Where did you get your funds to start? - Contractor Talk - Professional Construction and Remodeling Forum

Flimmer · 12-14-2005, 09:48 AM

When you started how and where did you get the money to start for things such as Trucks, Trailers signage, Advertising, first 3 months of operating capital, office equipment, Etc. Etc.?

I have a small rental Business and have some money coming in from that so I have been purchasing some of the office equipment for that, so I am covering that area part way so far. I also have decent credit so I could go get a truck and probably a trailer on loan, but I know that when I decide to get in an office and warehouse space that I will need at least 3 months operating expenses for staff(sales, bookkeeper, production, warehouse).

Did you get this through downpayments on jobs? Or some invester, or elsewhere?

Just curious how it all started for you guys?

I appreciate any help you can offer.

Flimmer

Grumpy · 12-14-2005, 09:52 AM

My savings account.

Flimmer · 12-14-2005, 10:07 AM

Wow Grumpy thanks for the quick reply.

I have money in savings but anything I have ever done has almost always been with OPM.. I know that I will have to have some money for the banks to look at me, If I decide to go this route.

Do you have a office/warehouse, trucks, trailers? Just curious

Did you finance these trucks and trailers?

MinConst · 12-14-2005, 10:36 AM

Flimmer,
Using a deposit from a customer will surley get you in trouble. If you want to be hurdled with loans from the get go is up to you. Buying truck, trailers etc is best done through banks but personally I use as much of my money as I can. I am small and don't have alot of loans to worry about when the first of the month comes. Times get slow and the bills still come in if you know what I meen. Three months capitol seems a bit short unless you are already slammed with orders.

copusbuilder · 12-14-2005, 11:34 AM

Quote:

Originally Posted by Flimmer

When you started how and where did you get the money to start for things such as Trucks, Trailers signage, Advertising, first 3 months of operating capital, office equipment, Etc. Etc.?

I have a small rental Business and have some money coming in from that so I have been purchasing some of the office equipment for that, so I am covering that area part way so far. I also have decent credit so I could go get a truck and probably a trailer on loan, but I know that when I decide to get in an office and warehouse space that I will need at least 3 months operating expenses for staff(sales, bookkeeper, production, warehouse).

Did you get this through downpayments on jobs? Or some invester, or elsewhere?

Just curious how it all started for you guys?

I appreciate any help you can offer.

Flimmer

Are you staying in the rental business or are you contracting.

I would suggest keeping your expenses as low as possible as well. Do you have to have a truck, warehouse??? Advertising??
I built as I grew...worked many hours and then started hiring when the $$ allowed..

Maybe a good used truck???

kenvest · 12-14-2005, 01:34 PM

The first thing you need to do is form some realistic goals and devise a business plan.

Do you want to specialize in one trade? New construction, remodel or handyman?

How much money do you need to sustain your current lifestyle?
How skilled are you? Are you licensed??

IMHO, the staff needed to grow the business will be harder to come by than the equipment. the papers are full of trucks, trailers and office space.......
Starting big with staff your unfamiliar with in a business you may or may not know much about sounds risky. Developing personnel is at least as important as funding.

good luck!

paroofer · 12-14-2005, 01:44 PM

Quote:

Originally Posted by Grumpy

My savings account.

Same here!

Takes a while to get off the ground, but it's nice to keep the overhead down.
We didn't buy a new truck (found a very nice used).
We had to buy a new trailer, it's hard to find a used one, but we paid cash.
We are conservative when it comes to spending (will that REALLY make us more money/pay for itself if we buy it?)
Office supplies, I shop around on the net.....there is a huge difference in prices on things such as paper and envelopes. If you use a lot say for mailings, the savings add up. As far as good advertising....test small before committing to spend a lot of $$. Our BIGGEST mistake...we did find out the hard way that yellow pages was a huge waste of money!

**Cole** · 12-14-2005, 01:48 PM

I agree, my savings account.

