Hey y’all,
Been in business for myself for a little over 2 years(12 years residential construction experience total). Started out small and after the first year – blammo! – growth! Recently had 3 new houses(approx. $400,000 each) under construction at the same time with as many as six employees — 5 carpenters/laborers and 1 superintendent and myself. Just finished 1 project – a spec. house that sold without even advertising it but really only broke even or lost a little. Would have been great to make some money on it but also being the first new house my company has done it really shows what we are capable of. Good portfolio builder. Second house is also a good portfolio builder but will probably just only break even. Third house is a T&M plus a fixed fee. Already spent the fixed fee to help finance the first 2 and the next project is a renovation that is also T&M plus a fixed fee but have pretty much spent the fixed fee keeping up with the other three. Part of the reason for the breaking even has to do with myself being stretched too thin to properly manage and control costs. I estimated properly and what I thought was realistic but not executed very effectively.
I now find myself approximately $75,000 in debt to a supplier(specifically for 2 of the projects above — both for cabinets) and credit cards. I started the business with $0 which probably wasn’t a good idea but working in construction I would never have been able to raise the large chunk of capital experts reccomend a new business has before it opens the doors. I have a good reputation, am a realistic estimator although 9.5 out of 10 don’t have a budget large enough to afford what they find out it costs to build in this area. I believe I can turn this around with better oversight, marketing and working hard to land the right jobs but I’m not quite sure what avenue to take in order to get the debt down to a reasonable amount. My book keeper suggested going to the bank and trying to get a businness loan of maybe $100,00, maybe an interest only loan so that in the short term I can use it as capital and work on getting ahead and then start making principle payments. There’s credit counseling, etc.
Any ideas? Surely some of y’all almost went down the crapper before you became the upstanding, succesful business people that you are now.
Replies
Some general ideas; pay off the vendors/cards with the highest interest rates first. Get a credit union loan and/or home equity line of credit, usually it's cheaper money than bank rates.
If the work is "not executed properly" you may want to look at those on your payroll. Nothing like workin for free to make one see the light.
Expert since 10 am.
You need to build a house soon for a banker that will extend you a significant line of credit. And you need to make him happy about the quality of your work.
there isn't any easy answers. first have you been paying yourself a wage or are you eating peanut butter while building your portfolio?can you get by on less?
my thought is you got to forget the portfolio for now and get some jobs that are down and dirty and not very prettybut make money .that are quick in and out,maybe 30 45 days .then go buy a case of peanut butter and start paying down the debt before it gets any bigger.
sorry but that superintendant would go,i can only guess what his salary is but if you can save that cost and you manage the guys producing money you might save enough to pay the cabinet bill.as you watch your guys are they all making you money or does one maybe just "break even"?
you can't rob fixed fee profits to support a money loser,pretty soon it will all come crashing down.each job has to stand on it's own.
my thoughts are worth just what you paid,but i know this you got to get a handle on this or a year from now you will be working for the other guy. larry
hand me the chainsaw, i need to trim the casing just a hair.
My thoughts are:
1. Stop building spec, and stop selling for a loss before complete.
2. Get a home equity loan, personal loan from family, or some other low cost credit. Pay off the credit cards and suppliers and start giving your new loan those monthly payments.
3. Scale down to 1-2 employees, get out your tool bags, and start doing work for customers that pays. Charge 10% more than you normally would.
Portfolio? Who cares. I have a great photo portfolio and website, and no one ever looks at either. You get your work by word of mouth referral from satisfied customers.
Hey dogfish beenthere, get over it if your ego is telling you that it is ok to lose money because you are doing a great job and building a rep. you are on the path to being out of buisness. my own ego put me in that spot some years ago and now another builder that built for the money ( not a dirty word we are not in a rock band ) has my services for 50k a year . don't do any thing that does'nt make money and if you need a supervisor to build three houses you are not spending enough time at work. the most expensive lesson i ever learned.
