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The School of hard knocks. What I've learned while running my business

41K views 90 replies 46 participants last post by  JBrzoz00 
#1 ·
#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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#84 ·
Good thread. I just listened to The E-Myth and man it was extremely paradigm changing for me. Changed my perspective majorly, broadened my scope, helped me see the big picture. I recommend it for anyone who isn’t one of those lucky few who just seem to be born with the knack for making money and being successful.


Sent from my iPhone using Tapatalk Pro
 
#86 ·
Lots of great comments here.
The school of hard knocks - just last week i found myself tested on a project that went wrong. An epoxy floor job that turned out disappointing, to me and the customer. He wasn't happy and neither was I. I could have blamed the paint store, the rep, and whoever else. But none of that fixes it, i wanted to walk away but obviously i couldn't.

The customer didn't want excuses. I owned the problem.

A wise person once told me "You are not remembered for the problem but what you done about it."
You have to pay for your education - it is never free. Well last week my education was expensive.
 
#87 ·
Nice post, lots of good info. Few things that help me.

1. Be honest and fair with Clients and Subs. Don’t be a pushover but be fair. Always be able to go into any situation knowing you have nothing to hide, might not always be correct but always be acting for good of project.

2. Have enough capital in the bank for the project you are working on to go sideways and your business not fold.

3. Pay your subs right away. They usually need it, always appreciate it and will come when you need them.

4. Have a foot in residential and commercial. Both very different, and takes a bit of work. They are very independent of each other in both the volume of work and margins. You should know where the money currently is.

5. Keep a low overhead and be flexible in both your ability to ramp up or down. From what I see, a head office of 3 people should be able to handle over 10 mill a year including estimating, accounting, site management.

6. Respect your employees and treat them fair. Make sure they have proper tools etc.

7. Make sure your site is clean, organized and materials are there.

8. Don’t skimp on material, can be used on next job and costs way more to stop because your out.

9. Don’t go crazy on material.

10. Know when to back your client with the consultants and vice versa.
 
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