opening my own business after learning the trade.

My old boss appeared to live comfortably, while physically working very little. I was jealous and envious. Running a business had to be easy, right?

Wrong! You're going to learn quickly just how simple life was working for someone else. The responsibilities of running a business can be overwhelming.

#3. Understand your finances.

Do you want do be in business 5 or more years after starting? Do you want to provide a good life for yourself and the family? How about retiring comfortably? Unless you have a degree or background in finance, you'll need to speak to a good accountant before starting up.

A good accountant will help you understand how to manage cash flow and finances. They'll teach you, what to charge for your services and so much more.

Look at the statistics. Most construction companies don't survive 5 years. Why do these companies go out of business? Because they don't charge enough money, or collect on receivables to keep the business running.

I'm going to give you a few examples of business failures that I've seen.

Example number #1

Paul was one of the best finish carpenters I'd ever seen. Paul would win awards for his work and was showcased in many magazines. This guy was a true craftsman. He never advertised, but he stayed busy through word of mouth. He was always busy, working 7 days a week.

Guess why he stayed busy? He was cheap. He was happy making $500.00 per day and in the beginning it worked, but as worked picked up so did his expenses. He never accounted for them and went out of business within 3 years riddled with tax burdens and debt.

He works for me.

Example #2

Nick was running a home remodeling business for years. He was the premier deck builder in my market. He had an excellent reputation and made great money.

One day, Nick and his partner decide to get into the commercial business here in NYC. He was now bidding large prevailing wage jobs. Nick knew his expenses and charged accordingly. He was on the path to financial freedom, or so he thought. Big jobs started rolling in. He was delivering the jobs but the cash didn't come in fast enough.

Nick was struggling to get paid for the work he completed in a timely fashion. After a few months went by, he couldn't pay his help. He started borrowing against his house and building but the money still didn't come in fast enough.

Nick went bankrupt. He lost his business, house, building and everything that he had because of cash flow problems.

Don't become a statistic. Understand how money works and reap the rewards.

#4. Bigger isn't always better.

My father owned a construction company here from 1974 until 1998. He'd seen the building booms and swoons. His business expanded and contracted many times over the years due to the economic situations. He'd seen it all and retired comfortably at the age of 57.

He offered one piece of advice before I started out and I regret not listening.

"Stay small and keep it all"

My old man was a high school drop out but he wasn't stupid. He started working in the industry at the age of 17 and by the time he was 23 went into business for himself. The business was different then. The housing market was booming and they were building everywhere.

He knew all the builders and quickly found himself employing over 70 full time mechanics. He made a good living. I remember growing up and never needing anything as a child. We had the big house with the picket fence, cars, nice clothes, vacations etc.. I was truly blessed.

Then came the crash of 1987. His work literally stopped over night. I remember the stress it put on my family. My parents did their best to hide it from me and my sisters but it was evident. My mother started working full time while he stayed home. Spending time with my dad before the crash was rare, he was always working. Seeing dad home was exciting and confusing all at the same time.

After a year or so life started to get back to normal. Mom was working part time and dad was working but I noticed he was coming home early every day. He went back to work and rehired his best employees. Dad now employed 12 full time mechanics.

He turned down work while focusing on profits. This man built a smaller, and leaner company. The money was rolling in and he retired comfortably a few years later. Ask him and he'll tell you that he made all his money after the crash of 1987.

He stayed small and kept it all.

#5. The world doesn't revolve around you.

Simply put, don't be a dick. Treat people with respect. I've seen too many self absorbed assholes in this business go out of business and I smile every time.

We're in the relationship building business. Do you want great customers to refer you? Treat them with respect. Listen to their problems and solve them. Strike up a friendly conversation and get to know them. I promise you it's fun and there's no better feeling than seeing a past customer approach you to strike up a conversation while you're out with family.

Have you ever heard the saying "it's not what you know, it's who you know". Look at any successful person and you'll finally an army of friends and admirers.