My general take is that you got to big to fast, it is not an easy move to go from employee to contractor, to understand where your risks are in contracting (almost always labor costs). I can't see how you could justify a superintendent or at least what I call a superintendent (bags off). That should be your job for now as well as estimating and general project management. When I started contracting that was how I did it very long hours and low pay, you have to keep your overhead down until you are well established and or the market is fat. It is a well established fact that many if not most contractors even ones that ultimately do well have had a brush with bankruptcy (I did). General Contracting is a gamble in which large amounts of money pass through your books but very little sticks. One can sometimes make phenomenal amounts of money and sometimes loose phenomenal amounts of money but generally one works with small profit margins. Keeping good records and job costing are very important to see what is going on, on the project verses what you have estimated. When you start robbing Peter to pay Paul things quickly fall apart. If the prospects are good in your area you can turn it around but you need some profitable work and operating capital. Cut your overhead get working capital if you feel you can turn it around otherwise.......
when i started i went gangbusters, The word gets out heres a young guy ready to work for nothing, I thought i was on top of the world, sat back, looked at all my crews, everyone was makeing more then me but boy i looked like a real player, stopped cold turkey and made every job make money, put my pride behind the door, started doing roofing, remodels went from 8 guys to 2 or 3, its hard to go from you and one or 2 to 8, or more, It takes at least 3 to 6 to pay your wage not working, add in a super it takes even more, very common mistake is to see a lotta money rollimg in and figure your gonna get a lotta of it,75 grand in the hole??????? stop the bus, somethings wrong
I'm glad I'm not alone.
Don't know if it matters but my company is not a sole proprietorship it is an S-corp.
Just to clarify, my "superintendent" is a hands on guy, mostly works with his bags on and is a very rare find around here as far as his skill, work ethic, management skills and overall construction knowledge. I pay him about $23/hr. and I've been paying him on a salary basis up until now but I am going to start charging him off on my T&M jobs as a lead carpenter to reduce the burden on my overhead. He's a real asset to me and my company because with him on the job producing, it allows me the time to, or at least it should allow me the time to provide the best customer service(which is where those referrals come from), set up procedures and checks and balances, manage the costs and money and spit out estimates for new work.
Now to be honest I have spent a lot of my time making sure everybody has what they need on the various jobs such as information, specialty materials and in order for everybody else to stay busy I've spent a lot of time mobilizing equipment and supplies. In other words, I obviously haven't spent the time neccesary to do the things mentioned in the paragraph above, except provide the customer service part.
I have paid my self a decent salary and whenever I have worked on a specific job as a carpenter or whatever I have also paid myself for that time. My wife has gotten used to me bringing home a decent income(she works very hard at her job as well) that now having to tell her that we may have to survive on less for awhile has become difficult to accept. Not to mention driving a truck that the company has been paying for including insurance.
In my area dependable lead carpenters or anyone who shows up for work every day and knows what to do and will do it right with little instruction is hard to find. I've spent hundreds of dollars running ads and trying to find people who wouldn't need much training but either they're not out there or they're already working for somebody else. I've even offered a couple of seemingly decent ones a job only to never hear from them again. So I have 2 just plain old carpenters who need regular supervision and direction, good carpenters but have to be partially supervised to make sure the job's getting done right. I have 2 other people who had very little experience when I hired them but have excellent work ethic, have the brains to learn very quickly and are motivated to grow and advance. One of them is interested and striving to be a lead carpenter and is close in a lot of ways but still lacks some overall hands on skill only due to lack of experience. The other isn't really interested in a leadership role but is someone who can work on a project independently and knows how I expect it to turn out. I've been through 4 carpenters helpers in the last 2 year of which were erratic and undependable, 2 of which were good and hard working but one left for another more suitable job and one left without a word to anyone. In my area employees are not expendable, if you find ones that show up dependably and can mostly do the expected work you try to keep them around long enough to give them a chance to become a solid contributor.
