I would like to start contracting by working alone and then spend some time with just a helper for a while. However, I eventually would like to grow to the point where I could have my company operate on its own. There is one thing that concerns me though. I don’t want to succumb to the danger of growing too fast. So how fast would you say is too fast? <!—-><!—-> <!—->
–T
Replies
any faster than you can handle
and feel comfortable handling...
"What's an Arkansas flush?......It's a small revolver and any five cards."
Yep, on all accounts. DanT
" grow to the point where I could have my company operate on its own."
Take a reality pill! That will never happen.
But for sake of discussion, the topic of your main Q is a good one.
Too often what happens in this business is that a guy gets going good, does excellent work and has a good clientèle based on his reputation.
Those he has worked for continue to spread the word until he has more work than he can personally supervise, so he hires more people top do it.
THAT is the critical break, where quality control goes into the toilet. A contractor needs a system to maintain quality no matter how many people he has. Normally after a year or three of declining quality, he finds himself spending more and more time and money fixing and replacing things that were not done right in the first place. Or he skates and leaves HOs with the problem so his reputation is now in the toilet.
Another big hurdle for a growing company is pricing.
Let's say that one guy alone can afford to do the work based on rates of $40/hour. So he gets a chance at a big job or lines up several small jobs at that rate. But he needs to hire people to help. That is where he learns about labor burden and how to add that into his pricing. Unfortunately he learns it as he is losing money.
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
Those are some good points. However, as far as being in touch with reality, Jerrald Hayes seems to think a business operating on its own can be a reality. It’s one of the first concepts he says someone who wants to start a truly successful business should learn:<!----><!----> <!---->
“What is The EMyth all about and what are the two books getting at? They’re teaching you that you have to approach designing and setting up your business operation as a "turnkey" business operation and can operate by itself without you in it. Seems nuts to even think about it that way when your setting out on your own for the first time but there is very good reasoning and logic behind that thinking.†– Quietly Re – Thinking Out Loud; Contracting 101<!----><!---->
Well, he seems to know what he’s talking about anyway. I think I should’ve listened to him sooner, but I was skeptical at first because he told me I should be building a frame with screws instead of nails. I guess sometimes it’s hard to change our mind about things we’ve been doing a certain way for a very long time.<!----><!---->-T
yeah.
and Jerralds ideals on running a const company work so well he tries to sell computer programing ...
think about it.
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
I was wondering about Jerald's operation. Having never seen it, I don't have a clue whether he has it to where it runs itself or not, but since he still seems involved in it, my guess is no, that is only theory.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I think the idea of running a construction company, even with the best systems, is simply too much work and risk and far too little reward. If Jerrald is setting up an a different business I think he's on the right track. Bob's next test date: 12/10/07
I wasn’t planning on mentioning this, but not too long ago I sent Jerrald a PM asking how much he charges for business consultations so I could enter it into my PILAO worksheet. Instead of telling me how much he charges, he basically said it was too much for a brand new small business too afford. Then he tried to sell me on the idea of becoming somewhat of a business partner. He for his part would monitor all of my business transactions via computer, and I for my part would in exchange buy all of his business software and sign over an unspecified percentage of my profits for every year I’d be in business.<!----><!----><!---->
<!----> <!---->
It all sounded a little fishy to me, but he seems like an honest guy and I wanted him to review my PILAO worksheet. After all, I thought it would be great to have my PILAO worksheet reviewed by Jerrald Hayes himself. He told me to send him all of my PILAO worksheet variations and he would critique every one, so without agreeing to anything yet, I sent him my PILAO worksheet variations via e-mail.<!----><!---->
<!----> <!---->
To be fair, I also told him how I wasn’t planning on going into business again for another 3 years yet so that I could continue to sharpen my business skills and build up capital. After a week passed with no response, I asked if he received my worksheets. He said that he did, but that he didn’t have time to look at the e-mails yet because he had been very busy. That much all seemed reasonable to me. Then, however, a month went buy with no response.<!----><!---->
<!----> <!---->
I then sent him an e-mail suggesting that the 3 remaining years of my plan was probably too long for him to wait for a return on his investment, that I really didn’t like the idea of having a business partner anyway, and that I’d like to know how much he would charge up front for his consulting services. Well, I don’t know if I offended him, or if something raised a red flag for him, or what, but it’s been several months now and he’s never responded.<!----><!---->
<!----> <!---->
Back when we had this discussion, Jerrald told me he trying to stop spending time on the forums. If he changed his mind, I suppose there’s the possibility he’ll flame me for posting this. Then again, he’s always seemed like a nice enough guy. Perhaps I couldn’t even dream of affording him, and perhaps 3 years was to long for him to wait. Or, perhaps my wanting to wait another 3 years gave him the impression that I wasn’t really serious about it. Well . . . whatever.<!----><!---->-T
3 years is certainly too much time to wait for a return of the time investment. I don't blame him for not jumping right into your business plan...after all, in three years everything will be different. He should have shot you an email and simply told you to call him in 2.5 years. Bob's next test date: 12/10/07
JourneymanCarpenterT - "...I then sent him an e-mail suggesting that the 3 remaining years of my plan was probably too long for him to wait for a return on his investment, that I really didn’t like the idea of having a business partner anyway, and that I’d like to know how much he would charge up front for his consulting services. Well, I don’t know if I offended him, or if something raised a red flag for him, or what, but it’s been several months now and he’s never responded."
