starting a new excavation business

[crane operator]

So you did make it

I've made it this far. Who knows what tomorrow brings?

According to the US labor figures, half of new business don't last 5 years. Only 30 percent make it to ten.

Most business guys's story are kind of the same and always a little different. Especially guys that start with nothing. Very few are 20. Most are 30's and 40's. And it takes 20 years to "make" it. Maybe more.

Second and third generation ownership- family business is a totally different category. My opinion on that was learned from my grandpa- First generation makes it, second generation maintains it (they saw how hard the first worked to get it) and the third generation looses it (they've grown up with money, always had it, always been given it, and it means nothing). That's some old Iowa farmer logic there, and its not true all the time, but its true a lot of the time. (if you're a third generation owner reading this and offended, you had great parents and are the exception- and I'm perfectly willing to be wrong in your case- sorry).

Slow and steady. Your competitors didn't get there overnight, you won't either.

it would be very very difficult to save 75,000 dollars .

No- its not easy to save that kind of money, but its not impossible. I've done it. Other guys here have too. If you and her are both working and get rid of the car and truck payments, you could do that in less than 5. Less if you sell the house and rent. Depends how you want to live.

I don't know what a house goes for in nova scotia, but if its a 100,000 house, sell it. If its a $200,000 house even better. Sell the new car and truck and pay cash for older vehicles. I've driven a lot of miles in a $2,000 vehicle. Take $30-40,000 of it and buy a nice older 20-30 ton excavator. Or a mini and a skid steer. Or a shovel and a transit. Whatever you can make money with. If you get to the end of the first year and you still have money left, you can go another year. If it doesn't work, sell the excavator and decide what to do next.

You're actually selling your house either way, because your banker is using it as the equity for the note, and if you don't make it, he's going to take it out of your house, with your personal signature. Selling the house makes you into the banker, and if you aren't willing to risk that, why should a banker?

If you are looking at doing this with a partner, family, or someone else co-signing on the note, don't. If its your dad- that is his retirement and your future that you're putting on the line. I'm always willing to risk my own future, I'm not so willing to risk someone else's. You have time to make another retirements worth of money, your dad doesn't.

 

[Birken Vogt]

To compound the above advice. When I was single I worked overtime and such and just let it languish in the bank account. When I got married, at first, we ate out and such a little too often, and I saw that slip away.

We switched to beans and rice and hardly look back. No steak for us, bone in meat target is $1/lb, boneless $2, won't pay much more than that. Maybe $2.50 with inflation. Dry beans and rice in 20 lb sacks. Same vehicle as when I was just out of school.

Worked a lot of overtime to build up a war chest. Gaining experience all the way. Always maxed out Roth IRAs for both of us and have not had to touch them, although the principal contributions are fully available as cash. That way I have a back stop but have never touched them yet.

I may have passed some opportunities but I also left alone some pitfalls by sticking to what I could pay cash for.

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One other thing on finance vs. rentals. If you finance, you are paying heaps of interest. If you rent, are as well. But if there is a downturn the rental bill does not just keep on coming.

 

[bam1968]

I don't know if this applies to you or not but I'm going to say it anyway. If you have children you need to take that into consideration as well. Especially if they are fairly young. If you think you are still going to be able to attend all of their school functions and ball games etc because you have that option being your own boss you are probably in for a big surprise. Your 50 hr weeks will most likely turn into 80+ hr weeks real fast. It sure did for me anyway. I missed alot of my kids activities over the years mostly because I was either trying to get a job finished before a the rain moved in or trying to get a piece of equipment moved before sunset etc. On the flip side I was able to attend some activities that I very well wouldn't have if I was an employee but these were few and far between. Just my $.02

 

[Vetech63]

I started my business here when I was 27. The hours working steadily increased every year and at 1 point in the 90's I was working 80+ hours a week, 7 days a week......and did it for 3 years straight. I missed so much of my kids functions, and the wifes as well. She wanted a bigger nicer house, which she got. Nicer vehicles which she got.......and got to stay home and not work. An ideal situation for her and I was ok with it because times were good. Then I walk in one day and she has decided that I need to be home more, then it became a demand. I'm a good 250K in debt because of the things YOU wanted, and now you want me home more? How in the hell do you think we can afford that? I told her if she was willing to put ourselves in the position that I could be home more, then so be it. Come to find out, she wasn't willing to take a dive in lifestyle at that point and within 2 years I found myself divorced after 18 years. There was no way I could be home more and keep up the lifestyle we had at the time........so I was in a catch 22 with no winning scenario.

Money is a funny thing. It can change things for the better, but also comes at a price. Ive been on both sides of the fence now at 54 years old and I can honestly say I'm much happier now with less of it. I have a modest home on 40 acres all paid for, good health, a great wife and 9 grandkids. In the grand scheme of things, I consider myself very wealthy.