I try to limit my work week to 50 hours most weeks or so because I have a couple of young-uns and a pretty wife I like to spend time with. Having my superintendent(it's really just a job title) or lead carpenter or whatever you want to call him allows me to do that. But I think everybody is right, I need to spend more time on the jobs either producing or making sure everyone else is.
I guess another problem is that the projects I take on are pretty unusual and custom(relative to what else is being built here in the mountains) so I don't always get a nice, clean complete set of plans and specifications, finish choices, etc. I spend a lot of time pulling together answers and decisions(and then acquiring those things) from customers as the various phases progress. Do y'all get enough information at the beginning of a large job to be able to roll through with very little input from your customers? I haven't met a customer yet who had a clue how much information I need up front in order to first of all provide an accurate estimate and then to build from that information with little interruption. With my license limitation(up to $350,000 per project - yes I cheat a little) most of my customers can't afford architectural services and if they do they are usually abbreviated.
My husband and I have been in business for 10 years now and starting out it was extremely difficult. We lived on tuna fish and eggs and bologna for the first year!
However, I knew that all would come around eventually. I stood beside my husband all the way and we made it through. I can only assume that it is difficult for a man to tell his wife we will have to survive on less, But she sounds like a good wife and would support you in your endevours as long as you're trying to make it better for all in the long run.
Don't know you or yor wife, hope I wasn't stepping out of line. Just trying to give you some positive feed back from the wife's point of view.My brain + his brawn = a perfect team
I'm a banker and have worked with a lot of builders. You've gotten some good info on the business side. You especially need to drop employees. You can be a general contractor and sub everything out. If you keep an employee, keep your best one and he can be your eyes and ears while working alongside subs, keep things moving, and hopefully be a source of new business.
I'm guessing that your history in construction is as a framer. If it is, my guess is you are running your construction business like a framing business, where you have to have a crew of guys to put up a house quickly. Then, between houses selling, you've got to try to keep those guys busy, and you're paying for way more labor than you need to be carrying.
In addition to employees, I don't even have to look at your financial statement to guess that you have way too much overhead, probably in truck payments, insurance, tool purchases. You are going to have to cut everything back and get lean. Too big too fast.
You also need to come to the realization that you are not bidding/estimating projects properly. If you keep fooling yourself like this, the situation will not get any better. And you are screwing yourself if you are breaking even on $400K houses. There's lots of "portfolio" houses out there that were built by builders that are not in the business any more.
I doubt that you are going to find a bank that is going to step in and refinance debt with a business loan in the situation you are in. Even the bank that is financing your spec houses. The banker probably suspects you are using funds from one house to pay bills on another, and that is a huge red flag. The exception would be if it could be fully collateralized, probably with your personal residence, but you still have cash flow issues.
Your suppliers and credit card companies took the risk to finance you, and they will probably have to bear with you while times are tough. Try to make regular and sizeable payments to your suppliers whenever you get a chunk of money. But don't take that chunk of money from proceeds from another project. Take them from profit when a project is finished. Stay in contact with your suppliers, as well as your bank. Let them know when to expect money, how much, and follow through. Just pay the minimum on your credit cards until you finish a project and systematically pay them down. If you can't make the minimum payments, you could look at refinancing your house and roll the credit cards into a new loan. Rates are still pretty good so hopefully you will not be losing a great rate on your old mortgage.
Consumer credit counseling affects your credit just like bankruptcy, so before you do it, consider it as carefully as you would before filing bankruptcy. Good luck with making it through this.
Tracy
My history in construction is as a carpenter who has done about all a carpenter can do -- forming, framing, siding, trim and cabinets. I quickly moved into lead and management positions both with an affordable housing non-profit and a high-end residential builder. I have managed carpenters, subcontractors and clueless owner-builders on everything from renovations, $100,000 owner-built houses(about 40 total) to being super on a $2,000,000 + house.