Hey Mike I don't recall ever getting the email your describing. Last I recalled I was waiting for you to call me back on something or other and then we had a death in the family here and some other things came up too so maybe I just missed it. I'll check though my email archives tomorrow.
That said however I very clearly do recall telling you just what we charge for our consulting because I used that to preface our business partnering proposal which if you'll recall I told you we were still working out details too (and we're still working those detail out, it just hasn't been a pressing issue since we have other things to work on).
"Back when we had this discussion, Jerrald told me he trying to stop spending time on the forums. If he changed his mind, I suppose there’s the possibility he’ll flame me for posting this. Then again, he’s always seemed like a nice enough guy. Perhaps I couldn’t even dream of affording him, and perhaps 3 years was to long for him to wait. Or, perhaps my wanting to wait another 3 years gave him the impression that I wasn’t really serious about it. Well . . . whatever."
Ahh,.... you're not giving me much credit there at all. And there are far more incendiary (and fun) topics to get into flame wars over. I not spending the time I used to in these forums because there are other things I decided I would rather work on both professionally and personally but I do check in from time to time to see what might be happening or not happening.
What I think you should have done here (and this is what some of my better coaching clients do) is persist and follow up. You should have called and asked me "Hey, did you get those documents I sent you and find time to look at them yet?" Instead you're Climbing the Ladder of Inference and making assumptions and guesses about what might or might not be going on.
View Image
" Perhaps I couldn’t even dream of affording him,"Perhaps this is the time for you to point out to him that your consultation service is an investment and not a cost, along with facts and figures and testimonials to back that up.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I’m very sorry about the death in your family.<!----><!----><!---->
<!----> <!---->
As far as what you charge for your consulting services, I’d appreciate it if you could tell me again – whether that be by a post, a brief e-mail, or whatever – because I missed it the first time.
What I think you should have done here (and this is what some of my better coaching clients do) is persist and follow up. You should have called and asked me "Hey, did you get those documents I sent you and find time to look at them yet?" Instead you're Climbing the Ladder of Inference and making assumptions and guesses about what might or might not be going on.
<!----> <!---->
That may be true. However, in life, especially in construction, and even more so in union construction, when someone doesn’t ‘call you back,’ they want you to ‘take a hint.’ Perhaps it’s a business weakness I need to overcome, but years ago I became so tired of wasting my time and looking like fool that unless I’ve come know someone well enough to be sure that’s not the case, that’s the assumption I make.<!----><!---->
<!----> <!---->
Sorry again about your relative.<!----><!---->-T
Whaa? I said what? I advocated screws over nails for framing? There's a wild urban legend if I ever heard of one. Did anyone Snopes that to see if that was true that I really said that?
Well apparently it is. I just checked and I see commenting on the pricing methodology for a garage project you were talking about back in 2006 I wrote:
I looked at that discussion real hard and have no idea of how or why I would have said that. Ya don't frame with screws. Ya frame with nails. While there may be a rare case or very special application here or there where you might want to use screws nails are stronger (and faster) to use in framing applications. I must have been thinking of something all together different in the way of what you project was when I wrote that. While I'll stand by what I wrote in regard to my reasoning about pricing I should have been condemned for saying what I said there regarding screws over nails. Why didn't you call me on it back then? You really should have spoken up.
And I have to ask where were all the rest of all back then too? Why didn't you all call me on the carpet for saying something outrageous like that?
We don't really frame that much at all. We've got some subs we'll use for that. In my long career I may have framed a bathroom or closet wall with screws here or there but that would only be because there weren't any common nails in my truck. We also use screws when we're building theatrical scenery or some trade show exhibits we've done because you want to be able to take them apart and reuse the materials after the gig is over but I can assure you we don't use screws for framing. In fact doing a quick check of what I said in the past here I found one post here in a discussion entitled Nails VS. Screws for Framing where I wrote:
And I once made a comment to Boss Hog about one of those "very special applications" I referred too (POCKET HOLES & SCREWS FOR JOIST ASSEMBLY Msg#77856.6):
Ad in a Global Warming discussion here I wrote commenting to Blue (Jim_Allen):
Yeah ya don't use screws for framing.
But there is another lesson here. Always question authority. While I was certainly very very wrong in saying you should use screws instead of nails for framing there and there are certainly other times I will be wrong too where I don't even know I am wrong. It's only in questioning and using critical thinking skills for accessing what we hear that we ever really learn anything.
View Image
JourneymanCarpenterT - "...I eventually would like to grow to the point where I could have my company operate on its own."
Piffin - "Take a reality pill! That will never happen."
