How did it go starting your own business?

[CM1995]

Welcome to the Forums Red Roan!:drinkup

 

[grandpa]

Congratulation's Red Roan..... I enjoyed the synopsis of your life..

 

[crazy-mp]

I have my own business, its not in the dirt work or construction side but I do own my own gun store. Biggest piece of advice is take it slow don't rush in thinking you will learn it all at once. Find somebody who can mentor you and you can go to when you have questions no matter how simple you think they may be. Oh and don't be in a race to the bottom, let your work ethic and quality of work speak for itself.

 

[overworked]

Number one rule, don't be friends with customers.you don't need their problems, and they will use yours against you. No bullsh.t.

 

[grandpa]

Number one rule, don't be friends with customers.you don't need their problems, and they will use yours against you. No bullsh.t.

I'd agree with this.... you can have friends, but business is business.

 

[Acivil]

The E-Myth is an incredible book. The Knack, by Norm Brodsky and Bo Burlingham is also incredible, both of these changed my life and I would advise anyone considering starting a business to read them. The main lessons I have learned in my decade of business ownership are these: a business doesn't need work, a business needs profit. A grading/pipe business needs repeat customers just like anyone else, I spent several years hard bidding projects in plan rooms and public projects before I established relationships with a few entities large enough to keep us in semi negotiated work, and sometimes even give us work that wasn't urgent simply to help out when we were slow but don't put all of your eggs in their basket. Plan for the bad days/legal disputes/nonpayment/accidents, they will happen, they're part of doing business in modern america, and you will survive if you expect them and plan accordingly. Make project owners and vendors share the risk in projects, avoid personal guarantees whenever possible, they'll work with you, or their competitors will.

 

[AA Equip Rents]

Roddyo has some amazing insight. What I have to add to what he touched on is work in the industry you want to go into. Do right by them and they may help you out a lot when you start your own business. This also provides an amazing opportunity to learn on someone else's dime, and not your own.
Credit is life blood as well.
Find others who want to do what you want to do. Preferably those with money to invest. Then make an LLC. Get a lawyer to help so as to protect your company so that when you want to fire someone or someone leaves the company doesn't die. As well as how you hire and everything. It's good to have everything in line first.

allaccessequipmentrentals.com

 

[AA Equip Rents]

Such an amazing book! The E-myth revisited helps you know what to do so as not to drown in your dream business. Thank you for mentioning it. Many different business gurus have suggested something called the "power hour". Take an hour to work "on" your business and not "in" your business. Some people i suggest while your researching:
-Guy Kawasaki (straight talk about the way to do business)
-Tony Robbins (good pump up talker)
-Timohty Ferris (how to automate and work less)

starting off I would suggest being honest about being a small business and not try to appear as a large business. You can deceive pretty easily but when you're not able to deliver they'll be more upset than if you were upfront with them. You can then have the advantage of finding those that appreciate the small business aspect and stay devoted. They also are more understanding when you don't have enough equipment to deliver.

allaccessequipmentrentals.com

 

[monster76]

the biggest advice i can give you is nothing is free. im not saying charge your best full rate but you will learn the fine line between friends and business and how to balance the bill accordingly. people are quick to talk bad things when you want to charge them for something but will be the first to say how was he gonna make it doing everything for free when you go under. other than that don't be discouraged if your aren't making the big buck right off the bat my 1st year was brutal but one big break was all i needed to get my self on track to getting more work.

 

[Joe Sullivan MZ]

Such an amazing book! The E-myth revisited helps you know what to do so as not to drown in your dream business. Thank you for mentioning it. Many different business gurus have suggested something called the "power hour". Take an hour to work "on" your business and not "in" your business. Some people i suggest while your researching:
-Guy Kawasaki (straight talk about the way to do business)
-Tony Robbins (good pump up talker)
-Timohty Ferris (how to automate and work less)

starting off I would suggest being honest about being a small business and not try to appear as a large business. You can deceive pretty easily but when you're not able to deliver they'll be more upset than if you were upfront with them. You can then have the advantage of finding those that appreciate the small business aspect and stay devoted. They also are more understanding when you don't have enough equipment to deliver.

allaccessequipmentrentals.com

I'd have to agree with all that, great post full of wisdom. As someone who has set up their own business and failed (i'll try again in a few years) I have experience doing a few things the opposite way of that advised above.

 

[LowBoy]

I applaud you Rossaroni :notworthy !!! That is the basic principle on the founding of my company. Amen to taking longer than you expected to get anywhere. I'll share with you.... a competitor used to come by and visit years ago and he had all new Cat iron. On credit! I remember him stating once " You still working on that junk to make it go?" That now was forty years ago. He's no longer in business and I am. And im still working on junk everyday. But its all MY junk and I now have over 75 piece's. I have a credit card , don't get me wrong, but its Never used unless im ordering parts (for my junk) over the phone. Grandpa

You won't find any better advice than this paragraph right here, written by grandpa. Thank you grandpa...

