Starting a new business - advice wanted - Contractor Talk - Professional Construction and Remodeling Forum

Panzer5 · 10-21-2008, 08:48 AM

Hi all - I'm new to the board and getting ready to start a residential remodeling business. I'd appreciate any advice you have.

Background: I worked commercial and residential construction and landscaping during summers in HS + college. I really enjoyed the work. Then I went into the Marines (infantry & tanks) for about 17 years, and enjoyed that as well. After the war, I got out, got a desk job and hated it. (I am one of those people who needs to be active & see the sun regularly...) I'm also ready to be my own boss.

In recent years I've been a DIY guy and helped several friends remodel their basements. Once again, I find I really like working with my hands and remodelling. I'm starting to get friends of friends asking me to work on their basements, bathrooms, kitchens, etc. So I finally decided to quit the office grind and do (professionally) what I like to do on weekends...

I live in Kentucky - which apparently does not have a GC license requirement - but Jefferson County does require proof of insurance (which I planned to get anyway).

Current Situation: I'm skilled at framing, finished carpentry, painting, hanging drywall (although I hate mudding & sanding), rough plumbing & electrical (although I'll have to subcontract those out due to state license requirements), tiling, etc. etc. I'm also good at marketing, sales, customer service, financial management and running a crew.

I'm going to form an LLC, purchase the required insurance - but I'm a little lost as to what else I'll need (besides tools - which I already own). I.e. accounting software, how to bid a job, how to find good subs, anything else I'm forgetting, etc.

I'd appreciate any thoughts you have for someone just starting out.

TIA.

BuilderOne · 10-21-2008, 09:29 AM

ever thought of a business mentor? a business coach? Try score, they give good advice for free. you can visit your local score office too. i used a business mentor when i first started years ago, and we built a pretty good business

MSS Contracting · 10-21-2008, 10:36 AM

The first thing I've learned in whatever entrepreneurial ventures I've endeavored is to not jump the gun on things that cost money. First focus should always be revenue, which is generally got in the beginning from marketing and networking.

Getting an LLC isn't necessary at the beginning ($300) if it's just you doing the work. It feels cool and all but the only reason to get one would be if you thought someone might sue you for whatever reason. Once you have employees it then makes sense, for as a sole proprietor their screw-ups fall back on you, and not a company entity.

I would recommend filing a DBA (Doing Business As - check your county clerk's website under corporate documents - $15) which lets the state recognize your business name as an entity different from yourself, although the distinction is pretty transparent in a sole proprietorship.

I would not recommend getting accounting software or anything else that costs you money until you are cashing checks in the bank. All that other stuff you've just got to learn, and the forums here seem a good place to start!

SCFoxman · 10-21-2008, 12:38 PM

Quote:

Originally Posted by MSS Contracting

Getting an LLC isn't necessary at the beginning ($300) if it's just you doing the work. It feels cool and all but the only reason to get one would be if you thought someone might sue you for whatever reason.

Personally, I think you NEED to get a corporation setup before doing ANY work at all. Doesn't need to be an LLC, you just need to be incorporated and set the distinction between your business assets and personal assets.

Regardless of how careful, diligent, experienced, etc... you happen to be, the unknown variables of construction and litigious clients will sooner bite you than kiss you.

First and foremost is to protect yourself (and moreso your family) from unnecessary strain. Get your business set up the right way, right away.

Floordude · 10-21-2008, 12:50 PM

I'll suggest some small business classes. You can have all the handskills and craftsmanship out the wazoo, but when it comes to running a profitable business, fail miserably and squealing out a barely livable weekly wage, as they are still in employee or subcontractor mode.

Mike Finley · 10-21-2008, 01:13 PM

Personally, put some freak'n money in the bank for this start up. If you can't even afford to buy software, form a corporate entity or anything else, then stick with a job working for somebody else, cut your expenses and put 10K in the bank to start with. Then do it right from the beginning, kind of just like normal people do when they start a business instead of modeling after a kid on the corner selling lemonade. Yeah, it's a great image of the bootstrapped guy going out without a nickle to rub together and making it happen, eating beans and franks and making do with $50 worth of tools, working 20 hours a day, struggling for 6 months, just keeping barely ahead of the bills, but it's not the way to do it.