While statistically I'll partially concede that point it's not categorically or absolutely true at all. And even if it was it doesn't at all negate the idea that every business person/contractor should have as their business goal to build a company that will operate on it own.
Statistically (and anecdotally) speaking it would be my guess that only one out of 50 or maybe even one of a a hundred businesses actually ever achieve that but it does happen:
I know of a very successful businessman who works all around me who has a painting company, a carpentry company, and a roofing company and he's got two of them running all on their own.
I've done work for a builder who was able to step away from his full time involvement there to spend a year or two with his sister opening up and getting up to speed a cappuccino bar that the two of them are only part-time involved with now since it pretty much runs on it own. (He's gone back to building at his leisure.)
I know of an architectural woodworking shop whose owner has it running on it own. He spends his days now traveling around NY and NE looking for good bicycling routes.
I know of an electrician who owns a company that runs on it's own albeit it is his twenty something son who runs it now.
I know of a firefighter who owns and runs a painting business who never lifts a brush and only barely touches the business.
and I have a friend who runs a 30 man operation while he only works maybe eight hundred to a thousand hours a year.
I don't work in my carpentry businesses except when I want to or when I have to.
Certainly however most of the time most contractors will never achieve that but that in many respects I think more due to their own personal leadership, financial management, marketing, and trust limitations than any kind of intrinsic truth about the building and remodeling contracting business.
"Too often what happens in this business is that a guy gets going good, does excellent work and has a good clientèle based on his reputation.
Those he has worked for continue to spread the word until he has more work than he can personally supervise, so he hires more people top do it."
I think that's true too but that is exactly what I was referring to when I say it's due to their own personal leadership, financial management, marketing and trust limitations. How often do we see companies named 'John Doe Contracting' where the marketing message John Doe and his company have given everyone is that JOHN DOE is a great contractor and HE will get your job done rather than THE JOHN DOE COMPANY will get your job done well.
I fact many companies even have names like 'Acme Contracting' where the marketing message they deliver is that RICHARD ROE is a great contractor and HE will get your job done.
The problem, or perhaps I should say obstacles, often start off with the marketing message the business sends out but it does go further than that. Most people can't really design a business operation or business model. They can work in a business and make it happen by being there to handle things as they happen but they just can't design a business model that sustains itself. It's just not that easy. Hey I'd love it if I could design a business consulting and software business that runs by itself but I very certainly haven't succeeded at that yet and I've also failed in that the marketing message I sent out with regard to consulting and software is that that that business is still all about and all around 'ME'. Sometimes that's a conscious choice we make and sometimes it an unconscious one but it important to recognize that it happens and to find the point where it does so we can work on designing our business to get around it.
"THAT is the critical break, where quality control goes into the toilet. A contractor needs a system to maintain quality no matter how many people he has. Normally after a year or three of declining quality, he finds himself spending more and more time and money fixing and replacing things that were not done right in the first place. Or he skates and leaves HOs with the problem so his reputation is now in the toilet."
And that illustrates sort of illustrates what I mean by saying it a "personal limitation" of the contracting business owner. Most small contracting business owners complain that "they just can't get good help" and while that may be true in some or maybe even most cases it is also true that when those small contracting business owners do get good help they aren't at all willing to do what it takes to keep them. So the good help leaves and the so so's hang on and were the contracting business owner not watching over ever last little bit of work they do quality suffers.
This is what Jim Colins writes about in his book Good to Great: Why Some Companies Make the Leap... and Others Don't View Image, one of if not the first things you have to do is "You Have To Get The Right People On The Bus!" Often our own personality and ego limitations keep us from ever achieving that. (see Jim Collins | First Who Then What for an overview of what I'm referring to). If we think 'no one is as good as me or capable of the quality I deliver' then yes we will never find anyone and we can't even hope to build a business that runs on it's own.
"Another big hurdle for a growing company is pricing.
Let's say that one guy alone can afford to do the work based on rates of $40/hour. So he gets a chance at a big job or lines up several small jobs at that rate. But he needs to hire people to help. That is where he learns about labor burden and how to add that into his pricing. Unfortunately he learns it as he is losing money."
And that fits in as the 'financial management' hurdle. To ever even think of being able to hand off a company and expect it to sustain itself REALLY understanding the numbers might even be the biggest hurdle of all. It's not just that you need to understand the numbers you need to REALLY understand the numbers if you are ever going to design a business system that will work and sustain itself. Not an easy hurdle at all.
All that said having watched Mike (JourneymanCarpenterT) online here and over in the JLC Forums I think he's really working hard asking all the right questions. In fact I've had talks with one of my neophyte contractor consulting clients where I said he should follow JCT around and see study the questions he's asking. While it's still a horse race and the odds are never great JCT is a horse I think I would place a bet on making it given what I've seen him studying and working on.