I don't believe my overhead is out of line though I will obviously have to try and trim it. The company makes one truck payment of $275 a month on an 8 year old truck that is almost half paid for and that I will probably have to sell so that I can free up some money to pay bills. I have a 6x12 trailer that has mostly old and well used tools in it. Early on I created some debt by buying some equipment so that we could do the work that we needed to do. A few smaller tool purchases, 4 sets of scaffolding and a few walkboards but that's really about it. I have my insurance with the cheapest WC and GL provider in the area that caters exclusively to builders. They won't even touch you until you've had at least 1 year in the business. That being said I have spent over $20,000 in insurance premiums so far this year and all I can say is -- insurance is GD expensive in this business. I have from the beginning and as recently as a couple of months ago used estimated and actual overhead figures to calculate my markup and profit figures and have tried to apply them across the board.
As far as my estimates, they are good but in the beginning I guess I painted myself a rosier picture than what was actually there in order to build a reputation and show people what we can do. I recently passed on a project because they gave me an ultimatum - build for our budget or else - I have taken the or else. I'm not afraid to say no, in fact 9.5 out of 10 of my estimates have not led to jobs not because my estimate was too high but because their budget was too low. I didn't compromise just to get the job. Like I said before I believe it was in the execution that things went wrong. On paper I had it all figured out but let things get out of hand in the execution. Believe me I'm done compromising on price.
Everybody keeps saying get rid of my employees, sub everything out. In my area good carpentry subs are as hard to find as good carpenters. I've hired framers and then had to go back in and fix things that they were well aware of - that they screwed up anyway - like driving cut nails into concrete floors in the wrong place where that concrete floor is going to be the finished floor. Getting them back to fix things or making them financially responsible for the repairs, yea good luck with that one. I've seen carpentry subs walk off of jobs and leave money on the table rather than swallow their pride and actually admit mistakes. They all say they will take good care of me and my job but then they F things up anyway that I have to go back and fix or I have to ride their butts to get them back which costs and delays. Not one of them thinks of themselves as a cog in a machine, they only care about their part and usually barely complete even that much to satisfaction. I envy those of you who live in a part of the country where you can sub everything out and don't have to spend all of your time babysitting. The people on my crew are the only ones that can be trained to do some of the more custom details that go into the houses I build. Subcontractors fear change! Sure I can do them too but I don't have time to do them, manage everything else and still bring the project in on time.
I do appreciate your input. Some of your assumptions are true, some not so much but I appreciate your thoughts nonetheless. Keep them coming.
I've read this whole thread and you seem to know what you are doing. The fact remains that you seem to be in a sinking ship. One of your processes must be neglected. One thing I notice you did not mention was how you handle changes. Cost overruns often occur when the time to execute runs to long or you or the customer or the environment initiate a change. If you are a really accomadating service oriented person you may not be actively managing your change orders. When someone changes a door location on a fixed price contract do you just move it or do you execute a change order?
Every delay that is caused by your customer costs you money unless you charge them for it. Every deviation from your plans changes the cost of delivery. Do you let a faucet change just slide by or do you hit them with an upcharge? The reason this pops out to me is because you have mentioned customers counteroffering to fit their budget and you walking away. I can't say I have ever done that. I have walked away from customers I did not like. All customers want a deal I see no reason not to negotiate. You want your job for $10,000 less no problem all we need to do is remove $10,000 from the scope of work. If they try to add it in later no problem just execute a change order, only now that $10,000 in scope may cost $15,000 because of the hassle of the change. You are not the enemy their is no reason to resent a change just make sure you charge the full value of the change to prevent losing money on the change.
Remember you are a contractor, your tool is the contract. It's great that you may also be a craftsman. If you don't control your contract and make sure you are paid well you may not be around long enough to provide the warranty for your customers.
