starting a small business

[2nstonge]

You should complete this form as part of your business plan...it will give you a line item for almost every conceivable possible cost and overhead you will need. The only way to make it in business - and make a decent living at it - is by understanding all of your costs and factoring them into your rates.

360 Difference Software for Builders&Remodelers

Personally, I never quote a customer a per hour rate. Tried that early on 'cause that's what everybody else did. Well, once the happy homeowner has you on the clock - in my experience - they become a taskmaster and clockwatcher to the extent they would never tolerate from their boss at work.

Everything now is looked at and bid out - fixed price preferred or a range depending on certain variables and possible hidden conditions. I became good at it pretty quickly; what's it worth to the homeowner to get this job done? how many trips for materials? is there easy access to site? do I need specialty tools to rent equipment? debris disposal and costs? Gotta look at it all.

-Norm

 

[Dougster]

An LLC isn't a missile defense shield - it's merely a speed bump if you've done something really bad & someone wants to come after you personally. I started with $1M in liability but started taking subcontract work from bigger general contractors and they asked for $2M in liability. The cost difference was minimal so why not? If Uncle Fester breaks his neck after he trips & falls into a hole I dug because I didn't have the work site properly marked off I'd rather my insurance company wrote him check than me handing over my house keys to the guy.

Absolutely 'NO' to both questions. I've had that done and the contractor needed a special license with state & fed EPA dudes looking over his shoulder the whole time. I can't imagine what his insurance costs are...how much does it cost to clean up the local aquifer if he springs a leak in the tank during removal? -Norm

I am starting to get the message: LLC notwithstanding, there is no substitute for a *LOT* of insurance. I will keep that in mind. It just seems like a lot of coverage compared to what I see in typical construction contracts and what my old employer carried. Perhaps I am comparing apples and oranges. I would still think you would try to strictly limit your liability by contract... correct? You wouldn't want to make it too easy for folks to go after that cool two mil...

The LUST thing is obviously complicated and costly... but it must be insanely profitable as well for those who can stand it. If I told you what I paid to get mine removed a few years back, you'd think I was crazy! I should have waited for the Mahindra!!! It would have been out, cleaned, cut up and gone before anyone had a clue.

Of course... maybe I'd also be in jail right now!!!

BTW, my old employer made a lot of money by taking certain jobs that involved too many laws & rules & paperwork & client risk for any sane company to handle. Hence my interest in possibly doing the same. I am an experienced mechanical/construction engineer after all... with many environmental engineering friends and contacts. Perhaps this will become my niche???

Dougster

 

[Dougster]

I researched all tax info I could find. Took night class for basic bookkeeping, etc. Make some money then ramp up. It's important to not spend every $ and bank some for future cost, emergencies, etc.

Insurance is different. $2k for liability ? $1k?

I am already looking into classes & courses that will help me do as much as I can myself. It's got to help.

I'm thinking more like a minimum of $5K on insurance just to get me started. I'm almost to the point on insurance where I feel I should go to a broker and say "Here is what I can pay you... now, what am I allowed to do???" It's entirely possible that I may have to start out that way.

I am not the kind of person that can or will pay out huge quantities of money in advance for nothing tangible in return and with no solid evidence that I can ever make it back. I'd rather run for a while with no liability insurance at all... assuming anyone would actually hire me that way... insanely risky as that might be.

Dougster

 

[Dougster]

When you speak with your insurance guy, tread very carefully as to what you do, don't do, how stuff is described etc. Insurance can get very expensive depending on how it is done and described, you also run the risk, if you ever try to hide something, of finding that your insurance does not cover that aspect when you need it.

1 million too much,,,, we mow, lets say we launch a rock and hit a child in the head, goes into a coma and does long term damage. How fast will the 1 mil be gone? Even the 2 mil will just get that kid started. Many commercial places are going to 2 mil as a base.

Good advice on being honest but exacting and careful with your insurance guy. I have worked with lawyers and been deposed enough times to know how that works. Every word has meaning. You need to be ultra-precise in the words and descriptions you use and the message they deliver.

The "rock hitting kid/coma/long-term damage" scenario is certainly awful and scary to think about, but should we all be thinking that way? If that were the case, I would never drive or even let a kid walk by my house. No amount of home or car or business insurance would ever be enough. It may not be easy to rationalize an amount of coverage, but it can never be unlimited. I don't have the answer... but there must be some better way to answer the question besides simply paying the most one can possibly afford.

Dougster

 

[Dougster]

I've had 30+ years of being around machinery and operating forklifts and backhoes and dozers. But when I tried to find liability insurance for my BX2200, it was TOUGH. No one wanted to write it since I had no commercial experience and it had a loader, which increases the liability of excavation. Only after I explained thoroughly that I couldn't dig basements or trenches, etc, did I find a policy coverage of 1 mil.
Ron

The loader alone triggered excavation-level premiums??? Mama Mia!!!