View Image
Thanks for the feedback.But all that detail was un-necessary for me. I suppose you were using it as a springboard for teaching your apprentice journeycarp.I think that the number of businesses that can succeed without the founder at the helm is closer to one out of maybe five thousand rather than your one of fifty or a hundred. Remember that the rate of businesses even suceeding in any form longer than three years is only three out of a hundred and worse than that in construction.but my main reason for my comment was not the general odds against him. It was my assessment of his overall skills.There are business skills, construction skills, and people skills all in need to found such a company. Journeyman carpenter shows himself lacking in at least two of them and he sports a handicap or two to boot on top of the lacks he shows.So for him - IMO - it will never happen that he has the kind of business that can run itself without his presence. But if you want to invest in his business, go ahead.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Piffin - "But all that detail was un-necessary for me."
Well the detail in that or in anyone of my posts isn't necessarily intended to be directed just at the just person I am responding to. What I write is intended for anyone and everyone who chooses to read it.
"Remember that the rate of businesses even suceeding in any form longer than three years is only three out of a hundred and worse than that in construction."
Three out of a hundred? Where do ya get that? That's not even close to what any of the studies I read about business failure statistics and what the wags have to say. Quoting from one article I was quickly able to find:
The numbers we more often read regarding business failure rates come from a Dun & Bradstreet study that generally states that it's around 80% and maybe as high as 90 to 95 percent in the first year but I even read somewhere the severity of that stat is questionable (Freakonomics maybe?? I'll have to check around) and the reality is more like 60% which is still very high but certainly nothing like the 97% rate your citing. (And the top of the failure rate is occupied by restaurants, construction businesses fall in behind them).
"There are business skills, construction skills, and people skills all in need to found such a company. Journeyman carpenter shows himself lacking in at least two of them and he sports a handicap or two to boot on top of the lacks he shows."
Having followed his questioning around the net and having also spoken to him personally I'll certainly argue against that. I think he's far better suited and equipped than many of the people here and on JLC who are already trying to run their own businesses. And while anyone and everyone has faults the one I do obviously see in him is perhaps his reticence and caution which might be too heavy handed. He might have a tendency to over think things too much sometimes. (What do ya think JCT?).
View Image
"He might have a tendency to over think things too much sometimes. "That is one of the handicaps I mentioned. Constantly making lists instead of getting up and DOING. There are people who spend their entire lives organizing, planning, and studying for that day when they will finally DO SOMETHING. But that day never comes. Journey fits the description to a T.As for the stats you quote, they start by limiting themselves to businesses with employees, thus probably dumping half to two thirds of the business startups attempted.Then the stats deal with the ones still operating and in business.I was referring to the ones that succeed ( defined by regularly making a profit) not the ones just barely squeaking by at a loss or just holding a turn, which in your article are 60% of the ones with employees.So see if you can find something dealing with all business startups and then reports on the successfull ones.my info comes from seminars with speakers like Zig Ziglar and coaches from the SBA that I attended long ago. maybe things have changed a bit since then
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Been googlingSeems that the rate of failure is neither as high as I report, not as low as you you believe, but that no good accurate figures do exist.But for purpose of out discussion, leaving exact rates aside, the main reasons for small business failures seems to be threefold.Lack of adequate capital
Lack of planning ( don't you love a good paradox?)
lack of strong skilled management.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
"Lack of adequate capital
Lack of planning ( don't you love a good paradox?)
lack of strong skilled management."I agree with those three line items. Then, I think about what JTC said and it appears that he's fixin' on getting all three right. He's planning long term (3 years). That tells me he's not going to rush in and he's going to get it figured out before he starts. The lack of strong management skills will be offset with a solid plan. It's much easier to be a good manager if you have a good road map. The lack of capital will be explored and provided for in the management plan. So....although it might be fun to dismiss his inquiries because he got started wrong a year ago, it also might be okay to give a little credit to him for persistence, especially if he's trying to get information from real world players in the market he's trying to break into. Bob's next test date: 12/10/07
"although it might be fun to dismiss his inquiries "To some degree, I am posing as the devil's advocate here, building the wall of challenge for him to leap over. Let him prove me wrong and I'll buy his celebratory dinner.And notice what I said about paradox - he is prone to being guilty of over-planning, yet good plans are one of the most needed elements for success.Persistence? I don't see that.
He did not follow through in his contacts with Jerrald.
What he does here can be seen as a couple other characteristics besides persistence. I could be wrong. It's just the way I read it.I'd love for him to prove me wrong.
it'll be 5-6 years before we know, given three to plan and start up and another 2-3 to show his performance.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I agree and understand. I think his questions are valid even if he's not going to be the one putting the answers to work. So, I think it would be much more appropriate to just discuss the answers without attacking and judging him. There's no point in making it personal when the actual topic is one that is very pertinent to most tradesmen's businesses. I do think it's a good thing to point out that action must be taken, realities must be dealt with, etc, so in that sense there's been a lot of good information exchanged but I think there's a lot more that went unsaid because the topic got derailed right out of the gates.I'd prefer to see all the personal stuff left in the Tavern. I know I'm just dreaming....I think his basic goal is possible but flawed too in how he described it. Bob's next test date: 12/10/07
"the actual topic is one that is very pertinent"I'm sure that you noticed that I pointed this out early in the thread when the nay-sayers ganged up on him.At the same time, it HAS to be personal to be able to apply it. A man needs to know his strengths and his weaknesses and have someone objective to point them out. If one is too thin-skinned for that, they are not deep and strong enough to handle the business world.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Piffin — "Been googling
Seems that the rate of failure is neither as high as I report, not as low as you you believe, but that no good accurate figures do exist."