 

[JD8875]

I'm 36 and was in a similar position 9 years ago. I started small with a skid steer, my personal diesel pickup, and a $200 trailer I built out of $#it I scavenged all over. I started doing little grading jobs and water diversion. Later that year I traded four cords of firewood for a well used and abused skid steer backhoe. I retrofitted that to fit my machine and started doing a little utility work, culvert replacement, and residential water leak repair. The next year I sold my cheap dirty hoe for the down payment on a bargain priced mini ex. I started doing a little more utility work and repair and started picking up jobs like pond dam repairs and little small clearing jobs. The next year I paid cash for my first dump truck which was a POS 81 Chevy single axle with an 8.2 Detroit. I rented a 20 ton how's a few weeks over the next two years and got into cleaning out ponds and building a few more small ponds. Started fixing washed out farm terraces. It turned off dry that year and I lined up 5 ponds to clean out. That's when I bought my 953 and worked out a deal with a buddy to haul it for me when needed. Two years later I was cleaning out ponds, building new ponds, clearing timber and brush and picking up jobs steadily. All the while my mini ex was dollar for dollar the best money maker. I traded my old skid steer on a good looking 06 tl130 and was doing good. I got talked into taking on my first small commercial job from clearing, to storm sewer, to building pad to final grade and some retaining walls. That was a great gig but it nearly broke me and I hardly saw my kids for 14 months. All the while my regular customers still had stuff they needed done. I picked up a backhoe for a bargain to do the commercial job and it paid for itself on that job. This past fall I bought my second truck and a well used trailer big enough to move all my own equipment. I've borrowed some money on my machines but kept my payments under $500 total a month and kept my full time shift work job. Here it is the end of February and I'm hoping the ground dries up enough to finish a pond before the banker and the insurance man hungry. Through it all I've grown steadily and I've made good money but I'd never think of taking on $200,000 in debt even where I'm at right now and keeping my full time job.

For me my business is a stress relief from my full time job and my plan B. My full time job is my plan B to my business if that makes sense.

My advice is go slow and watch it grow.
Good luck
John

 

[AzIron]

Second and third generation ownership- family business is a totally different category. My opinion on that was learned from my grandpa- First generation makes it, second generation maintains it (they saw how hard the first worked to get it) and the third generation looses it (they've grown up with money, always had it, always been given it, and it means nothing). That's some old Iowa farmer logic there, and its not true all the time, but its true a lot of the time. (if you're a third generation owner reading this and offended, you had great parents and are the exception- and I'm perfectly willing to be wrong in your case- sorry).

as a second generation to my dads business i take no offense to that statement its true most of the time.

the old man wouldnt let me have anything easy, growing working for dad was not optional it was just a realty cause dad taught us from as long as i can remember that this business was what put food on the table and boy did me and my brothers own our groceries. by the time i was 12 dad had grown to well over a crew of 15 guys and a dam lot of iron ( the worst of witch was the end dumps) dad only had a mechanic on pay roll 2 years there the rest of the stuff that was not under warranty was fixed by us. it really was a good way to grow up. when i turned 16 someone offered me a part time job after school i didnt want to take it so dad fired me to leave me no option its really funny now and it was some great experience cause i had no clue what it was like to be an employee let alone work less than 40 a week when not in school. so basically 10 years went by of doing other things when i was 25 i was a jr manager of a pretty good size farm and got burned out decided it was time to go back to work with dad. that took 6 months to get him to agree cause he had scaled all the way back to being just an owner operator with a backhoe it took another year of part time for him and a full time day job before there was any wage out of it and finally about last august i went full time for the business its has been an adventure wouldnt trade any of it so far while i have not sacrificed and struggled like dad did 40 years ago i had to come up with enough money to buy in to go back like i said dad wont give anything.

the best thing a guy that has a company can do for his kids it to push them out for at least 2 years go make it somewhere else cause that reality will change there perspective i know it did mine.

it has been easier for me to get in the game but i sure have not had a silver spoon because of it

our success is based on us being debt free if we cant pay cash we dont buy it witch is why i still rent my backhoe that i run daily cause it was sure nice in December when there was no work to send that machine back to the store and not have to pay for it

 

[RTSmith]

As a member of a fourth generation family owned equipment business, I only play in the dirt for fun- there is a ton of good info here. At 50+ years of age, 9/11 and the 08-12 recession has scared me from debt. Hate using junk equipment, but don't like a monthly bill either. And as my own boss, missed many years of my kid's activities. First there, last gone is the boss' life.

 

[TrentNz]

Im 22, started off with a 5000hr 5 ton kubota and 8 wheeler truck with 1.8mil kms on the clock. Had debt but it was on the lower scale.

Don't go berserk to begin with, buy second hand but don't just jump at the first thing you see. Shop round, test gear out and most importantly TRUST YOUR GUT.

We've just sold the kubota and now have a 900 hr zx50 hitachi and a 8900 hr zx120 hitachi as well as the truck.

 

[JPV]

I love this discussion, have sort of thought about going on my own now and then and I can see someday it will probably make sense, really like hearing about others experiences, thank you for sharing.

 

[Jumbo]

Here is my take from an electrical point of view and you father has probably said all this already:

When I was working, I ran jobs from a crew of just my apprentice and myself up to 300 people on the payroll. I did work from a 1 hour service call to a 28 million dollar budget.

I was asked all the time ‘you are a good foreman, general foreman, electrician, why don’t you go out on your own?

