Whats Your Business Worth?

PressurePros

Sorry, Tom, old thinking. Doing the same thing on a different day will always yield you the same results. Defeatist attitudes will quell your growth. Unfortunately most guys that say "it can't be done" just don't have the confidence to make it happen. I'm not trying to pick on you Tom but the same attitude prevails amongst the trades. The same guys that can fabricate things that would blow one's mind cannot expand their thinking and open their own minds.

You mention franchising a skilled act is a joke. Do you understand the concept of franchising? Franchising is selling a business model, not a skillset. I obviously would not buy a Dr. Electric franchise if I were a carpenter. But, if I was an electrician and wanted to go out on my own and wanted to stack the odds of success in my favor I would positively consider buying a franchised name. You can guarantee when I went to sell that franchise that it would have much more value than any other start up would.

Your chance of starting a company and being around in 5 years: 4%
Your chance of being moderately successful and still being in business buying a franchise: 60%

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Ken Fenner
Pressure Washing PA
Roof Cleaning Services PA

Tom M

Well Ken I realize how "defeated I might sound" the word I would probably use is exhausted. 15 years in always working a new angle or chin up attitude. From the begining and MANY TIMES after try to believe this industry is a business and not a service trade. But it just seems to me to many people have taken a vast scope of residential construction trades as hobbies and will do anything to avoid hiring out.
In the end your just somebodys handy man. Plumbing, electrical and mechanical are mostly fueled by builders. Plumbing and mechanical trades offer steady need service or emergency repairs. These are things franchisable "like merry maids". I know this negativity sucks I just things have evolved to an odd era and the money is in commercial.

Stone Mountain

Thanks. that is exactly why I am setting up this franchise system.

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Residential Deck Specialist: Vist our Website
www.fenceanddeck.ca

PressurePros

Tom, I do understand from where you are coming. I see the same writing on the wall which is why I started Restore-A-deck and will continue to expand product offerings. There is a big trend towards DIY. At the same time there are those that DIY and those that pay someone to do it. Its also why I don't work with many builders. I don't finance their lack of selling/pricing ability by dropping my pants on price. This is also why I entered this business from day one with a franchise model in my business plan.

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Ken Fenner
Pressure Washing PA
Roof Cleaning Services PA

Tom M

Ken, I wish you luck, if it were easy we all would be doing it. You seem to have the right mind set to see it through. I always wanted to keep it simple, earn a decent living and enjoy the freedoms of self employment. The theory was of course to accomadate all the needs of my customers and be there for the larger projects until I just worked on the larger projects and eventually just for myself building homes.
Everyone on the planet jumped on that bandwagon before I could reach my goal. There isnt a service or trade I PERFFORM that isnt becoming a stream lined " franchise operation". For me I have to pick something with potential, rework my plans and run with it. The small business owner is being driven out everywhere in everything.

BrickTricks

To all that had comments - Positive, Negative - Neutral; you've all heard the saying - don't shoot the messenger!! That's just the point, that there is no point! But to the few that read, and responded it got you thinking! And, that is the very first step to becoming aware. Having your ear a little closer to the ground, and being nimble if you should have to be, should the industry change in a way that you could not adjust to competing in.

Pressure's question "Contingency!" that's part of the risk associated with the start-up. That's one of the thoughts that shudder through your head and keeps you awake at night, along with another 100 other unknowns. Coupled with your other responsibilities - Dad, Husband etc. But, yet we still do it - set off into the abyss because we have the skills to do it better, faster, more efficient, cheaper - whatever... than the next guy. That's why were in business.

Probably all started out this way - no health insurance for a while until we can afford it - one more stress to add to the mountain of other issue, but after a few months it becomes a desensitized issue, and you go about business hoping that your fortunate enough to not have anything happen. That was my contingency plan. Then as the years roll along, and the business grows... have the financial common sense to start building a real contingency / rainy day fund.

mahlere

This is a little off topic...but what the heck. Brick Tricks and Pressure our backgrounds are similar to mine, I just never could work for anyone else

But, one of the issues I see with startups is no plan for the future. By that I mean, "I have a 20 yr old van that's paid for, and a telephone number. I have no overhead" and they charge accordingly. They cut their price to get work. They don't figure out what it's going to take for them to get the new van, the advertising, the new tools, the equipment, health insurance, etc.

And yes, in the beginning you will not be able to buy everything, but if you don't figure it into your costs, you never find the money.