Couple that with keeping a day job while building your own entity as long as possible if possible...and you'll be amazed how things will flow. If you have to borrow every cent to startup and grow...you'll be a slave to the lenders and they don't make good tenants in the house. Usually their relatives, "Broke" and "Lonely" will move it too, if things don't materialize like you thought they would.

I am guilty of the "I'll get it done no matter what" syndrome personally. A couple of times over the years, I stepped out on my own without proper preparation, no cash flow, etc. and ended up just like the hobos you see in the cartoons next to the railroad tracks around a fire barrel, with a stick with a bandana tied to it, with all I had left to my name. The worse part is, my wife was standing next to the fire barrel with me every time I did it because she's way too supportive. She was the one cooking the beans in the tin can over the fire.

In reality, it's a personal quest and sense of satisfaction that drives one to go on his own. I get that probably more than anyone on the planet. The problem lies in the present day politics, business environment, competitive scene and mostly now, this unchartered sea called Obamacare that has me wondering how things will go for the small businesses that have to struggle to survive without any more issues pressing them. That's a big deal to consider now. Should we stay gainfully employed, or should we dive into that sea and pay, pay, pay?

 

[Oxbow]

We are shut down for winter now, and this is the time for me to begin to get caught up on paperwork and all those things that will help the business, like web site improvement, updating our Statement of Qualifications, etc. I also have a bit of time to read and re-read some of the great threads on HEF. My wife says that I am addicted, and I suppose that I spend WAY too much time on here, but I have learned a tremendous amount. More importantly, I think about things that may not be directly addressed in these hallowed threads with a broader perspective having gained insight from you all - thank you for that.

I started in business in March of 2008, and as I have said many times since, my "Crystal Ball" was a bit foggy. Within 6 months of starting the economy private sector work fell flatly on it's face. We are fortunate to have experience in a niche area of earthmoving, and managed to secure some Forest Service contracts that were awarded on a "Best Value" basis; evaluation criteria in which the bid amount was not the sole determining factor for awarding the contract. The technical proposal and past performance/references were equal to the business proposal in the evaluation process. As a business we had little past performance history, but our references with people that I had worked with while working for another contractor helped tremendously. I have been operating equipment since 1980, and have been fortunate to work for some excellent contractors. Some were much better at moving earth than the business end of things, but all provided a wealth education in one form or another.

The business end of this industry is incedibly important for survival, and it is a struggle for someone like me to learn quickly enough what must be done on the business end of things; however, if one is contemplating starting a small business the most important component is to have a passion for what you are doing, not just a passion for being in business. If a person has enough of a love for what they are doing, and then pays close attention to the details, it is possible to start and eventually succeed with modest resources.

I am fortunate that my wife has a good career that can take care of most of our household expenses, and even with that advantage it has been an incredible struggle. This is the first year that I will need to address purchasing decisions that include the aspect of tax management. All previous years it has been no problem to show a loss.

To get back to more tangible advice, much of what I am about to say has been addressed by others, but the following has worked for us thus far:

(1) The cost of money is as important as the cost of fuel, labor, equipment, or anything else. I am constantly looking at our profit for a specific job at the end of that job and thinking "we did pretty good, we should be able to gain on our obligations", but 45 days later when we get paid we have accrued enough other bills on the next job that it seems we are right back where we began. The statement "Managing Cash Flow" makes it sound as if the secret is being a great manager. This is only partially true, because if you do not have the cash to begin with you CANNOT manage it wisely, and then you are forced into using poor fiscal choices in order to keep things going.

I use a charge card that must be paid off every billing cycle for as many of our expenses as I can, this buys me 45 days of time which helps to offset the time awaiting receivables. I pay a modest annual fee, but no interest or any other charges, and I have developed a track record now with this company that if something unexpected comes up (which it often does) that requires a large purchase they will back us. This has been very helpful for us starting our business, and soon I hope to be in a position in which we have the capital to not have to rely on this card. It has been a very helpfull tool in the mean time.

(2) Work with your small local bank. They will get to know you and will be incredibly helpfull. We were awarded a large job (for us) that required bonding. Because we had little experience as a business the bonding company wanted us to put up 15% of the bid amount. I was able to secure a short term loan from our local bank based upon the awarded contract to cover the $45,000 that I had to put up. If I recall correctly, the loan cost about $1,300 which I had figured into the bid. This goes back to what I said earlier about the cost of money and making good fiscal decisions. Imagine how much more I could end up with if I didn't have to ever borrow money, but if I hadn't borrowed this money I would not have been able to get this job. Working completely debt free is obviously a worthy goal, but in some circumstances if one manages debt carefully it can be a valuable tool.