Just a thought, good luck
Jason
" My wife has gotten used to me bringing home a decent income(she works very hard at her job as well) that now having to tell her that we may have to survive on less for awhile has become difficult to accept. "
If you can't tell your wife that you both need to cut back for a while, then you've got bigger problems than being 75K in the hole.
JMHO,
Ozlander
Dogfish,
The very first thing you must do is go to
http://360difference.com/Freeware/PILAOExcel.cfm
and sign up to get Jerralds' PILAO workbook. Then take the time to fill it out and see what is truely going on inside your business. Do this tonite!
There are other ways to do it, but Jerrald has provided the, IMO, quickest, most concise, and easiest way.
Until you know what you are currently doing finacially, you can't see how to get where you need to be in order to be profitable.
SamT
How are you tracking your money & costs for projects? Spending the fee from the T&M job to finish the other shows accounting issues. There's all kind of software available but I track mine in an excel sheet that I made.
I know a few great carpenters that built awesome houses but they didn't give much value to the accounting aspect of business. They're no longer GCs but great carpenters with a lot of debt.
Have you got a budget written down for you and your wife for spending? It's a good way to get control of expenses and then turn that debt around.
DOG.... i'm not going to tell you to get rid of your employees... but wow.......they will eat your lunch !
i've been doing this since '75... got up to 6 employees once
been all the way down to zero employees..
took a while to find the right balance
but generally speaking.. when times are good i like Me & three
when times are bad i like me & two
meeting a weekly payroll with 5 employees like you have is really tough and i don't think times are good, i think they're bad heading for worse
i think SamT said to download Jerralds PILAO worksheet.. i second that motion.. i don't think you have as good a grasp of your numbers as you think you do....
with the sales volume you have you should be doing a lot better, that tells me your margin is wrong
and what are you doing spec'ing houses in this market... what does "building a portfolio " do for you ?
sounds like a new version of "losing money & trying to make it up on volume"
and three jobs at once is a good way to lose track of the money.. ideally i like three jobs.. but phased... not all going full-bore :
one in design
one in construction
and one in contract under site-work
maybe one more in punchlist
but not much more than that..... you're wearing all the hats.... you can't do that and supervise 6 guys.. and i don't mean sub it all out
if you owe $75K to your suppliers it means that you didn't estimate correctly.. or the money would be there
it's not an insurmountable number, but it is daunting..
me ....i'd keep the best two guys and try to start making money with them
Mike Smith Rhode Island : Design / Build / Repair / Restore
house that sold without even advertising it but really only broke even or lost a little
Second house is also a good portfolio builder but will probably just only break even.
Third house is a T&M plus a fixed fee. Already spent the fixed fee to help finance the first 2
next project is a renovation that is also T&M plus a fixed fee but have pretty much spent the fixed fee keeping up with the other three.
I estimated properly
approximately $75,000 in debt
am a realistic estimator
5 carpenters/laborers and 1 superintendent and myself. [Bookeeper?]
charging him off on my T&M jobs as a lead carpenter to reduce the burden on my overhead.
I have paid my self a decent salary and whenever I have worked on a specific job as a carpenter or whatever I have also paid myself for that time.
3 new houses(approx. $400,000 each)
limit my work week to 50 hours most weeks
*****************************************************************
Say your labor burden is 1.5X wages, that would make them $69K for the "super" and $270G for the crew, and with material running $600K for the 3 houses, the total would be $940K, adding a 10% error factor would still leave $150K for you, profit and OH. Add the $75K debt and I think you need to have a CPA audit your books. Think of a CPA as a business doctor, If you're sick and don't know why, you see a doctor.
Now, looking at that montage of your statements, there are a few things I disagree with:
You have to lose the employees attitude. You do not get to set your hours, the business does, and if you are not working 60 hour weeks while your business is in it's infancy, your business is dying.
When you put your bags on, you don't get a bonus, you earn less for that time.
If your bookkeeper's not stealing from you, you are a lousy estimator. You can't be a good estimator untill you understand every penny that flows thru your company. You admit that you don't even know what these three houses cost to build!