Building a business brand is great but what's more important is your personal brand. When people like, know and trust you they will help you, but be genuine. Enjoy the day to day interactions with everyone you come across and you'll not only find yourself successful, but you'll live a life feeling fulfilled and accomplished.

#6. You're not the best.

How many of your competitors advertise they are the best?

I say who gives a ****. Just focus on getting better everyday. It's the only thing that you can control.

How do you become better at different tasks?

Read a book, study the subject. Talk to industry experts, or most importantly hire them.

Let's face it, you're not going to be great at everything you do. As a business owner you'll need to understand, finance, marketing, sales, production and many other tasks. Identify your strengths and weaknesses. Be honest with yourself. It can be a humbling experience.

Once you've identified your weaknesses. Hire an expert to run that part of the business for you. This doesn't mean that you should hand they keys over to this person. It's still important that you manage them and learn as you go.

Remember, you're only as good as your weakest employee. If you want to build a successful business. Swallow your pride and hire people that are better than you and treat them with respect.

#7. Company culture is important.

Why so serious? How many of you had a job you couldn't stand in the past?

Let's face it. Work sucks! It's not easy, it can be stressful and physically exhausting at the same time.

Why can't you provide a fun and rewarding environment for your employees?

Besides providing the basics like a salary and full time work. How many of you actually pay a top rate to your employees? How many construction companies provide medical and dental benefits? How about an IRA or profit sharing?

If you want the best employees in your industry, you need to provide all or most of the above. A great employee will not work for less and if you happen to get lucky and hire someone great without providing the above they will most likely leave you for another company very shortly.

With that said, if you decide to provide these benefits your company better have strict hiring guidelines and processes in place to make sure you're only getting the best. Hiring an average employee while providing these benefits can be expensive so be careful.

I recruit great employees from competitors to come work with me all the time but I'm not perfect. Every now and then I'll make a mistake and hire the wrong person. I'm honest and set the expectations up front. We have an employee handbook that lays out everything. If they don't meet our expectations we let them go right away. I'd rather be short staffed than keep someone on that doesn't meet our expectations.

Equally important is the environment which you provide for them. Do you provide them with the best tools and equipment? How about having fun while at work? Do you ask your employees for their feedback? Do you foster and environment that promotes creativity? Do you give bonuses?

Remember, employees are people, not machines. They want to live a fun and rewarding life while providing for their families just like you do.

#8. The customer isn't always right.

Some of them can suck the profits right out of your company. This question has been asked a thousand times and chances are you've heard it before. Who is your ideal client or clients? What do they have in common?

Think back to your best customers and worst customers. Make a list and then write down some characteristics about each one, like where did they hear of you, neighborhood, value of their house, age, gender etc...

The more you write the better. Find the common characteristics between them and you'll create a profile of who you want and don't want to work with.

You might even build a dozen or more profiles.

Once you've identified who your ideal client is, figure out how to advertise to them. Are they on Facebook? Do they belong to a certain group on Facebook? What do they read? What do they watch? Who do they hang out with and where? Etc..

I'll give you an example of one of my ideal clients.

My ideal client is a mom that has a child with asthma and severe allergies. She has carpet in her house that she desperately wants to get rid of to improve her child's quality of life. She can be single or married. She owns her own home. That home is in the 450k plus range and she may even have a pet. Their pet hairs get trapped in the carpeting making it difficult and dangerous for their child.

We created a full page flyer discussing the benefits of changing out carpets for something more Eco friendly like hardwood or laminate floors. I advertise this flyer in pediatricians offices, the parent magazine and in local school PTA flyers.

This ad has generated me we'll over 7 figures in the 4 years I've been running it.

Remember, identify your ideal client, target your ideal client, deliver relevant content to them and test and tweak your message until the leads start coming in. If you do the above correctly you will have more quality leads than you need.

#9. Your systems suck.

Most business owners in the construction industry fly by the seat of their pants. The contractor runs his business in such a way that he/she is the business. For very small companies this can work, but if you want to expand you'll need to start developing systems and processes.

I highly recommend reading the book e-myth contractor for a better understanding how creating systems and processes will help improve your business.