(3) Do not be afraid to rent equipment. Grandpa mentioned that a former competitor had all brand new equipment and was looking down at him for using older equipment and keeping it maintained, and that the former competitor is no longer in business. An option that has worked well for us is renting. We have rented most of our equipment and are now beginning to purchase those items that we use the most. I firmly believe that rental costs are not that much higher than owning costs, and maybe lower if a person is using a specific machine less than 1000 hours per year. If one is honest about repair and replacement cost, property tax, and the amount of money tied up in a piece of equipment (back to the cost of money again), renting equipment can make economic sense. We do a lot of work in stream restoration, and we cannot have ANY oil leaks. By renting, we are using like new equipment that is well maintained and for the most part trouble free. We have a great dealer that will address any issues immediately, and if they cannot be repaired quickly will replace the machine with another.
In our business we need a variety of equipment depending on the project. We may have a dozer, blade, roller, water truck, 80,000lb. excavator, and 30 ton ADT's on one job, and then need just a loader and a couple of 50,000lb. excavators on another, and then a long reach excavator on another. Because of our specific needs we may be an exception in regard to renting as opposed to a contractor that performs primarily one type of work, but renting is certainly worth looking at. Add to that showing up on a job with all newer equipment adds an air of professionalism (I know grandpa, you can't eat air, but it may help in getting the next job). Downtime is often greatly reduced, and capital reserves for major repairs are not necessary. Plus, the overhead involved providing a service truck and mechanic just doesn't fit into our tiny little company yet. At some point the numbers will reveal different answers as our business grows, but for now, renting has worked well for us.

(4) Know your costs. People in this business obvioulsy learn production costs like $/ cubic yard, or $/ foot of pipe intallation etc. I found out the hard way that knowing costs such as labor, which includes overtime, travel time, per diem, workman's comp, unemployment insurance, company match of FICA, and liability insurance expense that is related to payroll amounts, not to mention benefits is easy to overlook when you are first starting. I would see companies charging $45 or $50 per hour for labor and thought that they were really gouging. Add a modest profit to the labor cost and those labor rates are certainly not excessive.

Then there is overhead. I know you business majors and accountant types will have a different perspective on this, but quite simply anything that I pay for that is not directly applicable to a specific job is in my simplefied way of thinking overhead. This includes vehicle costs, office expense, my pay while putting together bids, etc.. This of course does not take into account return on investment, asset accumulation, capital gain, and what not, but those things are not very important when you are first trying to get going. All you want is to bring in more than you spend! When I first started I had no track record or data with which to use to quantify overhead, and I used 10% as a guess - way too low. For 2012 my overhead was 20.4%. We use quickbooks for accounting software, and I bring up profit/loss per job it only calculates expenses directly attributable to that job. In order for me to accurately guage profit/loss I have to then add 20.4% of the total to the cost side, then compare to the total. It has indeed been quite an education, but with our small business it just boils down to keeping track of every penny spent and modifying future bids and estimates based upon what we have learned.

(5) Treat your employees as if they were partners. I am amazed at what I miss on a job site when my mind is contemplating making payroll, or bidding another job, or whether or not to buy new tires for the lowboy or re-treads - you get the idea. I rely heavily on our key people to pay attention to job details, and think about what needs to be done next, etc. I remember being frustrated at a former employer when I was completely focused on the job at hand and he was talking abstractly about future jobs, or equipment that he would like to buy, or whatever. I was trying to get information and his insight on how to proceed on THIS job. I now know a bit of what it is like on the other side of things. Furthermore, I find that the more you can engage your employees in the decision making, the more they tend to think about the whole picture of a project, and the more pride they take in the outcome. After all, your employees will represent your business on and off the job, and if they are given more input on the outcome they also tend to take a sense of ownership in the final product.

Crap, I exceeded the allowable post size. continued on next post.

 

[Oxbow]

(6) Be completely honest in billing clients. If you credit them back when you encounter a savings they will be more apt to work with you when you have an overage. On firm fixed price jobs this does not apply so much, but on return clients that may hire more on a job by job basis I believe that complete transparency will build long lasting relationships in which the client trusts that they are being treated fairly.

Well, I have gone on far too long here and I will be amazed if any of you actually read the whole thing, but these are just a few of the things that I have learned in the past 5 years that may help someone contemplating their own business venture.

Cheers!

