Owner Operator Business Advice

[straightexhaust]

At the first of the year I finally decided to start my own business. I went out and purchased a 2006 LS170. At the time it had 640 hours on it and I found out about it through a friend who had purchased equipment from the guy before and vouched for his honesty and care of equipment. I got the machine with 66" low profile bucket for $15000.I also ended up buying his 18' 12000# trailer and he threw in steel OTT and a tooth bar for $5000. I bought a different truck as well 2001 F-350 7.3 crew cab dually 4x4 6spd with 121,000 for $15000. I think I made out pretty well on the prices for everything.

I also purchased a root grapple and a set of pallet forks. I currently am doing grading, lot clearing, etc. I am using cans and smaller dumps for my haul-aways. I debated getting a gooseneck dump trailer that I could also transport my machine with but I am wondering if that is just a waste of time and if I should just hold out for a dump truck in the future. But also unless it is a minimal amount of hauling is doing it at all profitable when I have to take time away from running the machine to do it? Maybe this is where employees would come into play?

I'm looking for some direction and advice from others who have started out similarly. Right now I have only done residential and just landed a snow removal contract this winter working with some other companies clearing a huge industrial complex. Not sure if I can compete doing commercial at this point or if it would even be worth it.

The other main issue is that I still work full time. It will have to be this way until business picks up enough to quit and do this full time. This really complicates things though

Thanks for all the help

 

[guajilloweld03]

Did you borrow money to start this business ?

 

[straightexhaust]

No this is money that I had saved up to start the business. Before I would ever be able to do it fulltime I need to save up for 6-8 months of operating costs which will take some time for sure.

 

[guajilloweld03]

Great, you have accomplished one of the most important parts of any business and that is saving money so you do not have to borrow. Not having any debt takes a lot of pressure of of you.

You will need a good book keeping system and this system does not need to be fancy or expensive. We have a small rental property business and my wife is the one who keeps the books . She uses an Excel spreadsheet to track everything and has a good filing system for all receipts. At the end of year we use a tax person to file taxes. With over regular jobs we have enough taken out for taxes. Some people use Quicken books for the book keeping part.

At some point you will generate enough money to where you will need to send Uncle Sam his share of taxes. You can hire an accountant but this cost you $, so if you can do it your self you save $$. You can hire someone on contract bases to do your book keeping weekly or monthly. It's important to track all money going out and coming in and have a separate account for the business money . Pay your self a wage and the rest of the money keep for your business and at the end of the year use some of the profit for yourself and the rest to expand your business.

You will need to budget for everything repairs, supplies, fuel, tires etc and have saved 3 to 6 months of operating money.
Insurance, this you will need on all equipment and yourself.
Where most people get in trouble is that they see money is the business account and they start using it for vacation or eating out,buying cars and toys. So when the time comes to pay the business bills there is no money and they start to borrow to cover bills. You need to be a tight wad, but not so much that you do not enjoy the fruits of your labor.

Sounds like you are off to a great start. Work hard and enjoy life.

 

[old-iron-habit]

Sounds like you are starting out well. To answer your truck/employee question. A dump trailer is handy to have. You may be able to trade in your current trailer on a dump trailer. A dump is handy to use for the small volume misc hauling and moving the the machine to boot. On the bigger haul jobs I would recommend you hire the trucking. Build the cost into the job. Trucks cost a lot of money to keep current, insured, and legal. Hard to justify a truck and possible driver with just one machine. Get established first.

 

[straightexhaust]

Sounds like you are off to a great start. Work hard and enjoy life.

Thanks for the reply and advice. I am currently using quickbooks and for the time being I have an accountant handling the tax filing. She is charging next to nothing but I may take over and do it my self once I see how things go for a couple of years.

Sounds like you are starting out well.

Thanks, that is what I was thinking. I certainly cannot afford to get involved in another truck right now and employees are for the future. Just wasnt sure if I would regret having purchased the dump trailer in the future if I end up getting a dump truck of my own someday. Just trying to keep initial startup costs to a minimum

 

[guajilloweld03]

Well the commercial side, most require several million $$$ in insurance and takes 30 or more days to get payed. Have worked for a large chemical co and currently work for a State university ( as employee) and both of these pay but it takes a while to pay.

Some of the best advise I have heard is from financial guy Dave Ramsey .

 

[CM1995]

Stay away from the commercial jobs for now, since you have a full time job as that will never work. Commercial GC's want you there now!:cool2

There is good money in commercial work, it's all that I do but it comes with big insurance requirements (as has been said), paperwork, staffing, equipment, etc, etc. It's not hard, just a different game.

Hire out all of your hauling for now and build the cost into the job even if you don't make much on your sub. As you progress and gain more work full time in the business and when you need a dump truck on a regular basis, then start looking for a truck. A dump truck can be profitable but you have to keep it utilized and running, keeping it running and DOT legal is job in itself unless you shell out $150K for a new one and then it will sit at the dealers service yard.

JK, it's not that bad but it does add another level to the business - both revenue and expenses.

 

[straightexhaust]

Yea on the insurance topic...I'm actually meeting with an agent this week. What kind of liability should I have for what I have goin on now?

Yea dump trunks come with a lot of insurance and DOT expenses, definitely a big purchase there. I have experience doing mechanic work on big rigs though, used to work part time at a trucking company doing piece work so I would definitely go the used route.

 

[CM1995]

You should be fine with the standard $1,000,000 commercial (not meaning commercial work but business insurance) policy. Check your prices and coverage amount with the agent, it varies and you may not need that much coverage.

What is your current revenue and type of work for the business? This is usually what insurance carriers base the price on, among other things of course. Demolition for instance, raises eyebrows within the insurance industry.

 

[Oxbow]

You should be fine with the standard $1,000,000 commercial (not meaning commercial work but business insurance) policy. Check your prices and coverage amount with the agent, it varies and you may not need that much coverage.

What is your current revenue and type of work for the business? This is usually what insurance carriers base the price on, among other things of course. Demolition for instance, raises eyebrows within the insurance industry.

Mine reclamation makes the insurance companies and bonding outfits squeamish as well, even though all you are doing is cleaning up what has already occured.

My insurance company bases our premiums on our payroll, which seems assinine to me. If I pay higher wages in order to attrack and keep better operators one would think that the exposure to the insurance company, or at least the probability of having a claim, would be less. Instead, the higher my payroll is the higher the premium.

As CM suggested, hire your trucking for as long as you can. There is a cost associated with the efficiency of your job if you cannot get truck(s) when you need them, but generally you can hire that part of the job out cheaper than you can own one.

 

[straightexhaust]

Yea $1,000,000 was the number I had in my head but I will go over things with him once we meet.

The roll offs definitely have their advantage of not paying for a truck to sit and be loaded. I guess it is something that I will have to play around with the numbers on.

Word of mouth, my website, and craigslist is all I have currently to bring in business. Anyone know of a good way to jump start getting the word spread that also wont overwhelm me seeing as I work fulltime also.