Start out by writing down a flow chart of steps that need to be accomplished to complete a task. Refine and simplify them as best you can.

A successful business will have systems for everything like, marketing, sales, finance, production, hiring etc..

By writing these task you will be creating a training manual for every employee that works with you in the future. The new employee will need minimal training while staying consistent with your companies goals and objectives.

The best part about creating systems for you company is that your business will be self sufficient. It will run on cruise control, allowing you to take time off and enjoy what's really important.

#10. Don't forget what's really important.

One of my most important beliefs in business that I've developed over the years is that we all work to live and don't live to work. It's very easy to let the business overwhelm you with the day to day operations, especially if you're not running your business correctly.

I'm only 37 years old but I've learned that life can pass by quickly when your not paying attention. A few years ago, I was working 12-14 hour days 6-7 days a week. I would leave early and come home late. I rarely saw my kids. Then one day it hit me on my daughters seventh birthday.

It forever changed my life. She was seven, and I swear to you I didn't even realize how old she was getting. Those seven years went by so fast. From that moment I vowed to spend the weekends and evenings with my family. I will not see a customer or answer my phone before 8 a.m. Or after 5 p.m.

I started this business of mine years ago for my family, but somehow lost touch because of it. Not anymore. I'm a father and husband first and a business owner second.

I'm sorry for the long post. I hope you find what I've put here to be helpful. If I help one person improve their business it was well worth my time invested in writing this. Please excuse the typos and please add your experiences to this post.
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Old 12-15-2015, 06:29 AM   #2
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


Good reminders. Thanks for the post.

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Old 12-15-2015, 06:40 AM   #3
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


I felt compelled to write this, because I wish I knew these things when I started out. It would've helped me save time, money and my sanity lol.

I enjoy talking to, learning and teaching people in this business.

Hopefully I've taught a few valuable lessons and will learn from other replies here.

Please add your list.
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Old 12-15-2015, 11:19 AM   #4
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


I recently had someone say man you have the dream, on a good day maybe. The amount of my self and soul that has been sold to own operate and deal with Accurate Cut oh how I miss getting a paycheck and going home. I tell people Im the shop keeper the stocker and the floor sweeper and the list goes on. I recently learned not to do all progress payments on a credit card to the tune of 15 grand and change because someone could and tried to dispute the charges, thank god I paid the lawyer 2 grand 5 years ago for the contract that protects me in such cases. The time I spend dealing with some of the inner workings rather than the work can throw off a 3 day project which makes for some interesting client calls they are sometimes understanding sometimes jeckyl n hide. I love the work Im decent at it but thats not all that has to go into me being the owner a father and a reasonbly sane person. I enjoy this site as I learn and know we all have struggles triumphs and things we all go wow didnt see that coming.
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Old 12-15-2015, 01:51 PM   #5
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


Sometimes we need to stop, look around, listen and smell the roses.
We do get self absorbed and it's hard to change.
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Old 12-18-2015, 12:46 AM   #6
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


Really good OP. I've gone back and forth about hiring on an employee but truthfully have a good thing going with my small operation.
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Old 12-18-2015, 04:41 AM   #7
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Old 12-18-2015, 07:47 AM   #8
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


Great post. Should sticky this for all the kids who come in here asking if they should start a business.
Love the floor advertising idea! That is understanding your ideal client!
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Old 12-18-2015, 07:51 AM   #9
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


Nice. I need to go back and read that a couple of times.
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Old 12-18-2015, 02:58 PM   #10
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Stay small and keep it all! My favorite
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Old 12-19-2015, 12:26 PM   #11
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


#11. Building a brand.

What is a business brand? It's your business identity and if your a new company, it can be a struggle to generate leads without it. The good news is that you control how the people in your market perceive your business.

It's also important to realize that a strong brand is more than just a logo; it's reflected in everything from your customer service style, staff uniforms, business cards and premises to your marketing materials and advertising.

How do you start?

Over the years I've experimented with everything, but my business didn't truly grow until we professionally lettered the trucks, dropped matching yard signs on every job and required all employees to wear a matching company uniform.