 

[LowBoy]

I read every single word Oxbow. Congratulations on your 5th year, and for all your short-term success. Honesty and integrity have obviously been your focal points according to your story.

 

[CM1995]

Well said Oxbow!:thumbsup

That is good advice for anyone who owns a small business.

 

[Oxbow]

Thanks LowBoy, I share your sentiments regarding government and the ACA. One thing about it, we will all be on the same playing field in dealing with the new healthcare regulations, I think, if they ever figure out what those are.

Thank you too CM. They say "live and learn". My problem is I'm not going to live long enough to learn what I should have long before now.

 

[Dwan Hall]

Take a course in small business at a local community collage. Most business fail due to mismanagement.
Don't buy equipment then look for work for it. find the work then buy or rent the equipment needed to do the job.
Don't look for growth till you have your business established then only after you have the work that requires it. Getting to big for your britches is one of the fastest ways to go broke.
Take what ever money you have and put it in savings then take out a loan using the savings as collateral. ( most banks charge 2% on this type of loan, some as low as 1% )
That way if you fall short 1 month you always have the money in savings to cover a payment.
Always do a little extra on every job. Show it on your invoice but do not charge for it. (like a little extra cleanup around the job site)
Always maintain a loan at a local bank even if you don't need it at the time. Again use that savings account for collateral. Borrow against it then put the money back in that same savings account. You will be surprised how fast it will grow.
As long as you owe money out do not spend any of your income on toys, (snow mobiles, motor cycles, hot rods, etc.)
You do not need the best piece of equipment to do a job at first. Save the A/C, air ride seats, pretty paint jobs etc. till after your totally in the black.
Plan on a lot of extra hours, and I mean a lot just to get started.
The first 10% of every job should go into a retirement account. After that it is up to you to figure out how much you need to make a living. I brake mine up into 1/3rds. 1/3rd for supplies, overhead, insurance, utilities, equipment, etc. 1/3rd for? labor which includes me. (you must pay yourself along with everyone else.) and the last 1/3rd for profit. (profit is money that is not needed to maintain your business but can be used for anything you like with out hurting your bottom line.)
Don't plan on making a business succeed in an area that does not have any money. It is much harder to make money ware there is none then ware there is a surplus.

This is not the only way to make a business succeed but it worked very well for me.

 

[LowBoy]

Take a course in small business at a local community collage. Most business fail due to mismanagement.
Don't buy equipment then look for work for it. find the work then buy or rent the equipment needed to do the job.
Don't look for growth till you have your business established then only after you have the work that requires it. Getting to big for your britches is one of the fastest ways to go broke.
Take what ever money you have and put it in savings then take out a loan using the savings as collateral. ( most banks charge 2% on this type of loan, some as low as 1% )
That way if you fall short 1 month you always have the money in savings to cover a payment.
Always do a little extra on every job. Show it on your invoice but do not charge for it. (like a little extra cleanup around the job site)
Always maintain a loan at a local bank even if you don't need it at the time. Again use that savings account for collateral. Borrow against it then put the money back in that same savings account. You will be surprised how fast it will grow.
As long as you owe money out do not spend any of your income on toys, (snow mobiles, motor cycles, hot rods, etc.)
You do not need the best piece of equipment to do a job at first. Save the A/C, air ride seats, pretty paint jobs etc. till after your totally in the black.
Plan on a lot of extra hours, and I mean a lot just to get started.
The first 10% of every job should go into a retirement account. After that it is up to you to figure out how much you need to make a living. I brake mine up into 1/3rds. 1/3rd for supplies, overhead, insurance, utilities, equipment, etc. 1/3rd for? labor which includes me. (you must pay yourself along with everyone else.) and the last 1/3rd for profit. (profit is money that is not needed to maintain your business but can be used for anything you like with out hurting your bottom line.)
Don't plan on making a business succeed in an area that does not have any money. It is much harder to make money ware there is none then ware there is a surplus.

This is not the only way to make a business succeed but it worked very well for me.[/QUOTE

]



Another good chunk of advice here too. I picked up on a very important factor toward the end of Dwan's post; speaking about the right area to start a business. Location, location, location means the difference between success and failure. Another is the amount of existing businesses doing the same thing you plan on. Many areas are already saturated (like mine,) with people doing dirt work, so unless you have a much better strategy than the established ones...it's a tough game to play in sparsely populated regions. Volume (or consistency) of work is critical.

 

[CM1995]

Very good advice Dwan.

Two of my fathers sayings that I take to heart when it comes to business -

"I can stay at home and be broke, there is no need in working towards it."

"A poor man never wrote me a check."

 

[Aliate]

Really great thread, it should be stickied, I check this thread pretty often. I read your whole post oxbow, great words!