Well I didn't say what I believed the business failure rate was, yet....I think it probably follows and fits in to Pareto's Rule so I'll then (infer) say "around 80% of all new contractor businesses started fail in within threee years".
"But for purpose of out discussion, leaving exact rates aside, the main reasons for small business failures seems to be threefold.
Lack of adequate capital
Lack of planning ( don't you love a good paradox?)
lack of strong skilled management."
My own list that I compiled of 30 Plus Reasons Why Contracting Businesses Fail.
As for "Lack of adequate capital" it may be that JCT is working on builing lists (I like lists and planning notes, more business people should have such a habit) and hasn't yet pulled the trigger yet because he building up succficent captial?
As for "Lack of planning ( don't you love a good paradox?)" life is full of paradox. And I don't at all think that JCT will suffer from a lack of planning. The question is will it be the right plan and will he be able to change his plan as events in front of him change. Dwight D. Eisenhower once said: "In preparing for battle I have always found that plans are useless, but planning is indispensable."
And as for "lack of strong skilled management" I think that the big hurdle and while it may not lead to failure (so-so managment may or may not lead to failure) it is certainly the hurdle that stands in the way of success.
View Image
What I think you should have done here (and this is what some of my better coaching clients do) is persist and follow up. You should have called and asked me "Hey, did you get those documents I sent you and find time to look at them yet?"<!----><!----><!---->
Well: Hey, did you get my last post I sent you and find time to look at it yet? I'm asking because I just checked this thread, my breaktime e-mail, and the personal e-mail address I gave you and although you’ve replied to Piffin’s last post, the price for your consulting service I asked about in post #40 is still nowhere to be found.<!----><!---->
When I PM'd Bob Kovacs and asked how much he charged for his consulting services, he basically PM'd me back $120/hr. Now I can simply budget, say, $1,200 into my billing rate for that estimate or two I really need help on each year. I also plan on setting aside some money for his consulting services to polish up my estimating skills before I go into business. To make the most of it though, I think I need to study a little more about estimating first so I can ask more specific questions.<!----><!---->
You are obviously a very successful businessman, but from a customer’s perspective, as far as pricing goes anyway, I like Bob's approach a little more.<!----><!---->
As far as . . .<!----><!---->
And while anyone and everyone has faults the one I do obviously see in him is perhaps his reticence and caution which might be too heavy handed. He might have a tendency to over think things too much sometimes.<!----><!---->
To All:<!----><!---->
<!----> <!---->
First, sometimes I intentionally over think things to find out at what point everyone thinks it’s enough. Second, if YOU lost the equivalent of $25,000 two years ago because YOU didn’t think things through thoroughly enough the first time but were too anxious to ‘just do it,’ how cautious do you think YOU would be? Finally, I need capital. Nobody seems to be hearing me when I say that so I’ll say it again. I NEED CAPITAL. Just in case that wasn’t loud enough: I NEED CAP - I - TAL! For the average Joe like me, that takes time.<!----><!---->
<!----> <!---->
I don’t know if it’s possible to over think something unless you’re spending so much time thinking about it that you start neglecting what’s more important. The amount of time I spend on each subject is relative to the amount of time (3 years) I must to wait to acquire the capital I need. I would love to get out there and start tomorrow, but I know from experience that without enough capital I’m only going to be stepping backwards and falling on my face. I want to be in business so bad I can taste it, but the only thing that’s holding me over right now is being able to prepare for and talk about it.<!----><!---->
<!----> <!---->
Do I have a tendency to prepare more than others? Yes, I admit that. Perhaps I personally feel a need to be more prepared in order to feel comfortable. However, in view of my foregoing explanation, I think the amount to which I over-prepare has been somewhat exaggerated.<!----><!---->-T
Knowing that you need capital and planning for it is a good sign. Bob's next test date: 12/10/07
do you look at that $25k loss 2 years ago a real loss or did you learn anything from it? Do you look at as in 'What lessons can I take away from that and actually gain something from it? If not it really was a loss.
Business habits are good in personal life so you can start there. One easy way to start to learn budgets and forecasting costs is to set your personal spending on a budget, forecast it out for a whole year. keep all your receipts to provide data on your spending so you can track the costs of the enterprise of You. Build this in an Excel sheet and several opportunities to learn are had. These are habits you'll need to run projects for customers and to run your own business, aka tracking costs. If you can make it work in your personal life you can make it work in your business life.
JCT,
Im right with you on the business plan. I believe even a construction company cna be set up to run itself. It will take a lot of time,patience and mistakes.Time to train people in the way your company should be run and patience from you and them to deal with thiers and your mistakes.