A professionally lettered truck is a rolling billboard. Think about how much driving you do in your market.

Did you know that it takes on average 7 touch points before a person will recognize your company?

Get that truck lettered and in a few months time, you'll be surprised how many customers in your market will want to do business with your company.

It's the foundation to building a successful business IMO. My website, direct mail and print advertising have become much more effective because of it (leads increased over 500%) and sales closing ratios have increased as well.

When my secretary talks to a potential client, almost 90% of them respond to the question "How did you hear about our company?" with "I see your trucks everywhere".

They'll be responding to a direct mail piece or looking at a print ad in the local newspaper, but in almost every case. They see the trucks, so we must be successful and do great work. They trust my company.

We have 3 trucks on the road everyday. That's not a huge fleet, but it keeps my company on top of the customers mind and my business has been successful because of it.

Last edited by lawndart; 12-19-2015 at 12:31 PM.
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Old 12-19-2015, 12:40 PM   #12
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


Great post Lawndart.
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Old 12-19-2015, 01:06 PM   #13
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


$500 a day sounds pretty good to me. If he works for you now, I assume you are paying him around $80/hr. Good for you if you can manage that, I just don't think I could make a go at billing someone out at $150-200 hr.
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Old 12-19-2015, 02:26 PM   #14
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


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$500 a day sounds pretty good to me. If he works for you now, I assume you are paying him around $80/hr. Good for you if you can manage that, I just don't think I could make a go at billing someone out at $150-200 hr.
You can do it at $2,500 a week or $10,000 a month if you have low operating expenses. Once you pay for a truck, tools, shop, CPA, lawyer and all the other expenses that go into being available to do business, that $10,000 a month doesn't go very far. It certainly isn't a 6 figure income which could cause a person to wounder if they should just get a job.

$500 a day sounds like a lot if you are used to making wages. As a business, not so much.
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Old 12-19-2015, 02:38 PM   #15
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


Sometimes you gotta be a dick
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Old 12-19-2015, 03:09 PM   #16
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


Great post(s) for the most part, but #11 seems to contradict #4. Are you keeping it small or building a brand (making it big)? As far as lettering your trucks - I would do it on a truck that's mainly used for estimating, but not on a van or trailer full of tools. IMO that just invites thievery.
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Old 12-19-2015, 04:22 PM   #17
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Re: The School Of Hard Knocks. What I've Learned While Running My Business


Man, I could elaborate on all this pretty well but good posts.
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Old 12-19-2015, 04:29 PM   #18
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Quote:
Originally Posted by 66 Shelby View Post
Great post(s) for the most part, but #11 seems to contradict #4. Are you keeping it small or building a brand (making it big)? As far as lettering your trucks - I would do it on a truck that's mainly used for estimating, but not on a van or trailer full of tools. IMO that just invites thievery.
It's dependant on your location whether it invites thievery. It's a good point though.
I think the potential for advertising is worth more than the time lost replacing tools (which are insured, right?) Should you be robbed.

Building a brand and keeping it small are not contradictions. Building a brand can help you get big, sure. Or it can let you really pick and choose your clients.
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Old 12-19-2015, 05:38 PM   #19
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Quote:
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You can do it at $2,500 a week or $10,000 a month if you have low operating expenses. Once you pay for a truck, tools, shop, CPA, lawyer and all the other expenses that go into being available to do business, that $10,000 a month doesn't go very far. It certainly isn't a 6 figure income which could cause a person to wounder if they should just get a job.

$500 a day sounds like a lot if you are used to making wages. As a business, not so much.
If you are a business of one, it's pretty good.
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Old 12-19-2015, 06:05 PM   #20
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Quote:
Originally Posted by Chris G View Post
$500 a day sounds pretty good to me. If he works for you now, I assume you are paying him around $80/hr. Good for you if you can manage that, I just don't think I could make a go at billing someone out at $150-200 hr.

Paul makes $35 an hour with me on the books now.

While running his business he would charge between $60-$80 an hour for him and a helper. I'm guessing those rates weren't enough.

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