Flimmer · 12-14-2005, 03:07 PM

Yes, I plan on staying in the rental business, as well as grow it. But I also work in the contracting business full time, I have experience working with Subs, Advertising, contract writing, customer service, sales, collecting payments and marketing. The reason I am moving into my own business is because it makes sense for me to. Not to mention that my passion is to control my own destiny and run my own business.

What I mean by this is I want to continue to grow the rental business in which I work with contractors, tenant issues, collecting rents, etc. What I want to change is to not work for someone else in the contracting business which takes up alot of my time(scheduled office times, in-home visits, advertising meetings, customer complaints,project planning, etc., etc..) Especially when I know I have all the contacts and knowledge to get it done myself.

By working for myself in the contracting business this will give me some time to put towards the rental business as well, not to mention the capital to buy future properties. This way I can kill 2 birds with 1 stone. I can have the rental business and my contracting business under one roof and utilize my employees in both..

Answers to Questions:

I plan on new construction, additions.(New homes(turn key), garages, cabins)

Yes I would need a truck(no not new), trailer, staff (bookeeper,warehouse worker,production manager, I would handle sales the 1st year) these things in my opinion are essential in order to have a solid infrastructure in place to handle the contracts that come in. Unless you guys can tell me differently, you could probably add some things that I did not mention.

Minconst, How will using the deposits get me in trouble, after all isn't that revenue to run my business. Each job has material costs with overhead and profit, wheather I use the deposit or the final payment for paying the bills does it really matter? Just curious.

Sorry I rambled on a little, alot of questions to answer.

Thanks for the replys, keep-em coming. Flimmer

Jeremy England · 12-14-2005, 07:10 PM

I guess my question would be what type of contracts are you looking for.

Trucks, staff etc... all that is pretty expensive. I am a gc/homebuilder in the gulf coast area, 90% of the work that I've had since I've been in business is residential. Yes we do ok on a whole house project but I absolutely could not afford to pay an auxillary staff. Mainly because on custom homes the bank rarely lets me get ahead of them. On spec homes I don't know yet because the only work thus far has been custom but I can't imagine having any more cashflow from that since it would be borrowed money. We don't have an "office" everything is run out of a pickup truck and my house basically. The only employees are tradesmen.

We did invest about 2000 in advertising, and spent about another 1500 on tools that we did not already have.

All this money came from my savings.

Hope this helps

Mike Finley · 12-14-2005, 07:57 PM

I would want more than 3 months of operating expenses if I was taking on a staff and warehouse space right off the bat.

There are basically 2 ways to do it, grow your business from a small boot strapping operation, or jump right in with a loan (bank, credit cards, friends, home equity, etc...)

Which way to do it I would consider the business plan you have. If you can generate strong steady income very quickly then I would do the jump start with a loan.

If you can't guarantee generating strong steady income in just a couple of months then it would seem more prudent to grow the biz by boot strapping.

Glasshousebltr · 12-14-2005, 08:21 PM

I found it.......on the ground......that crap grows on trees around here.

Bob

mdshunk · 12-14-2005, 08:52 PM

Quote:

Originally Posted by Flimmer

...How will using the deposits get me in trouble, after all isn't that revenue to run my business. Each job has material costs with overhead and profit, wheather I use the deposit or the final payment for paying the bills does it really matter? Just curious.

Doing as you suggest is the construction equivalent of a Ponzi scheme. Yes, you have profit and overhead built in. Just don't count your chickens before they hatch. It is only after you complete the job and do your final cost analysis (you should always do that), will you know what your actual profit and overhead were. You're new in the biz, and you will screw up a fair number of bids and estimates. Some, you'll make out like a robber, and others you'll end up doing for free.

ruskent · 12-14-2005, 09:51 PM

Why in the world do you think you need a book keeper, warehouse worker, and a production manager if you are just starting a business? Please explain, maybe i am missing something?

nadonailer · 12-14-2005, 10:15 PM

I always just fly by the seat of my pants (and pray a lot

)

MinConst · 12-14-2005, 10:22 PM

md kind of explained what I was getting at. If you start out thinking that a deposit is your money to do with as you wish you will be headed for trouble. A deposit is for materials and possibly pay your help while the job is going. You will find that sometimes a deposit is not enough to do this with and if you spend it on non related expenses to the project it is for you will fall behind and end up in a bad place. I have seen this happen to both myself in years past and others who ended up one step in front of the sheriff. As MD said don't count your chickens before they hatch. Cash flow is tuff sometimes especially when starting out.