I believe many people will need to be involved, one person for each hat you take off. With that comes more payroll. Now we have to get more jobs or charge more. Repeat this with each new hat. Once it is set up to run itself, payroll alone will be extreme which will then corner us into the big project market.
I believe it can be done. Thats why I work so hard at what I do. Hopefully it pays off.
I'm taking it that you still work for someone now and you are trying to get your ducks in a row before you split off. F that! Do it, fall on your face, get up and go at it again! Im not sure if the time you are spending saving up enough money is worth the lessons that could be being learned. Making mistakes is how we learn. With or without capital you will still make them.
Matt
Just came in (Thursday, June 19, 2008 ; 8:18 PM) I'll e-mail ya or reply here later this evening.
View Image
Hey Mike as I mentioned way back when what we typically charge for our consulting ranges from $85 to $150 per hour but I think you are going about your planning in this regard all wrong. As I also said back then I would give you a framework to develop a little mini business plan so you could then tell us about your business idea and how you planned to approach all the different disciplines that are part of running a business. Then once we were able to evaluate your strengths and weakness we can then start to tell you should put aside $xx for marketing, $yy for developing your estimating system, $zz for developing your brand identity etc. etc. People don't plan their kitchen remodeling projects by asking us what our hourly labor rate for carpentry is. The want to know what would it take for cherry cabinets with inset doors, what will it take for stone countertops etc. You can spend a lot of money learning how to be a really great estimator but it wont amount to a hill of beans if you don;t have any marketing in place to generate any job leads and so on an so forth.
"When I PM'd Bob Kovacs and asked how much he charged for his consulting services, he basically PM'd me back $120/hr. Now I can simply budget, say, $1,200 into my billing rate for that estimate or two I really need help on each year. I also plan on setting aside some money for his consulting services to polish up my estimating skills before I go into business. To make the most of it though, I think I need to study a little more about estimating first so I can ask more specific questions.
That sort of interesting in that I had thought Bob was interested in being a part of our team here. Hmmnn, I'll have to ask him about that.
"... from a customer’s perspective, as far as pricing goes anyway, I like Bob's approach a little more."
You do? I wasn't aware that there was any difference at all in the way that Bob and I think in regard to Markup and Pricing ideology. We have some stylistic differences in the tools we use. He (generally) likes Excel whereas I prefer an integrated database system (we develop our own FileMaker based solutions) but the philosophy and thinking behind the tools we use is virtually the same. I think you would be hard pressed to find anything significant that we disagree on in that realm.
"...if YOU lost the equivalent of $25,000 two years ago because YOU didn’t think things through thoroughly enough the first time but were too anxious to ‘just do it,’ how cautious do you think YOU would be? Finally, I need capital. Nobody seems to be hearing me when I say that so I’ll say it again. I NEED CAPITAL. Just in case that wasn’t loud enough: I NEED CAP - I - TAL! For the average Joe like me, that takes time."
Hey I certainly understand that sentiment. During my first go around in business two decades ago now I was at one point $220,000 in debt. I had a ton of clients that owed me lots of money who couldn't pay me (the money they were financing their new homes with they lost in the Black Monday stock market crash) and I was soon to discovered my pricing methodology was flawed too and on the labor only jobs I wasn't covering my overhead. (I had learned the flawed Total Volume Based Markup via Walt Stoeppelwerth's books and seminars and discovered the problem with it the hard way. The problem I describe in The Potential Problem Using a Traditional Volume Based Markup while fictional is based on my own real life experience) It took me two years to fill the ditch I dug for myself back then. And then again as recently as four or maybe five years ago I think it was we had a sneaky dishonest client stiff us for the last $29K he owed us but thanks to knowing we need to build a cash reserve that didn't kill us and we just kept on going. Hey I'm on your side in regard to the importance of capital Mike. But that also why I think you need a more thought out well developed business plan so you have some better ideas and plans about where you going to spend your money too.
"Do I have a tendency to prepare more than others? Yes, I admit that. Perhaps I personally feel a need to be more prepared in order to feel comfortable. However, in view of my foregoing explanation, I think the amount to which I over-prepare has been somewhat exaggerated."
Listen, I don't think I know of many people at all who do as much prep and planning as I do. I love preparation and planning!
Playing high school football one year we were 8-0 and scored over 300 points that year while only giving up 24. We played in what was at the time the first sectional championship game they ever had. We shared one common opponent with the school we were scheduled play in that championship. They beat that team something like 16-12 while we slaughtered them 48-zip. The newspapers pick us as 18 point favorites so confident and cocky went on the field to play that game and they rubbed our faces in the dirt humiliating us and beating us to death 24-0. That was the only football game I ever lost. We weren't prepared to play that day.
Then back in 1993 I was in the midst of project managing a large multimillion exhibit job when my girlfriend (who went to school for project management) at the time came by to ask me how things were going . I gave her a tour and apparently rattled off all the details to all contingency and back up plans I had for all the different elements of the exhibit. At one point she finally stopped and looked at me and said "Jerry you have just got to forget about that football game".
