Unbelievable.
I’ve been laid off for four weeks, and haven’t made any serious effort to find a new a position, let alone work for myself. I’d kicked around the idea of hanging out a shingle and doing some jobs, but not pursued it.
And now I’m having trouble scheduling the work on my plate for the next few months. Sure, the bulk of it is for family, but I just landed a time and material job renovating a kitchen and bathroom, and possibly more (the whole house is under renovation). Just met these people today.
WTF? These people called *me*, and I’m not even a real contractor. My wife’s aunt dropped my name.
Anyways, I have everything to learn about the business side of this. I’d probably lose my shirt if I had to come up with an estimate, so T&M is a good. I chose an hourly rate that reflects what I’m used to making. It’s somewhat low for a contractor, but I don’t do this every day and will be slow compared to an experienced professional.
And Dad wants me to have drawn a plan of his workers’ quarters in one week, because he wants the drains for the plumbing roughed-in very soon. This is kind of an unreal feeling, like “Oh, I guess I’m a contractor now.”
Replies
Congrats. Remember....bid low and if you don't make a profit, you can make it up in volume.
One hint: treat Dad and friends professionally. Once they make committment to you, make a comittment back and don't treat them like second class citizens. Don't jump someone in front of them unless you have agreed beforehand that their jobs are "fill ins".
Most of the work I did for relatives was agreed upon to be fill in. Often, they had far off deadlines like a baby shower or graduation party so it usually worked out.
I always gave a "courtesy" family discount of 10% for my family and did everything for Mom for free: she payed for the materials direct.
Also, don't forget to send you Aunt a thankyou gift for the referral.
FKA Blue (eyeddevil)
"Remember....bid low and if you don't make a profit, you can make it up in volume."Nice. Not a problem for this T&M job. . . but I have to learn how to estimate or I am going nowhere down this path.
Edited 11/24/2007 12:05 am ET by Biff_Loman
" Remember....bid low and if you don't make a profit, you can make it up in volume."
Where on earth did you read that pearl of wisdom?! That is absolutely the silliest business advice given to a one man operation, not to mention just starting out, I have ever heard. Just how much volume can a one man band produce. Not enough to make up for no profit I can guarentee that. And if his resources are limited when first starting out you are suggesting he burn them up early hoping to turn out "volume".
If you are not bidding for profit each and everytime you will slowly work your way to nothing. You will always have a loser here or there but to price it so you know you aren't making a profit is dumb. You can sit at home for free and be a lot more comfortable.
New guys always under price themselves anyway (I certainly did) and to encourage that is silly. Go back to another business book. DanT
That was tongue in cheek, I'd say, Dan
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
He was kidding.For this job, I set my hourly rate about half-way between the rates for handy-man/hack work and professional work. If I felt that I had the experience and the setup to achieve professional results at a professional speed, I would not hesitate to charge a normal hourly rate. But I'm not there yet.
"I would not hesitate to charge a normal hourly rate. But I'm not there yet."Yes you are but you just don't realize it.The problem with newbies is that they don't normally figure out the true costs of doing business until they are burned out. You have a huge advantage in that you are in here asking the right questions at the right time. Whether you implement them is your business.You need to think of yourself as a traveling shop with all the same type overhead that any shop owner would incur. The easiest way to see all these costs is to pick up a simple pro forma business plan and fill it out. If you can find one that is tailored to your construction business, so much the better. If you don't want to spend the time figuring out the real costs of doing business, spend that same amount of time hustling up a great employer. You'll make a lot more money with a great employer, if you are a great employee, than you will with operating a business that is slowly sinking by not charging enough to pay yourself and cover all your real expenses. Your biggest battle will be with getting started undercapitalized. It will force you to do some really stupid and risky things. I know....I've been there.
FKA Blue (eyeddevil)
If your post was in humor I apologize. I couldn't tell with no sign. DanT
Yes, it was intended as humor and I apologize back for not being clear enough about it. FKA Blue (eyeddevil)
If your post was in humor I apologize. I couldn't tell with no sign
Those of us who knew him as Blue knew right away. And the =) never was his style either. The fact he apologized for not including it shows he's mellowing.
edited to add: ...or not: 97078.10
View Image “Good work costs much more than poor imitation or factory product†– Charles GreeneCaliforniaRemodelingContractor.com
Edited 11/24/2007 11:23 am by Huck
Dan, I use to always say, "I lose money on every job but I make it up in volume" & my other one was " I don't charge much so if you don't pay me I don't lose so much"
Just two bits of Wiz-Dumb!!
Be well No one should regard themselve as "God's gift to man." But rather a mere man whos gifts are from God.
Don't forget:
'We might not be good, but we're slow!"
also:
"Do your best, caulk the rest!"
Which, of course, I don't personally subscribe to either one.
But I do say around customers who have come to know the quality of my work, and that I can joke around with.
Bryan"Objects in mirror appear closer than they are."
Klakamp Construction, Findlay, Ohio - just south of the Glass City
I've been mulling over the various expenses a contractor would incur - everything from vehicle insurance and maintenance to buying sawzall blades. ;-) I don't even have a cell phone; I had a company phone before.I'm ready to shut up and listen on the topic of rates, now.