SamT
I can do without your condescending attitude, thank you! I'm sure your a lousy something too but since I don't know you very well I couldn't possibly know what that is.
I am a good estimator, I do know what the projects cost and if you don't have any advice to give that can help me and not insult me then just don't respond.
I made some mistakes, we all do. So far I've gotten constructive criticism without stooping to name calling.
People in glass houses, etc. etc.
When you assume, etc. etc.
Yea, I guess you could say I'm a little sensitive about how well I've f-ed this up!
I read Sam's post and thought that was a pretty good statement. And constructive not insulting. I don't build houses so didn't want to post based on not being sure of the why's and wherefores of building and cash flow process. But I also thought the 50 hour limit, getting paid double for working and not knowing your costs were all poor business. Without knowing your costs you can't possibly estimate well. It is not simply a matter of knowing material costs and labor hours. DanT
Yea, I guess you could say I'm a little sensitive about how well I've f-ed this up!
Watch your blood pressure... There doesn't seem to be any crisis here, is there?
I once figured that if I could generate the work I could make more money managing than producing. Nothing wrong with the plan, but I failed. After 6 mos I took careful accounting and every time natural attrition happened with an employee, he/she wasn't replaced. Turned out I was working my azz off, getting the work done adequately, and making the same take-home.
Which brings up the only constructive thing I'd like to mention. It would appear you took too much money out of the business (duh!). I didn't, because I kept closer tabs on my books than it appears you did. Which is kinda what SamT was saying.
DW and I now deal with a large number of retail businesses. Paying oneself more than the business provides is a common mistake. Certainly your shortfall isn't insurmountable, just isn't anything you want to repeat. Doesn't matter which legal form the business takes, you're in charge. Your first duty should be keeping the business afloat. Taking out too much money for yourself doesn't work.
When I discovered there wasn't money to adequately pay me for the work I was doing, time to change direction. Mine was to fewer employees. Only you can decide what you need to do. Increase profits, cut overhead, reduce your personal financial expectations, ... PAHS Designer/Builder- Bury it!
>>Taking out too much money for yourself doesn't work.
Agree completely. Some of the industry experts say "pay yourself first, pay yourself what someone else would charge to do it". That's not how I do things.... I get what's left over.
That's not how I do things.... I get what's left over.
And presumably are solvent. Don't like what you're getting? Strong motivation to change something. Very functional.
There are a lot of business models. One size does not fit all. I wrote what seemed to me applicable for the model df was pursuing. I suggested nothing about pricing. He's proud of his estimating skill.
I've been strongly criticized in my past for under-pricing. Justifiably so. But my critics didn't enjoy my backlog or referrals. Doesn't have to be one or the other, but from what I've seen, usually is.
Completely unrelated to df's plight, one truth I learned awhile back is that you only need to earn what you want to spend (plus a cushion). Easy to say "more money is better", but there's always a personal cost. I'm down to 1-2 months/yr paid work, living well (not expensively). I've also gotten better at pricing. PAHS Designer/Builder- Bury it!
>one truth I learned awhile back is that you only need to earn what you want to spendAnd a great truth it is. It's very much what my CPA meant by "you have to learn to break even before you can make a profit." You've learned how to set a lifestyle goal and then reach it. People who don't define a goal with similar clarity will never make enough because there's no target to know that you've reached.In running several businesses, I learned to adjust my cost structure to fit my expected income. If I wanted more income, then I could incrementally invest more time or funds, be/c I had a good handle on my fixed costs vs variable costs.Learning to recognize when you have "enough" is a key to happiness, and you seem to have done so.
Learning to recognize when you have "enough" is a key to happiness, and you seem to have done so.
Pretty well. Got quizzed recently by a relative about retirement income. Financial security is important, but why would I want to "retire"? Turned out he (univ. prof) didn't either.