I have since learned something else that also works really well. Iterate, iterate, iterate. Sometimes you have to learn to put aside the "Ready. Aim. Aim. Aim. Aim...." mentality and adopt one of "Ready. Fire. Aim. Repeat".
View Image
Hey Mike as I mentioned way back when what we typically charge for our consulting ranges from $85 to $150 per hour but I think you are going about your planning in this regard all wrong. As I also said back then I would give you a framework to develop a little mini business plan so you could then tell us about your business idea and how you planned to approach all the different disciplines that are part of running a business. Then once we were able to evaluate your strengths and weakness we can then start to tell you should put aside $xx for marketing, $yy for developing your estimating system, $zz for developing your brand identity etc. etc. People don't plan their kitchen remodeling projects by asking us what our hourly labor rate for carpentry is. The want to know what would it take for cherry cabinets with inset doors, what will it take for stone countertops etc. You can spend a lot of money learning how to be a really great estimator but it wont amount to a hill of beans if you don;t have any marketing in place to generate any job leads and so on an so forth.<!----><!----><!---->
<!----> <!---->
Jerrald, that all sounds very good, as long as we can agree on a few things:<!----><!---->
<!----> <!---->
Whenever we come to a point when you’re going to chare for something, I just want know about how much I’m going to owe you before the charges start accumulating.<!----><!---->
<!----> <!---->
If the arrangement is for a return on business profits, I want know when that return will be expected and at what percentage rate, before such an arrangement goes into effect.<!----><!---->
<!----> <!---->
Any partnership that I ever form will be a “limited partnership†only. That is, nothing more than an investment financing arrangement. I want to be the only one actually managing and operating my business.<!----><!---->
<!----> <!---->
You’ve probably accounted for all of this already, but I want to be sure and clarify it so that there are no misunderstandings. <!----><!---->I don’t want to move to the next step and be billed afterward for hundreds of dollars, or find out after the fact that I owe 50% of all my business profits for the rest of my life. It’s not that I’m unwilling to pay a fair price for excellent service; I just don’t want to dig myself into debt without knowing it.
<!----> <!---->
The other thing that I should probably let you know is that if you do send me a business plan outline, it might take me a while to fill it out, as I will have to do it around my work schedule and the many other activities I’m involved in. For example, depending on how “mini†this mini business plan is, it may take as long as a month for me to thoroughly research, fill out, and return just the marketing section in the business plan.<!----><!---->
<!----> <!---->
I’ve actually been researching business plans recently. I was also going to start some threads on the subject, but I didn’t think that the others here at Breaktime would respond very favorably to it. I can understand if they don’t want to talk about paperwork, as I don’t like to do it. It’s one thing to get over the pain of doing paperwork, but it’s twice the pain when you’re also trying to figure out how it’s done.<!----><!---->
<!----> <!---->
Lately I’ve been doing my research primarily at the website of the Small Business Administration (sba.gov). In fact, I’m a little surprised that no one quoted the statistics from that site on this thread (“According to the U.S. Small Business Administration, roughly 50% of small businesses fail within the first five years.â€). Anyway, the site seems to have a lot of very helpful business stuff, for example, check out the links in the library. I’m quite surprised it wasn’t recommended to me yet here at Breaktime.
<!----> <!---->
I also happened to have just started reading a book on writing business plans before starting this thread. In fact, the title of it is “Your First Business Plan.†I’ve only read the first chapter so far, but it seems to be pretty good. Surprising, since I usually take a lot of care in selecting a book before I start reading it. This one, however, I just happened to pick up on my lunch break while renovating a book store.<!----><!---->
<!----> <!---->
If it still sounds good to you, feel free to send me the mini business plan framework and I'll get to work on it.<!----><!---->-T
" I’m quite surprised it wasn’t recommended to me yet here at Breaktime. "We only recommend the good stuff;)
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I filled out a business plan that I got from the Chamber of Commerce when I first started out. One of the best things I did. It made you think of all the intangibles that you would never consider and forced you to come to a reality point financially. DanT
Don't let the dogs run you off. Post that business plan thread when you get around to it. Bob's next test date: 12/10/07
Jerrald, I wanted to wait until the weekend was over before asking, because I know how busy things are for me at that time. Since I’m guessing you could simply e-mail your business plan outline at the click of a button, I’m wondering a little bit about whether you think everything is still a good idea. Please let me know.<!----><!----><!---->-T
JCT does have some oddities to his manner here and a rather strange background, but don't you think the Q is a good one for discussion?
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
It's a good question, seems his expectations are a bit high.
A self running business & a harem would be good.
Maybe a money tree would be better?
Joe H
LOL, and I thought we were too old to dream like that!BTW, I found evidence the other day that money grows on trees.
I was out cutting firewood and cleaning up windfalls along near my driveway in from last winters storms and there was a $20 stuck on a notch in a young branch.Seemed like it had been speared when the tree fell, but then the trunl rolled over and the branch holding it was facing the sky. The bill was so bleached at one spot where it faced the sun that it must have been there 5-6 months.You'll be glad to know that I did the right thing. I invested it in ale
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
A wise move, I'd have done the same but Coronas here.