Edited 11/24/2007 9:20 am ET by Biff_Loman
There are lots of threads dealing with costs. Some are very complicated. All are important. Basically, if you are closing 100% of your bids, you are giving your services away, not selling them. That in itself will lead you down a path that leads directly into the ratwheel. What do you think are ALL of your expenses in your direct and indirect costsheet? Can you list the top thirty? Top twenty? Top ten? Go ahead, list what you think you need to allocate for. We'll add some others. As a hint, explain what you think you need to charge for truck replacement? Do you think you should charge ten cents an hour or ten dollars an hour for that. Or, do you think that a truck will magically appear when your current one wears out? FKA Blue (eyeddevil)
Biff.
Say you think you are worth about half the going rate, whatever that is.
Let's pick a number as an example.-going rate: 25.00.
And these numbers are just for an example-no way no how they should mean anything of and by themselves.
Alright-half the going rate-12.50.
Bad situation there at 12.50. Because maybe your talents aren't 100% but your costs of doing business sure will be.
Add up your costs of doing business-we here in the states can go to our Schedule C on our tax returns. Fine if you're here and fine if you can stay afloat till the first tax period is over. For figuring purposes a person can access the schedule C and fill it out b/4 even coming close to filing.
Jerrald has posted his sheet on how to figure your wage and you should take a look at it. It will open your eyes for sure. And to be sure, it's not an end all source-as some rates just don't pan out in certain areas. It would be good if it did. It is there that you have (probably) to sacrifice your take home a bit.
Best of luck.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
http://www.quittintime.com/
Excellent post, Jim.
And the problem with not charging enough is that you attract a long list of customers who only know you as 'cheap' - doesn't matter that your work is better than the other guys.
When you finally figure out that you're not charging enough and raise your rates, your 'cheap' customers may not pay it. So now you have to start building a new base of customers who know that you do good work but charge a fair price, not a cheap price. It can be like starting the business over again.
-Norm
Very true Norm.In the framing business, it's very common for a framing foreman to quit his boss and go out on his own. The first thing they think is that they should give a lowball price to a builder "to get my foot in the door". I'd be rich if I had a dollar for every time I've heard this. The problem is that the builder NEVER ups the ante and before that framer gets his capital base established another new framer comes along and lowball him "to get my foot in the door". It's a viscious circle; one that is not easily overcome if the skillset or toolset involved is not extensive enough. FKA Blue (eyeddevil)
You might want to rethink not working without a license if you're working Downtown T.O. Another very serious thing to consider is the appropriate insurance coverage. You sure don't want to get caught using a personal vehicle for commercial purposes, or your insurance carrier will drop you immediately. I hope you're pulling a permit for these jobs? Are you B.C.I.N certified or at least know of someone who will stamp the plans?
Edited 11/25/2007 10:44 pm ET by natedaw
Geographically, I'm only a two hour drive from Toronto, but conceptually I am nowhere near. But I appreciate the concern, and you can consider your mission accomplished. I will check out the municipal business service and see if there are licensing requirements, and see how easy it is to obtain permits.I've heard that they are a royal pain, and it seems that few outfits bother with them, here.
I've heard that they are a royal pain, and it seems that few outfits bother with them, here.
That's the story everywhere.
Better to learn the right way to do things right from the getgo.
btw ... most of those saying it's a pain have probably never actually tried to do things above board.
I heard much the same about getting registered with the city ...
went down ... fearing the worst ...
took maybe 15 min. Showed an insurance certificate, company letter head ...
and gave them a check for around $65.
done.
hardest part was driving downtown and finding a parking space ...
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Jeff, You and I are usually at opposite ends of the earths poles on things here. I agree whole heartedly with your advice here.. Start legal , if your gonna get payed to be the pro, then be the pro.
They can't get your Goat if you don't tell them where it is hidden.
Speak, O learned ones. I incline my ear to your voice.Uh, like about the permits. And such.
Jeff! Shhhh! Don't let it out that it's that easy. There aren't many secrets left for us to capitalize on. The biggest secret that remodelers had was the sawzall and HD ruined that for us. If you let the cat out of the bag about how easy it is to register...we are doomed! FKA Blue (eyeddevil)
blue,-- you commented on something that might be the single most important thing for someone starting out in business to learn
i learned MY lesson through chimney flashing.- i found out-maybe 12 years ago- that there are realley 3 different price points.-------
the low price--was seen as a " fair price" in some neighborhoods---but percieved as " probably incompetent" in another more affluent neighborhood. Starting out-- I prided myself in charging the same (low) rate no matter where I worked.
That midset kept me pigeonholed at a certain level for 6-8 years. simply changing my price----got me entirely out of one type of neighborhood, greatly increased my prescence in another neighborhood and totally solidifiyed my share of my core market.--if the 3 price points are low,middle,high-- i aim for the very uppermost reaches of middle-or the low end of high----that makes me "expensive but worth it" in that middle range--and "fair priced' in that upper range.