Panzer5 · 10-21-2008, 01:30 PM

I've got the money to form an LLC - and too many lawyer friends to not form the company separately from myself & obtain sufficient insurance to protect myself & family. So, I'll be going with an insured LLC (although I know I'm still on the hook for my own mistakes...). I also have been squirrelling away money for over a year to help me either with a start-up or to be the downpayment - had I wanted to buy an existing business.

I'm also in contact with SCORE - have a meeting with them next week, in fact. I've got pretty good business skills - probably on par with my craft/handskills; which is why I want to own the company and be the GC rather than simply sub out.

I guess what I'm looking for is advice on estimating, finding good subs & other technical aspects of contracting. Especially useful would be "I wish I had known then, what I know now" kind of advice; you know -- what do you wish you had done differently type advice.

Mike Finley · 10-21-2008, 01:41 PM

Good for you, it sounds like you are on the right path.

Typically good advice to anyone in business is make your best plans, break them up into small bite sized pieces and expect for it to take twice as long to reach them, and be twice as expensive as you think to do anything.

In today's economy this has never been truer.

If you're smart you will fixate on doing high-quality work and don't compromise on what it costs to achieve it. It takes time to build a reputation so be patient.

All the answers to your questions are in the search funtion of this forum.

Good luck.

Jason W · 10-21-2008, 02:02 PM

Supply yards might be a good place to start as far as looking for good subs goes, however not full proof. You'll still need to weed through some to find a few good ones.

As far as estimating goes, their are a few good programs out there like National Craftsman that are useful for double checking yourself. For the most part, experience should always trump any of those programs. I often find huge differences in my number and theirs. You have to know your own capabilities and forget about how much everyone else would do it for. If you worry to much about other quotes from competitors you might just find yourself working for wages and getting no place quick.

Marketing is the toughest for me. So many ways to spend those dollars to get noticed. Some bring no return, some bring price shoppers, and some bring wealthy educated customers that just want the best. This is probably the hardest thing to figure out. What brings nothing for one, might work for you. Your area makes a difference; the type of people in it and how you are around them.

Figure out your "Brand" as soon as you can. Meaning, what you'll do and how you do it. Sell that value to your customers! Stay on that course! If you present yourself as a high end Remodeler, don't let yourself get involved with customers looking for cob job work to get them by for a while. This will only slow you down in your quest. However, if you want to be a Handyman type and get involved in small repairs and such, be the best, act quickly, come prepared. Set your truck up so that your ready to handle anything with out running to the store twice a day.

Lastly, I have to say that you must be very brave to get into this industry right now. It is getting flooded with low ballers that are looking for a pay check for the week. Almost everyone who becomes unemployed seems to go straight to the trades thinking their's nothing to it. You'll have to overcome these types when selling value to your customers.

Good luck to you and welcome to CT

JDS · 10-21-2008, 03:05 PM

Estimating at its simplest form.

Cost of Materials (Make sure you get updated materials, do go as last weeks prices ** I wish I would have known that then ** Add Markup )
Cost of Subs (Add all your subs together and make sure you have a contract even if they are family/friends, sub contractors ** I wish I would have known that then ** )
Cost of Labor ( How much do you want an hour and how much are you paying laborers per hour. Add Markup )
Cost of Overhead ( How much does it cost to run your business... Tools, Office, Paper, Printer Ink, Blades, Gas to get to jobs... etc. )
Cost of Profit ( How much do you want to put away for your profits?)

it is just simple math and addition.

There are different ways to estimate, you have to find what way you like and how you make money.
You can do a Thirds type of estimating - Where Materials are so much, then you multiply by 3. So 1/3 is materials 2/3 is your profit and labor.
You can do by Sq Ft, but this has its down falls when you have to small a job or need better accuracy. Let me know, I have an Excel program I made back when I started about 4 years ago... it is handy. If interested let me know I will email you the file.