Sure was tough to walk away from the two businesses I grew in Denver that allowed me 2-3 months every fall in Italy, or wherever. I finally realized it was not "enough". Nor would I ever get there in/near that city. My CPA there, now very wealthy (by my standards) and living in San Diego, thought I was nuts.
One makes better decisions with deliberation, probably like your last relocation. Which I imagine you consider temporary.
I've also known several people who found what they really wanted to do, recognized what the financial reward would be, and went about learning to live on that (small) income. Not my model, but it works.
Hope df finds his applicable model. Very few make so much that they can't figure out how to spend it all.PAHS Designer/Builder- Bury it!
I could not pay myself before paying subs or suppliers. To me that would be fraud.
dave..... what is the legal priority ?
isn't it ? :
employees
IRS withholding
subs
suppliers .........
i think so.
in which case, if you are a corporation... then you are just an employee of the corporation.. so , you get paid first
i know....... for my first 20 or so years in business i always paid myself last.. then i got religion & incorporated.. now.. i get paid with all the other employeesMike Smith Rhode Island : Design / Build / Repair / Restore
Mike, I am incorporated and fortunately I get paid for everything I do, but IMO it would not be ethical for me to cut myself a check when I know it would mean shorting a supplier or anyone else. Yes, I am an employee of a corp and therefore entitled to my paycheck like anyone else, I guess... but since I am also the CEO and toilet scrubber the responsibility for the financial condition of the business is mine. My personal commitment is to pay everyone for their part, and I won't use their money to pay myself. Maybe that's stupid, I dunno.
Not stupid in my world. I have done the same thing for the past 32 years. I hope one day to be an overnight success...
Edited 7/15/2007 6:45 pm ET by ibkruzin
Don't forget, there's a difference between growing a company and managing a company. What you do when growing a new company may be different that what you do once you're reached cruising speed.
what you do once you're reached cruising speed.
I was about to break the sound barrier and have been braking down to "cruising speed". Good way to put it.
View Imagehttp://grantlogan.net/
I've never met a man that was owed as much as he thought he was.
Stop keeping us waiting.... start a photo thread and post all this funny sh2t all at once. Yer on a tear!
dave..... here is what i do.... since i've incorporated i always pay the employees.. including me
if we're short i go to the major shareholders ( me & my wife ) and ask for a loan
they loan the money back to the corporation and get repaid when times are better or cash flow is pumped up again
it is far too habit forming to just not pay myself... and who is more valuable to the corporation than me ?
if i can't meet the payroll... it's an early warning sign that things are not going well
so...
i stick with my priority pay list
this might seem like a game.. but the first 20 years of paying myself last were the real game... running my company like a hobby instead of a business
Mike Smith Rhode Island : Design / Build / Repair / Restore
I was in agreement with David until this post. I do the same. I pay me and the rest of the crew. If needed I pay me a little less but always pay me. Then if needed I loan the company money under a bookeeping code that allows me to pay myself back during better times. You are my hero! DanT
One of you fellas explain to me the difference between paying yourself first and then making a compensating loan to the corporation, and waiting to pay yourself until cash flow permits??
I have some bad habits. I do not take a deposit, I do not have the customer front me money, I do not ask for a retainer. I bill twice monthly for work completed and sometimes that can be a whopper. I have a fairly good chunk of operating capital and I use it to run my jobs. I have a fairly good chunk of personal capital and can float quite a while between paychecks. Hell, I am way behind on payroll just for the fact of being way too busy, and have currently paid myself thru May. I need to get June done tomorrow so I can file my 941 timely in Monday's mail.
It's definitely contrary to popular wisdom, but my business philosophy is that my customers pay me for work that is complete. There are a few instances where I get upfront money to make a deposit on something like windows or cabinets, but it's rare. Another principal is that anyone I buy from gets paid as soon as they invoice, if at all possible. In some cases they have to wait for my billing cycle. Anyway, I am an excellent person to have owing you money.
