Replies

1. 
   Piffin | Jan 16, 2006 11:39pm | #1

   Buying stock in Toll Brothers lets you control the size of your investment and you can pull out anytime you want!

    

    

   Welcome to the
   Taunton University of Knowledge FHB Campus at Breaktime.
    where ...
   Excellence is its own reward!

1. 
   ncbuilder | Jan 16, 2006 11:47pm | #2

   LOL...maybe I'm looking at this from the wrong end.

2. 
   ncbuilder | Jan 16, 2006 11:51pm | #3

   Especially considering Robert Toll made over $50 million last year...

2. 
   user-89918 | Jan 16, 2006 11:57pm | #4

   "Here's the way I see it in a greatly simplified way: The small guy who works day to day in the business is limited by his time and energy. The guy that subs everything out is limited by his time and energy. The guy that has a super(s) then is limited only by their time and energy and the number of supers."

   NC, could you elaborate on this. What do you really mean? Sorry for being thick.

    

   The CM

    

1. 
   ncbuilder | Jan 17, 2006 12:31am | #5

   One man builder - There are 24 hours in a day. One man can only work so many hours doing so many things. He's limited by his time and energy.Paper builder - While subcontracting most phases, there are still things that need done by him. There is paperwork, A/P, A/R, blah, blah, plus meeting with the clients, etc. Agian, there are only 24 hours in a day...Paper builder with supers/office staff - More people equals more hours in the day. More people equals more mouths to feed, car paymenst to make, etc. But there is a compounded rate of growth due to more people being more effecient than one person.My question is: What is the optimal size for a builder? At what point does adding staff go from increasing effeciency and profitability to hindering it? If you add a $50,000 super, does it save you work or add to it? If you put on an office girl (yes, I know this sounds sexist) at what point does it make sense to add her? If you pay her $15/hr are you only getting $15/hr back plus increasing your stress and workload or are you really getting a higher value back?I know these are vague questions, but I'm trying to decide the optimum structure of my company. I've been small and I've grown too fast in my past life. I now have the opportunity to make the decision rather than let my workload make it for me. What happens to most guys is they bid too much work, get it and then need to add people. The problem is they bid it without the overhead figure and it becomes a vicious circle that puts many guys out of business. I'm trying to determine the size first and then bid according to that size.

1. 
   user-89918 | Jan 17, 2006 01:56am | #6

   I suppose that your categories might be looked at as progressions or stages of the contracting business. One might believe that they are progressions forced upon us in an attempt to increase the bottom line, to learn and absorb the different aspects of the business of building, not by our choice but by necessity.

   For example, as a young man we start out as the one man builder.

   "One man builder - There are 24 hours in a day. One man can only work so many hours doing so many things. He's limited by his time and energy"

   Then, to increase production and dollar volume, and hopefully profit, the next step seems obvious.

   "Paper builder - While subcontracting most phases, there are still things that need done by him. There is paperwork, A/P, A/R, blah, blah, plus meeting with the clients, etc. Agian, there are only 24 hours in a day..."

   Then the machine takes control, all by itself, it becomes something that is less efficient (in some cases) and as the dollar volume increases, you start to re-evaluate the situation, wondering if the herculean effort required is really worth the bottom line. The overhead numbers become amazingly large and the sales volume needed to support it is staggering.

   "Paper builder with supers/office staff - More people equals more hours in the day. More people equals more mouths to feed, car paymenst to make, etc. But there is a compounded rate of growth due to more people being more effecient than one person"

   ___________________________________________________________________

   At this point, you end up asking yourself if it is worth it (did you make the money you expected to make). For some guys (and girls) the answer is yes. I have good friends who run very successful general contracting businesses. They produce huge sales volumes and pay equally huge overhead. Do they make the huge income for themselves that is equal to the effort needed to produce it? Most say no, some say yes.

   I think there is a fine line or a balance point for each individual based on what they consider to be excellent compensation for their efforts. Each of us look at it differently. All things considered, ask yourself what you want to make each year and what you need to do to produce that particular dollar amount. Where are you most comfortable. I think it depends on our age. The older (and maybe wiser) we get and the more we have been through will determine the path we choose.

   The question becomes where do you personally want to be five years from now?

   I probably didn't come close to answering your question, but I think that, judging by the way you worded your inquiry, you already know the answer. Determine the dollar amount you need to make and take it to that point. Stay as small as you can.

    

   The CM

    

   Edited 1/16/2006 5:57 pm ET by the cm

1. 
   silver | Jan 17, 2006 05:49am | #8

    Jumping into the fray now-

   I am at a point in my life when I am really trying to figure this out as well...I have been reading lots especially Michael Stone , BreakTime,jlc online... 

   "Determine the dollar amount you need to make and take it to that point. Stay as small as you can."

   This piece of advice is huge for me and -so obvious, now. We all have our own comfort level.

   I appreciate being reminded of a simple wisdom.

   Thanks to all for an interesting thread so far.

   silver 

    

    

1. 
   IdahoDon | Jan 17, 2006 07:06am | #9

   The least stressed and best paid custom home builders I've known run a relatively small crew of about 6 carps, 4 asst. carps and 2 laborers; and build only one or two very large houses a year. 

   No cute office girl, no cad boy, no mascot, no fat lazy uncle, no maid, and no crazy nefew, although one builder had all of the above and still made a little profit, very little.

   Cheers,

   Don

3. 
   gstringe | Jan 17, 2006 02:38am | #7

   I understand your question, and yes there are different approaches or more precisely, plateaus in any business. Such as when to go from a one man operation to adding a helper, or an office person. From a helper it is lets say adding another carpenter etc. Understand when you go from one plateau to another, the money doesn't follow in a linear fashion but you have to work the plateau along until you start losing efficiency and then you come up to another plateau that needs to be jumped up to. These financial/efficiency plateaus are really just mathematical models that aren't too difficult to plot out, but I don't think that should be your only approach.

   More importantly, you must evaluate your personal goals and capabilities. Are you looking at this from the standpoint of maximizing your personal income or are you concerned about doing ok with minimum stress etc.

   If you are a great people person/people manager, then that will push you in a particular direction but if you really love working with your hands and require minimum stress and people interaction then that puts you another direction.

   Your personal management capabilities are probably the biggest factor in determining which direction or format you should persue regardless of what it says on paper. Taking a business in a direction that does not match your capabilities is a sure recipe for dissapointment.

   I like your approach....now lets see your departure