My stock response was the same every time; “yes I am, however, I am not a business person.” Bidding, collecting the bills and all that pencil pushing work was not my forte, I pushed enough pencil doing what I did for 40 years. To do more was not in the cards. I never wanted to get in the hole where you bid a job “because you need to keep things moving” and end up underbidding. Two successful contractors I knew: One was a one man band, he spent three days a week with the tools and three days a week with the pencil. One day off a week until he sold out after 20 years. The other; he worked 14 hours a day, 7 days a week for the first 10 years, then cut back to 12 hours a day 7 days a week for the next 10 years. He is a multi-millionaire I will admit, but I think I had a better life. He also went through three wives in the process and gets to share his money with them now.

The real question you have to ask yourself is what kind of a life do you want? Me, I was happy with a 40 hour week and a bit of OT once in a great while. Perhaps I was lazy, but I enjoyed my family, we had and have lots of time together, again, it all depends what you want from life.

 

[Tarhe Driver]

Let's go back to accounting for a moment. One of the hardest things for me to understand when I, a North Carolina farm boy, went back to school after the Army was the following: "A normal profit is part of cost." This kind of goes along with your dad's saying, as you quoted, that you would be "buying" your job.

"A normal profit is part of cost." Let me try to explain. What that means is that from the business' annual income, after you pay all of your hard and soft costs, as well as a competitive salary to yourself, the business itself must turn a normal profit. ("Normal profit" differs by industry.) If the business is not generating a normal profit after all expenses, including your salary, are paid, and all you are getting out of it is competitive salary, why would you take the risks and headaches of operating a business just to say that you work for yourself?

Another old saying is "Excessive profit breeds ruinous competition." Are your competitors making an excess profit on their jobs that will allow you to get into the business, take some business from them at a lesser price, but still make a normal profit? Sometimes growth in the area can open room for another business, but if your competitors are making only a normal profit and you go into the business, will you all suffer, you probably more than they, because in the beginning you will have no equity in your business as I understand what you have explained here.

Again, sit down and talk with an accountant who is familiar with your industry so that you will have a good understanding of all costs that you might incur. I really admire you for having started and responded to this thread. My impression is that everyone who has responded has your very best interests at heart. And remember that interest is rent on money borrowed.

 

[taylor]

Small business here- Farm drainage and some excavating stuff in the summer. Been at it for 10 years, grow slow. When at the bottom of a flight of stairs, no matter how big of a run at it you have, you can only take one or two steps at a time. There was a time when a 7000 dollar repair bill was more than i could take. Now we have 50-70,000 budgeted for repairs and maintenance.
One other thing I'll throw out is a high percentage, don't know exactly, of small business go out of business or go broke after their most profitable year.

 

[DMiller]

I saw it working quarry mechanic, different truck names, Blah Blah Excavating, Hmph Hmph Trenching, So So Hauling where the truck names and colors changed but not the faces or names driving them, equipment bought, sold, resold or LLC's flowing in and out of business all trying to catch up to the Old Fart down the road that started his off normal business when the quarry opened decades prior on a wing a prayer and NO regulations as have today. Not in at the ground floor being half a flight behind, catching up on that stair climb just is not so easy.

 

[ilovetracks]

Depends on you and your area. You either have the desire or don't. When I was young someone told me there's no money in it, I said,"I'll live in my pickup if I have to", that's how bad I wanted it. Came from a family with nothing fancy, started with a pos 1976 f-750, an 1970 Allis-Chalmers 655. It was a freaking nightmare for the first two years, it was tough but better to be 18 than 50 starting!
Depends on the area. Some are hot and could make real good but I live in a rural area, not a lot of work. I don't make a fortune but only work a combined maybe 25-40% of the year and make a living, I like my off time and do fab projects. I'm 32 now so I'm well over the hump, thank god, the struggles were worth it but there are tough times with no work, a lot of rain sometimes like now, breakdowns on breakdowns and customers bitching.
I'd have it no other way because this is me, it's in my blood since the first time I saw heavy equipment running, pushing sand in the huge sandbox my parents built (my brothers and I would line equipment up for lube truck!) as a child (still have the ertl case rubber tire loader, wore that thing out!!! it literally has wear on the cutting edge because I have the new model of it next to it), I collect the diecast equipment too. I have iron fever like you don't know, IT'S A SERIOUS THING!!!!! To say it's in my blood is an understatement. If there was a hot model to my left or an A-C motor wagon to the right, I'd be to the right.......but maybe glance to the left!!!!! lol

 

[ilovetracks]

Also what others say, grow slow. I've seen many come and go. Steady wins the race, save in the good times because I absolutely guarantee there will be bad. Borrow as little as possible, keep low overhead. I like no employees myself, to each their own. You can buy 15-25 year old stuff as long as its GOOD stuff. As my friend says, "your stuff is used, not abused", there is a huge difference, and good used is hard to find. My cat 943 was 21 years old when I bought it (I was too), has over 18k hours, it runs like a new one for 11 years. Bought it for 25k! Everyone running 953 now, I think the 943 is underrated by people myself. Buy quality, your equipment is EVERYTHING