Joe H
they got them money trees in california, every year about harvest time the forest rangers fly helicopter loads of them from out of the deepest part of the forest.
What Piffin said. Plus, if you grow too fast you get too far in debt, so limit growth to what you can mostly finance out of pocket.
ROFLMAO!!!
I love a good catch. :D
--------------------------------------------------------
Cheap Tools at MyToolbox.net
See some of my work at TedsCarpentry.com
To quote James Taylor in "Two Lane Black-top"......
"You can never go fast enough".
To quote Mario Andretti: "If everything seems like it's under control, you're not going fast enough." Car & Driver Magazine.
Very few of the big businesses that i know of are started by people who do the technical aspect of it. Their business oriented 1st and then find a market to work.
Bigger builder around here is run by a lawyer, and pretty sure he never was paid to swing a hammer for hire in his career. He manages the systems, has people beneath him to manage the details, and they have people... etc. His marketing & archyectures are of better qaulity than his houses but people flock to his name.
If you want a big company you gotta have business sense. More business sense than technical skills because that's what you hire people to do.
To start you have to have a solid plan that works and not just lofty ideas. You need to establish sound business practices from the start and not something that'll be thrown in later. Ask around your local businesses to see if they have a a small business owners group or something that helps guides people when starting their own business.
In the past you've come across pretty abrasicve, is this how customers see you? Maybe you need to hire someone to do your marketing.
Funny thing...I never considered him as abrasive. Just a guy so young and idealistic that he didn't know t its from t anks
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
i was trying to be nice
I guess I can understand why some people may have come to see me as abrasive. There are certain individuals who like to be instigators. They write very rude posts in the hopes of starting arguments. If you respond in kind, they’ve drug you down to their level and everybody thinks you’re a jerk like they are. Sometimes even if you dignify their post by responding to them at all, they and everyone else will view it as you validating their statement as a reasonable one. I’ve now decided to simply ignore posters that are attacking me, and to let their own posts reveal to everyone else what I shouldn’t have to explain.<!----><!----><!---->-T
First, you have to have lists.
Lots and lots of lists.
Politics: the blind insulting the blind.
Click here for access to the Woodshed Tavern
With that one statement I believe you have won the one liner of the year award!!!!!! If only I could remember who to contact about giving it to you. Probably rez or Gunner.
Live by the sword, die by the sword....choose your sword wisely.
i vote rez
I can’t wait until Piffin reads that one. I can just hear him now:<!----><!----><!---->
<!----> <!---->
“Oh don’t encourage him!â€<!----><!---->
<!----> <!---->
LOL!<!----><!---->-T
;o)
Politics: the blind insulting the blind.
Click here for access to the Woodshed Tavern
Actually what I thought - after LMAO - was, "I hope Jeff didn't hurt his feelings now or he'll turn all abrasive at us.";)
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
The common guideline is 20 percent increase in gross sales per year is the ideal growth rate. I think it's a flawed guideline but useful.
There also are some interesting stats about profitability as a percentage of gross sales that indicates that there are a number of stages that a company will go through that will cause peaks and setbacks on profitability as a function of gross. So a small builder running 200K to 600K per year is likely to make more profit than one running in the 800K to 2.5 mil range due to the additional overhead that level implies.
Likewise profit margins for new homes in the 300K to 600K level tend to be more reliable than in the levels below and above. these clients have enough money to do interesting work and to purchase a few luxury high margin items but not so much that they think they are deities and that you should bow down to them when they enter the room.
Just my experience, make of it what you will.
M
------------------
"You cannot work hard enough to make up for a sloppy estimate."
I think I agree with you. Bob's next test date: 12/10/07
ShelterNerd - "The common guideline is 20 percent increase in gross sales per year is the ideal growth rate. I think it's a flawed guideline but useful.
There also are some interesting stats about profitability as a percentage of gross sales that indicates that there are a number of stages that a company will go through that will cause peaks and setbacks on profitability as a function of gross. So a small builder running 200K to 600K per year is likely to make more profit than one running in the 800K to 2.5 mil range due to the additional overhead that level implies."
I read that too (the 20 percent increase in gross sales per year part ) and generally speaking I think I would agree with that although there are certainly exceptions to that as a pure rule of thumb. Going back to what I wrote earlier I think growth is really ultimatly dependent upon just who you are able to "Get On The Bus". (Jim Collins | First Who Then What)
I'm also in agreement with level of growth plateaus that you're described too. Wish I could remember where I read that in the past so I could cite it now. I just can't find it or clearly recall where I read that.
View Image
Read a book called the E Myth. Then you'll understand why Piffin is right.
You want to start a company that will operate without you? Work nights as you get and MBA from a good school, then bust butt for years with smarts, not muscles.
"Doubt is not a pleasant condition, but certainty is absurd."
~ Voltaire
So how fast would you say is too fast?(quote)
When it becomes half-fast.