I wouldn't have believed it if I didn't track hours worked compulsively--------but changing the pricepoint had no impact on hours worked-----but a very nice impact on the bottom line.
again-really good point blue,
stephen
A very good article in this month's Deck Builder mag; http://www.deckmagazine.com/abstract/71.html
-Norm
heres a story that shows how to make profit on volume,i'll have to shorten it cause i don't type fast.
2 guys decide to sell watermelons so they get a small trailer and go buy a 100 watermelons for a 100.00.they then sell them for a 1.00 a piece at the end of they day they are trying to figure out why the did'nt make any money ,finally one of thems says" if we had a bigger truck we could sell more watermelons......make up for it in volume!
so if any one ever says" we just need a bigger truck" this is the bussiness plan they are using. larry
if a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
Edited 11/24/2007 3:48 pm by alwaysoverbudget
So I've been reading some of those threads. . . my head hurts! I'm drawn to complexity, though. I'll get the hang of this.
License, Bonding and Insurance.
Start there.
Hmm. Yeah. . .
License?- if required ,sure.9 sometimes none are even available
Insurance?--definitely
Bonding???--in residential work?------- seriously doubt it.
Stephen
Regional differences. I based what I posted on what applies here in Ore.. Should have said "if required in your local" Here you cannot offer to contract work in the field of construction without having all 3. Doesn't matter if it's residential , commercial or industrial. No Bond= No License. No Insurance= No License. No License = Possible Fines if caught . License also requires passing a test . That applies even to Landscape Contractors. (Yard maintenance )
They can't get your Goat if you don't tell them where it is hidden.
All right!! What the other guys said and just be sure that you're pricing things right. I think you said that these are family or via family but don't give too much of a discount just to get the job or that their friends/family. You've got the hardest part over and that's getting your name in their brain to to the job they want. While you're doing these jobs and even better if you can do it before if you have the time is to start figuring all odf your businees expenses, start figuring your business model. It'll help you bid accurately at the early stages of your new business.
What's the local rulings for being a GC?
No license required to be a GC here in Ontario. Other than that, I don't really know. I'd say that operating without insurance is a poor idea, so I'll have to look into that. For renovations around here, work - including quality work - without permits is the norm. I've been led to understand that there was some new legislation, recently, that makes someone lucky if their permit application is approved within a century. ;-) There's virtually no enforcement anyway.So really, I can just go for it. Insurance seems essential, but other than that it's just "git 'r' done."And yeah, I need to come up with a business model.Edited 11/24/2007 7:34 am ET by Biff_LomanEdited 11/24/2007 7:34 am ET by Biff_Loman
Edited 11/24/2007 7:35 am ET by Biff_Loman
good deal that it's easy. 1 more hting to keep track of is how you're going to handle/manage the money. Best to get a separate account from your personal.
That's pretty much how I started too. And like you, I wasn't' entirely sure (nor am I yet) that I wanted to do this as a career. I've been busy for 5 years now so I guess it's officially what I do. I didn't have insurance or even a registered business at first (it was mostly family and friends), but I certainly do now. It's actually not very expensive for interior painting and light carpentry.
If you fancy yourself a trades person, you're on the right track. One note of caution if you're like me. Once you have regular work every week, even if it's not a full week, you'll stop looking for work in you old career so you can focus on the new one. This can be a really good thing, but it also decreases the likelihood of ever going back.
I don't really want to go back. I enjoy this much more. However, I did earn more in my previous career and I do have a price that could lure me back. No one is offering those prices anymore anyway.
Biff,
I can tell you what I would do--(and did do)-because it works--in fact is idiot proof.
If you are good with computers-there are other ways--but basically
go to Office Max or Staples--TODAY.
buy a copy of"Dome Simplified Weekly Bookkeeping Record". there are a few "how-to" pages to read through at the beginning--but in fact from the second you open it up---it will all be simple and obvious what you are to do.
In less time each day then it would take you to boot up your computer---you can complete your dailey bookkeeping chores
follow the system for a year--at the end of the year you are in an excellent position to quickly and logically do your taxes
following the system for a year means-that at the end of the year you will have concrete numbers as to EXACTLY what yourreal-out of pocket expenses have been.
also--track 2 other numbers religously-------actual time spent on production-and actual time spent on overhead----( estimating,sales,taxes and so on-----that is non-billable time)
within a year or so--you will have an excellent idea--of what your billable rates MUST be--that's critical-they MUST be.
very quickly this will help you focus---and stop doing little old ladies favors-etc.
you will soon observe-that as an employee-all your working time was" billable" to your employer--but as a contractor-a Huge amount of your time is NOT directly billable.
I have tracked these numbers for years--and roughly 30% of your time is not directly billable( but still must be "paid for"-that is reflected in your billing rate.
you may choke at first-when you discover-with your own hard numbers--that you MUST bill at a rate of $60/hour or $92/hour-or whatever it turns out to be--but that is OK--- it will force you to focus-and help you weed out money losing types of work--and help you concentrate on the specific customers who actuall EARN for YOU.
Very best wishes,
Stephen