You have to try to find your niche and see how you like to bid it. I actually use 4 different methods of bidding depending on the job.
Dave

MindfulDesign · 10-22-2008, 01:12 AM

Hi there!
Hey, if you need a professional and reliable designer/drafter, let me know! I’ve started my own business about 9 months ago, but I’ve been working as an architectural designer for 12 years now. I can help you to look professional when estimating or space planning for your additions, remodels or even new construction.
Katia

orson · 10-22-2008, 09:12 AM

Panzer5,

My guess is the biggest challenge you will face is marketing. Sales, estimating, contract writing, so on and so forth are strictly academic exercises if you don't have leads coming in.

I wish I had focused on this more a year ago when I was setting up my company.

I am just now starting to read books on marketing I should have been reading then.

Make no mistake about it, it is possible to dump many thousands of dollars into advertising and get a zero ROI (return on investment).

I recommend reading Duct Tape Marketing by John Jantsch as a good starting point.

Although I'm sure you'll take any work you feel capable of doing start thinking about possible niche markets to work your way into.

Finding subs is hard, no matter how many referals I get and who refers them you still end up with lousy ones.

SCORE is a good resource but be cautious about them with financials. My advisor worked with contractors for his entire career but did not have a clear understanding of the types of gross profit margins you need to achieve to make ends meet in a small remodeling company.

Bowsherb · 10-22-2008, 02:57 PM

I'm not sure of your finacial backing but you had mentioned finding good subs. I believe that this will not be an issue for at least a couple of years. I say this because if you are just starting out you will either be acting as a sub for a larger contractor or be in direct contract w/ homeowners on small dollar projects that really should not require the use of subs. I suggest to you becoming involved w/ the local building contractors and requesting from them the opportunity to bid on there large projects while you produce small dollar projects for yourself so you can stay in the black.

Do as much free advertising as possible!!! Craigslist.com is a good start

good luck

thanks for your service to our country

CyFree · 10-24-2008, 02:30 PM

Learn, learn, learn. Educate yourself.
Look for local resources, like the local library, local chamber of commerce etc... for courses and coaching services.
For example, the local library where I live, offers a free consulting service, that helps you build an effective business plan, figure costs, determine prices, establish goals etc.
The best thing you can do is have very clear, feasible and specific goals and a good action plan, detailing the steps to achieve it, and a deadline.
Network with other local small business owners, learn from their experiences.
Make informed decisions, not educated guesses.

Scott Meyer · 10-27-2008, 11:34 AM

You listed many talents you have when it comes to skilled work. However, don't get trapped in to thinking "the more types of work I can do the more money I can make." It appears logical and simple at first. The more types of work the more varying jobs I can accept.

However, this doesn't work well for marketing. When selling yourself, you need potential clients to understand what you do right at the beginning. Trying to sell several different lines of work is tough. Saying "Drywall + Repair experts" or "Framing expert" is much easier, clearer, and makes sense to the client. They won't believe you are an expert if you have 8 different types of work and only one guy.

Please don't take this as a rip on your ability and skill. Contractors don't fail from poor work; they fail from poor business practices.

In addition, doing multiple types of work doesn't help with time and specialization. For example, let's say you pick up one small painting job when you have been framing mostly. You must now waste a lot of time getting the painting tools in to the truck. Forget one tool, and now you're taking a trip to the store which is adding to the labor of this one job.

If you're good at marketing as you say, you'll find that you can stay in one revenue stream and market much more efficiently.

mark the coach · 10-27-2008, 09:50 PM

Congrats on deciding to move forward in your own venture. Lots of good advice precedes this post. If your familiar with business I'm sure you know you need a plan. A recommended read is Mike Gerber's book called The E-Myth Contractor. It is excellent at pointing out the need to plan and use systems to have a successful contracting business.
Seek out organizations who attract successful contractors and promote education and training. A great organization is NARI. (National Association of the Remodeling Industry). Don't skimp on training.
There are 4 major areas to develop systems in.
1. Marketing; who, what, where, who is your target customer, the type of work you are looking for and how will you attract them.
2. Sales; all services and products need to be sold. Learn how to sell professionally using a consultative sales process. If you have been sales trained great if not consider it. The greatest contractors in the world will be very slow if they don't know how to professionally sell their services. One of the biggest mistakes companies make is that they don't sell aggressively.
3. Production; develop clear and systematic production processes and systems. Train yourself and people using best practices. Make sure your paperwork accurately describes what the customer is buying and that it is translated seamlessly to the field.
4. Administration; have a simple yet effective office system to process paperwork quickly and efficiently, pay bills, maintain records, insurance, lead tracking, job costing, ect.