Flimmer · 12-14-2005, 10:47 PM

Md,
It's not the estimating and bids that I am concerned with, I don't care how many jobs a person has bid in their careers they have all screwed up on bids and lost their arses on jobs, it happens, we move on and learn from our mistakes..

In the last 6 years I have bid on approximately 1200 jobs and sold over 400 projects and have never lost money on one of them. Did I make what we would like on all of them? NO. But, like I tell my boss, wait till the year ends, I have never been under what I needed on profit margins at years end!

Factors sometimes beyond our control helps us to make a better profit than we were expecting, like excavation comes in less than normal, or we get a product for less than we were getting it before, and the job gets done for less labor than we determined would be in the job.. Or it goes the other way and the excavation comes in a little more than we would have anticipated..
I can also say that this past year probably killed alot of companies who didn't have a little extra profit for the never ending price increases this year. The company I work for is normally more expensive than the competition, there is a reason for that, we don't ever give our products and services away, or go with the cheap products just to get work.
I also should let you know that I am 100% comm. and I have made the mistake of counting my chics before they hatch when I first started, so that won't be a problem. But you can bet that I will have an idea of how many chics I want at the end of the year(goals).. I never go into the year without a clear set of goals, with the mindset that I want to not only reach my goals, but surpass them. That has always been my attitude.. I truly started this thread to get an idea of how you all started out financially, but appreciate all the advise.

By the way I don't know what a ponzi scheme is, so I probably wouldn't do that, whatever THAT is.

Question?
So, do you not get a deposit for your projects? If you do, do you not use that money to buy materials,permits,etc. I would think that everyone would rather use the customers money to get started on project. Then have a payment schedule that allows you to use the customers money throughout the project..

I believe that you need to take on some risk in order to be successful in any business. Some hear seem nervous to do this. Is that the case? If so, Why?

I may be wrong, JMO
Thanks for the info, Flimmer

Flimmer · 12-14-2005, 11:15 PM

Sorry Minconstr, I did not see you post before I put mine up. I agree with what you are saying to a point. Let me give you an example: I start my business say January 1st, where I live you cannot build until at least April(road restrictions) I am starting my business so I can keep my overhead down quite a bit by not getting into my office/warehouse space right away when the money is not flowing yet anyway. My initial investment(my money) is spent on sales materials, advertising, contracts, phone service, etc., etc. I run estimates and sell lets say 15 framing jobs at $14,000avg.=$210,000x aprox. a third down for deposits=70,000 and 1 turn key home at 180,000 x a 3rd down=60,000 both together I have 130,000 in deposits I order big ticket materials such as trusses, studs, garage doors, than I get permits. after that I have x amount of money left over. would you not pay out bills with this money. In my opinion I sell a product and it includes overhead which is part of the product, and it needs to be payed.

These of course are not real #s, just an example to get more out of this discussion.

I appreciate your comments, Flimmer

**Teetorbilt** · 12-14-2005, 11:35 PM

I was an out-of-work engineer with offers in Seattle and Holland, both too cold for me. Dad was a GC and I grew up in the trades, I just gravitated back into it. There never was any 'funding'. I just helped a single mother move once.

RobertCDF · 12-15-2005, 12:07 AM

Lets see... started with a good amount of debt, little cash in the account, and I have been floating most of my tools intrest free for the past 2 years. They will be paid for soon. Not the best way to start out, but if I had stayed at my old job I would never pay off the tools, or the rest of my debt. Finally starting to bid things right I might make some decent money this next year.