Does that make any sense?

firehawk23

I think business valuation for a single person or a small group is pointless unless there is intellectual property or real estate with the company. Trying to sell a business where you are the person who makes whatever happen happen is difficult because if youre not there then nothing gets done. Management is an important part of the valuation of a company. Vehicles, tools and equipment are all important aspects but if theres no one to run it then whats the point of buying it. If one is looking to expand to the point where they are going to sell then they should be concentrating on growing the business and not the everyday tasks of the jobsite. Become an investor instead of a carpenter. (there is nothing wrong with being a carpenter and I have a great deal of respect for those who are).

BrickTricks

The way Ruskent's dad operated his business, and managed his time; worked for him! I'm sure that to speak with him he would expouse pride of ownership, how he built his business, and the success he enjoys. Success is viewed differently by everyone. An interesting trend is that this is in a sense the 2nd generation entrepuener. Previous to our parents, most of our grandparents went off to work for the machine. Our parents generation spawned more and more entrepuenerial spirits, and probably coined the phrase. Now we are able to constructively criticize that generation, and throw barbs he / she worked all the time... on and on. Though they were blazing a new frontier; now we can see where they made mistakes, and what is cost financially / family tolls, and we can adjust and make changes to not repeat history.

Well we / I have really deviated from the topic that was started here! But beleive it or not, it's all relevant. The sole proprietior and a few employees, most likely if you work your business through to retirement the Value added will most likely come from any equipment you sell with the business, and possibly some goodwill from an excellent reputation you built on the name you traded under.

King of Crown

sorry to jump in on the middle of a thread, but IMO, a business is only worth its contacts and relationships. I sold an small distribution business, and the only reason it was bought was for the contracts with stores. If any of us had really big business's with big overhead and allot of employee's, I doubt we would spend our time talking about it online.

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Real nice guys

ruskent

If we had the right systems in place we'd have pleanty of time to talk online, play golf, hit the gym, etc.

mahlere

maybe. but did it work for his family? judging by ruskent's post, not that well.

ruskent

I don't think its working to good for my dad or our family!

King of Crown

Yeah, but I think that is why we come on here, so we can learn how to get a system into place, not because we already have that system. I understand what you are saying and agree with you, but I know to many large business owners, and the last thing on their mind is sitting around talking on their computers about solving problems. I think that is one of the great things about this site, is that we come together to solve each others problems, not because we have a system worked out where we are not dependant on our own circle of people.

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Real nice guys

ruskent

Thats exactly why i come to this site. Its great to talk to other people who are not your local compeititon. I think any company that does not visit trade forums is at a disadvantage.

I do wish we had a couple of big time contractors in here for persepective from time to time!

Matt

Sparky Joe

Because everyone is full of talk and lots of hype, but on subjects like this they speak of things they know nothing about......

Ask them how to build a deck and you'll get another 5 page thread filled with answers.....

Ask a subject such as this and they say "we have sytems".....
What are they? and you get the post following my quote "......I've spent years figuring it out and I won't tell anyone not as dilligent as me......for if they were as good as me they would know......."

blah blah blah..... If you had an answer you'd be jumping up and down to tell it you jackass.

What are the words I'm looking for to name such a type............Perhaps; Hoity, Toity and Full 'o' Crap

Sparky Joe

Because it is a long thread I'll include the post that chapped my ass.
It's from a guy named "Pressure Pro" who's trade I assume is pressure washing someone's damn house......woopty dooo, guess you would have to be pretty Hoity Toity to sell something like that.....

Here's the post, keep in mind he knows all the tricks to business and because he struggled so hard he WILL NOT share them with anyone, yet makes a post on the topic anyway....

Valid question. I guess my answer would be because then everyone would have a formula for success that I have worked hard at developing and spent a good amount of money researching without having to do any footwork. I think ideas have been seeded here. There are books about the topic. There are seminars. There are paid consultation firms. If someone is serious and is ready to take the step from self employment into business ownership there are plenty of resources where things aren't spoon fed.

I know if I am given something without working for it and learning from mistakes made figuring it out, I can't appreciate it as much. I understand Paintguy and other's mentalities because I have had the same thought process with other things in my life.. stubborn to the end. I don't want to preach to anyone. I am passionate about business. Incorporating positive emotion into a topic is difficult in writing. I guess I am at the stage in my life where someone only has to tell me the pan is hot, instead of me burning off two layers of dermis to prove it.

PressurePros

I'm sure you'll get over it, Sparky. Deep breath, count 1,2,3 .. now doesn't that feel better?

