Excavating business questions again

[RDrancher]

Go for it Ryan!

I've been in business for myself for over 30 years. The first five years were spent working part time on weekends before I made the jump. Was it tough? Oh heck yeah! Would I do it all over again? You bet! But then I know I suck as an employee

Going into business for yourself will always be tough, no matter what the economy is like. When the economy is bad like it is now, some folks are willing to do the same job you do for peanuts...or less. You have to be creative in your marketing and advertising, search out a niche for your services and be very flexible to keep work flowing in. Look at where your competition is advertising, especially the guys with a great image. Right now while you have steady income, work on your image (truck signage, the way your equipment looks). Like Bob Rooks said, it's VERY important. Also, take care of any licensing and insurance requirements. When you go off on your own there will be MANY times when you simply don't have the means to pay for these things.

Man, I sure wish I was 24 again! :thumbsup:

 

[crashz]

I've been thinking the same way Ryan. Maybe start small, weekend work and see what develops. Here is what I'm going to do:

-Start a business plan to road-map what services I will offer and how to accomplish that.
-File for a LLC and obtain a tax ID.
-Apply for a business license and excavator license in MA (not the hoisting licesnse for equipment).
-Work with my insurance agent to come up with what I need based on my business plan.
-Work with the SBA and local chamber of commerce to see if I'm missing anything important.

And few unanswered questions:
- Will I be required to provide health insurance (MA) for myself if I'm already insured?
- Workman's compensation?
- Am I required to have a "payroll" and payroll tax as the only employee?

My idea is to offer excavating/tractor services on a smaller scale and focus on small residential and landscapers as clientel. I do not plan on operating equipment beyond what can be moved with pick-ups and 1 tons. This reduces my expenses and taylors my services to equipment that I have or willing to aquire.



You have very little to loose. You have quite a bit of equipment and therefore will not need much for start-up costs other than the paper side. I'm not surprised to see that people are not recommending this venture, as a steady paycheck is tough to find. However, you are in a unique situation, where your start-up costs will be licensing and insurance, and to a lesser extent more frequent maintenance. Its really a no-brianer to start part-time and work from there.

 

[Bob Rooks]

Well I'm surprised that nobody has mentioned Performace Bonds yet, or maybe it's come up with your insurer. Basically, it guarantees the contractor or person or business you are contracting with, to financial reimbursement if the contracted work you are going to do is not executed within an agreed upon time frame, under stipulated conditions. Rarely do these favor the little guy. Been there, done that. Talk about stress. You can stand to lose everything and then some, if you're not insured.

 

[DIRTROAD]

- Am I required to have a "payroll" and payroll tax as the only employee?

As the owner of the company you can take a draw from the owner's equity.

By doing this you will save approximately 27% because you will not be paying the employer's matching S.S. and Medicare Taxes as well as State and Fed Unemployment compensation.

You still have to pay taxes on profit, just not in the form of payroll taxes.

 

[Verticaltrx]

What has gotten me more business is good old fashioned "shoe leather" (talking to people, making more business aquaintances through face to face meetings, etc.)

Likewise. Who you know is important in any type of business and word of mouth is always the best form of advertising in my findings.

I work more for the higher end clientele and market myself/my business accordingly. I don't do the volume that the other 'farm fence guys' do but I do provide a much better quality product at a slightly higher price. I market my work as 'premium quality' which to some equates premium price. It may scare some away for that reason, but then again they aren't the crowd I'm catering to anyways. Also an added benefit is the higher end clientele haven't be hit as hard by the economy.

Go for it Ryan!

Right now while you have steady income, work on your image (truck signage, the way your equipment looks). Like Bob Rooks said, it's VERY important.

I like to have nice looking equipment and trucks but having a good self image is also quite important. Clean neat clothes, good hygiene, good personality, speak with a smile, use good grammar, etc all make an important impact on people, whether they are your clients or not. I also try to come in below my estimate on every job, even if it is just a tiny bit. (sometimes you have to factor this in when making a bid). It makes people feel like they are getting a good deal. Alternately, you can also provide a little extra service to sweeten the deal. Things like this don't cost you much but have a great return.



I'll also add that once you figure out the necessary legal stuff the best way to figure out how to run a business is to start small, but just jump right in and do it. Also don't be afraid to grow slowly, one of the big killers of small businesses is too much success/growth too fast. I started my first business when I was a Junior in high school, a bush hogging/land reclamation company, and it taught me a lot. After I graduated college I was ready to go into business for myself full time and started my current construction company (I'm 27 BTW). Bottom line, if you are the entrepreneurial type, have a fair bit of the capital needed to start, and have the desire to do it, GO FOR IT!

 

[crashz]

Well I'm surprised that nobody has mentioned Performace Bonds yet, or maybe it's come up with your insurer.

As I understand it:

On large contracts, this is normal business, however small contracts are typically not bonded unless required by the owner. Typical contractor liability insurance will only cover liability (damage or injury as a direct result of the work performed), but not liquid damages due to loss of service for the owner or inadequate performance by the contractor.

Bonding will require some upfront cash and gleaming credit with a bonding agency. Bonding agencies will only make that investment based upon the risk they are taking. The bonds usually cost about 1.2 to 1.5% of the total contract value. Therefore the bonding agencies will only write that bond if:

- the risk of under-performance is low
- the bond value is a reasonable amount

Therefore it is highlky unlikely that a bond could be written for a small one man start-up, working residential jobs that are less than $5,000 - $10,000.

 

[crashz]

As the owner of the company you can take a draw from the owner's equity.

By doing this you will save approximately 27% because you will not be paying the employer's matching S.S. and Medicare Taxes as well as State and Fed Unemployment compensation.

You still have to pay taxes on profit, just not in the form of payroll taxes.

Thanks Dirtroad!

 

[Builder]

As I understand it:

On large contracts, this is normal business, however small contracts are typically not bonded unless required by the owner. Typical contractor liability insurance will only cover liability (damage or injury as a direct result of the work performed), but not liquid damages due to loss of service for the owner or inadequate performance by the contractor.

Bonding will require some upfront cash and gleaming credit with a bonding agency. Bonding agencies will only make that investment based upon the risk they are taking. The bonds usually cost about 1.2 to 1.5% of the total contract value. Therefore the bonding agencies will only write that bond if:

- the risk of under-performance is low
- the bond value is a reasonable amount

Therefore it is highlky unlikely that a bond could be written for a small one man start-up, working residential jobs that are less than $5,000 - $10,000.

I think that sounds pretty reasonable. I've never been asked for a performance bond. That's for the "big guys". I have been asked to agree to have a house built by a certain date with a $200/day fine for every working day beyond that date which I refused to sign. I still got the job and built the house in less time than the customer gave me anyway.

 

[RyanL]

Hi guys, thanks for all the info and different point of views so far. I've been busy all weekend working in the garage on side jobs and sellin firewood, i just do little bit of everything. Current project for a guy is ford 2000 tractor: needing, clutch, trans seals, front end loader mounts and subframe built, and brackets built for a bigger bucket. I've been trying to read and understand everything just bit over whemling. I think i need to get some more working capital and try to pay down my house somemore and continue to fix up my equipment before i start. I also want to read more into and understand more of the legal and paper work side of things. Thanks for input so far everyone makes good points.

 

[bdeboer]

Start with a good accountant to help with decisions on whether to be an LLC or Corporation etc. Use them to get the tax benefits/workmans comp. paperwork organized before you start.

State of Ohio will assume you are hiding something if you change to corp. after the fact.