With the 509, I guess I'm a dead man!!!

The experience thing raises an interesting question: How does one get commercial operating experience if you can't buy the insurance to enable you to do any commercial operating work? Sounds like Catch-22 to me.

Dougster

 

[Dougster]

The secret to small business is to only work 1/2 days, the good news is that it does not matter which 12 hours you pick.

You will reach a point, where you cut your prices to get work..... DO NOT DO THIS..... As the man said to me, I can go to bed at night, Broke and Hungry, or TIRED and broke and hungry....... Don't need to work just to be TIRED.

I love these quotes. You made me laugh out loud. I think I will have them BOTH made into big signs and post them right above the tractor!!!

Dougster

 

[Dougster]

Personally, I never quote a customer a per hour rate. Tried that early on 'cause that's what everybody else did. Well, once the happy homeowner has you on the clock - in my experience - they become a taskmaster and clockwatcher to the extent they would never tolerate from their boss at work. Everything now is looked at and bid out - fixed price preferred or a range depending on certain variables and possible hidden conditions. I became good at it pretty quickly; what's it worth to the homeowner to get this job done? how many trips for materials? is there easy access to site? do I need specialty tools to rent equipment? debris disposal and costs? Gotta look at it all.
-Norm

Excellent advice Norm. This whole hourly rate thing has had me losing sleep at night. Obviously, I would prefer that everything be a sole-source, pre-negotiated fixed price, but folks who call are still going to want to get some idea of your rates even before they invite you out so that they can compare them to other folks in the area. And I know that I am not alone in my area.

Let me ask the loaded question: What is a fair hourly rate (or rate range) for a 40HP compact TLB and operator? Is it different depending on what you are actually doing... i.e., what implement(s) you are using? Do you hide or build the delivery fee into your rates? Or charge it separately? Or does that only apply to full-size backhoes requiring third-party/tractor-trailer delivery?

Other than insurance cost, I think this hourly rate thing is the next most critical number to obtaining & executing new "non-word of mouth" business.

Dougster

 

[randy41]

look into doing your bookkeeping on your computer using quick books.

 

[2nstonge]

Let me ask the loaded question: What is a fair hourly rate (or rate range) for a 40HP compact TLB and operator? Is it different depending on what you are actually doing... i.e., what implement(s) you are using? Do you hide or build the delivery fee into your rates? Or charge it separately? Or does that only apply to full-size backhoes requiring third-party/tractor-trailer delivery?

You're going to find that really depends on your location, competition, what it is you're actually doing, etc.

For instance, I'm only using a JD 4110, my little tractor biz is called "Backyard Tractor Works". In my area there are tons of guys with TLB's, excavators & 10 wheel dump trucks tripping over each other to dig the next foundation or cut a new driveway. My target is homeowners that have small projects; trenching, drainage, gravel drive repairs, lawn prep, brush removal...all the small stuff no one else wants. Yet, I know I'm charging more for a day of my services than the big guys are getting to do excavation work. I literally have no competition in the immediate area.

I charge a flat half day or full day rate which includes my trailering expenses - again, no hourly work. My half day/full day rate fluctuates based on how far away they are, access to the site, the type of work, the terrain, am I going to beat the snot out of my tractor or is it a reasonable job...it all comes into play.

All it takes is something to break and if you've priced your work just to make an hourly wage you won't last. When I first started out I was doing a sweet tree thinning/brush removal/landscape project for a customer along the Battenkill River - just a gorgeous setting, good money (I thought), nice 2 day job - until I ran over the old rebar survey stake from days gone by. That flat tire cost me over $400 and an extra day and half of time. Charge what your time, equipment, maintenance, and overhead costs are truly worth.

-Norm

 

[Hakim]

I haven't read this whole thread, but encountered the "massive liability" issue years ago when we started manufacturing and selling products -- fragrances and body care lotions -- that were put on women's skins & faces.

Our insurance agent at the time gave me what I consider to be some very, very, very good advice, which I rarely see offered to any business: "Umbrella coverage."

You should buy, say, a base of $1 million liability coverage, then add "umbrella" coverage of around $5 million or more. If the "first" million of coverage costs, say, $3,500 in your industry, the "umbrella" would cost maybe $400. Hard to believe, but true. The way it works is, the "umbrella" coverage ONLY kicks in AFTER the entire first base $1 million is used in judgments.

Around 98% or more of MOST lawsuits are settled before a trial. Still, the average cost to even get rid of a nuisance meaningless suit can be $25,000 even more.

In the construction industry, I assume the issues are more complex and potentially much more costly. Still, ask your agent about "umbrella coverage" --- if not for the business, then for yourself personally --- that way, if you are held liable personally even though a corp or LLC, you will NEVER "lose it all."

Sad we have to calculate this way, but what a world we live in...