You know what burns my ass? Guys that hide behind anonymity and make harsh judgements based on absolutely nothing other than their own ego driven diatribes. My name and location are right there. Do your own homework.

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Ken Fenner
Pressure Washing PA
Roof Cleaning Services PA

mahlere

Don't fret Ken, he's an angry boy. An angry, bitter boy.....

BrickTricks

Damn Sparkey! Neutral Ground Come Loose?!! -LOL!- I took a look at the link you posted. They are some heavy topics, most are probably here for the "Manual - Hands on Skill Sets" The mental and necessary evils, as in the list on you link are mental, and right brain hard learned skills!

I think this particular thread is becoming a mixing pot not, so this will be my last post. But, in order to drive any of the systems on your list, the most important system would be Job Pricing / Estimating, as without that properly functioning therre will not be a need for any of the other systems.

I am continually amazed at how I see contractors attack, and price jobs! So you want to start a pricing system thread - I'll make your head hurt! So... Let's try to get this off the ground as simple as possible, and if anyone wants to take it further... I'm all in!

How many times have you heard a friend / contractor talking about how they price a job? "Well I do this then mark up material X, then I add my Profit">>> Stop right there, there is no such thing as 'Profit', only contributions toward profit. There is no Profit, if all overhead, and expenses are not met.

Lets go a little further... Lets make-up a small little company, and see where it goes. XYZ Company has the following, and everybody's cost structure will be different!

Asset Value Return on Investment Cost/Month Recapture $
Van 17,000 35%@ 7 year Life $450.00 $723.21
Tools 7,000 35% @3 year Life $194.44 $262.49
Insurance 35% $400.00 $540.00
Cell Phone 200 35% $150.00 $225.00
Gas / Diesel 35% $250.00 $337.50

So here are som basic expenses - some are fixed, and some are variable, meaning if we aren't working - we're not burning gas diesel, our tools aren't wearing out... get the general idea?!

So, based on what we have above - we are looking to recapture $2088.20 / per month at a 35% roi, return on our investments in the items being paid for above.

Now, we have, all based on straight time - no o.t. or weekends, and 7 holidays / year a maximum # of working hours of 2040 / year to recapture our expenses.

So 2040 / 12 = 170 hours / month. If we were 100% efficient 8 hours per day, no breaks our recapture rate would be $12.28 / Hour at 100% efficiency. But, we are not. I figure I loose 25% a day between phone calls, piss break, coffee, talking whatever.. so that jacks rate up 25% for those 2 lost hours... Now is $15.35.

Now you have to look at your expenses on your personal side, and schedule them the same way without the ROI, just total raw expense - lets say this is $3500.00 so / 170 = $20.59 + $15.35 total nut to be recovered in 170 hours / month @ $35.94 / Hr. So, just you by yourself must be doing whatever your doing for at least $287.52 / Day to cover the expenses outlined.

The hours are easily turned into the way we estimate / each / foot etc. You know what you are capable of - say on average I can run combo 300' of crown / base / shoe / chair combo. per day @ avg of 3.75 / foot so in 8 hours that averages to 140.62 / hour.

Once you get a grasp for what your cost are, and get to that hourly rate, the next thing to figure out is of the 170 hours per month or 254 working days per year or 21.16 working days / month - how many are you working? Lets say 75% of the time roughly 16 days / month. So we need to add in another 25% to our break even rate to cover days not worked - pushing our Break Even Hourly Rate to $44.93.

So what have we accomplished here? We have recaptured 35% on our business expenses - which theoretically we recaptured returns on our investment to replace our van every 7 years, and our tools ever 3 years, and all of our personal expenses are covered - we are technically at BREAK EVEN!

This is a very important number to know, as it now allows you to start pricing work intelligently! You know what you cost is HOW LOW YOU CAN GO! And this gives you tremendous flexibility with your pricing. So, if you are slow you can keep on working knowing you are still making money, at prices that most would never consider.

I saw a post on another thread where a guy was slinging trim in new construction - crown to be specific @ 1.75 / foot! The responses were - that the guy was insane! I saw the guy as brilliant! New goes very fas nothing in your way - even workinh it by yourself and pushing out 4-500 feet / day that's still capturing contribution towards PROFIT @ 87.50 / Hour that 700.00 / day on the low side - $700.00 you would have missed, when the G.C. said you can have it at 1.75 / foot, and you told him to go **ck himself! -LOL!!-

It get's far more complicated than this - but this is a good starting point for anyone that would like to discuss it further! Might fine Dry Conversation Here! Well... I'm off, to sling some trim! Talk Later!