Good luck with SCORE. Also consider seeking a mentor who has succeeded in what you want to do.

Lastly whatever your dream is, right it down with a date and make it your goal. Most successful people right down their goals so they know where they are going.

Best of luck.

mark the coach

www.thecontractorcoachingpartnership.com

Floordude · 10-27-2008, 10:03 PM

Quote:

Originally Posted by Scott Meyer

You listed many talents you have when it comes to skilled work. However, don't get trapped in to thinking "the more types of work I can do the more money I can make." It appears logical and simple at first. The more types of work the more varying jobs I can accept.

However, this doesn't work well for marketing. When selling yourself, you need potential clients to understand what you do right at the beginning. Trying to sell several different lines of work is tough. Saying "Drywall + Repair experts" or "Framing expert" is much easier, clearer, and makes sense to the client. They won't believe you are an expert if you have 8 different types of work and only one guy.

Please don't take this as a rip on your ability and skill. Contractors don't fail from poor work; they fail from poor business practices.

In addition, doing multiple types of work doesn't help with time and specialization. For example, let's say you pick up one small painting job when you have been framing mostly. You must now waste a lot of time getting the painting tools in to the truck. Forget one tool, and now you're taking a trip to the store which is adding to the labor of this one job.

If you're good at marketing as you say, you'll find that you can stay in one revenue stream and market much more efficiently.

I disagree!

Being diversified is a very good way to always have work and building a business. The key is working it into your marketing.

I live in a city where no matter what part you live in even gated communities, stuff will come up missing from your vehicle. I never leave even one tool in my truck. When I get home, everything is removed from my truck and placed in its spot, in the garage. The next morning My truck gets loaded.

Scott Meyer · 10-28-2008, 02:53 PM

Floordude, we have a differing opinion here, which can be really good for learning.

Mark The Coach brought in the book E-Myth, and it reminded me of a lesson in that book "Successful owners work ON their business, not IN their business." That might not be quoted exactly. But it is the same concern we have when it comes to too many activities.

First off, you can be very successful being a one man operation forever. It's possible to make plenty of money.

But we tend to find that more contractors want to be in charge of a company with employees (Arguably, this is probably over emphasized since this is the type of person we help). But for this type of person, if you don't have time to work ON the business, it will never be positioned to grow.

How does this tie to too many skills? Two ways. First, you'd have to find someone who can do all the same work you do before you can step away for a few hours a week to work ON the company. If this person can't be found, then you as an owner will be stuck working IN the company when these different tasks need to be completed. As an example, promoting just drywall means you have to find someone who can do drywall. That’s easier than finding someone to do drywall, painting, and etc. It's also easier to train.

Second, working it into your marketing is tough to do. Not only does it mean that you have to be much more careful with your message, but you risk adding clutter to your message. Be cautious! If you don't spend a lot of time with your marketing message, then you probably haven't optimized it. I'm not talking about word of mouth. This is a given. But marketing is about going beyond the given, that's how you beat competition.

Any other thoughts and rebuttals are appreciated.

Tinstaafl · 10-28-2008, 07:38 PM

Quote:

Originally Posted by Scott Meyer

First, you'd have to find someone who can do all the same work you do before you can step away for a few hours a week to work ON the company.

Scott, I have to say that entire post was very well written and to the point. I think you have a firm grasp of the issues involved here. The only thing I would add, and I can tell that you understand this, is that a young and energetic person who still has the ability (unlike me) to work 16-18 hour days can indeed make a good living as a multi-talented one-man-band while growing the business.

However, that does take its toll, and it's very tough to keep it up for years on end. That's where planning comes in, setting goals for when you'll be able to take on subs or employees who will be able to take up some of the slack while you spend at least a few of your waking hours each week focusing on something other than work.

rbsremodeling · 10-28-2008, 07:46 PM

i also think Scott nailed it. I think 80% of remodeler's should find a specialty and make it their main focus.