As the stakes are getting higher I am considering changing my evil ways. Get a chunk up front, run the job with it, get another, etc. But our industry has such a lousy reputation for overpromising, underdelivering, taking the money and disappearing, etc. Just trying to be the guy I'd want my mother to hire...
dave...
<<<Hell, I am way behind on payroll just for the fact of being way too busy, and have currently paid myself thru May. I need to get June done tomorrow so I can file my 941 timely in Monday's mail.>>>
i was there too
i would fall behind on my 941's...
and then the next step was to fall behind on the WH .. next thing you know..... behind the 8-ball
i got a payroll service about the same time i incorporated..... currently it costs me $26/week
for an average of 4 checks.. ALL I HAVE TO DO is 2 things
fax them the hours, takes at least 2 whole minutes a week
and make sure the money is in my account..
they write the checks.. even do direct deposit for any employees who want it ( no more rushing off to the bank on payday so they can pay their rent , etc )
they file all state and federal reports and pay all witholding, tdi, , etc
they will evn pay WC if i want to set it up that way
no more late fees, no more suspense about tax liabilities
get a payroll service
also... since i'm getting paid in a timely fashion .. i don't have to do any more Estimated Taxes .. as long as i keep my pay in line with my year-end adjusted total income... some years i pay additional taxes... some years i get a refund
paying myself first ( just like any other employee ) keeps it on the up & up
skipping a paycheck is the same thing as giving the corporation a loan.. except that it skews the books
get a payroll service and kiss the 941's and all that time you spend on payroll goodbye
Mike Smith Rhode Island : Design / Build / Repair / Restore
>i got a payroll service..... currently it costs me $26/weekIsn't that the biggest convenience for the least money? Loved it when we used it when I had a bunch of employees in a prior life. Makes it easy to pay yourself, be/c you're just another name on the list. "Feels" much sillier to do that if you're writing checks by hand. It's a mindset, and the payroll service makes it easier to keep the professional mindset.
Mike, that's good advice about the payroll service. The circumstances in my personal life have me way behind on doing some things, like paying myself and improving some of my systems. Fortunately the aforementioned circumstances are highly positive and I ain't complainin'... not by a long shot... but I am not going to jiggle the tower until sometime later. If I steer things right I will have a month off in Jan. or Feb., at which point I can take a breath and overhaul some stuff.
how can you go wrong with " Just trying to be the guy I'd want my mother to hire..." if it's working i wouldn't screw with the system.
when i was in the bodyshop bussiness never took payment till the work was done. 1 guy didn't pay in 25 years.larryhand me the chainsaw, i need to trim the casing just a hair.
>but my business philosophy is that my customers pay me for work that is complete. I'm the same way, with one exception. I get a token retainer...$1000. I tell them it's to cover upfront costs--the preliminary phone calls, contract preparation, etc. And that's true. But really it's to get them serious. Writing a check of some amount represents a commitment to them, and they aren't inclined to walk from it.But I, too, bill the rest when the work is done. I just don't let them get too much ahead of me. And I make sure they don't have a full set of buildable plans--via a big watermark saying, "Draft Document--Do Not Build From This Page"--until the final check clears.
david,
i also ran my business just as you do .
I am with you . I have to live with myself , not my critics."Poor is not the person who has too little, but the person who craves more."...Seneca
David,
I lend it to the corporation. During good times I pay myself back. Since it is debt repayment there is no tax, FICA etc. burden. This way also should the company fail I will be on the list of lenders. So after the auction I can recieve my money back.
While I do business entirely different from you (and think your mom would be ok doing business with me lol) I think if your formula works for you that is ok. I do business based on my philosohpy that most people will take advantage of you if they think you aren't watching. I might be wrong but prefer to prepare as though I am right.
I think Mike is right about the payroll issue. I also have my accountant do all my tax work, reconcile the check book and the credit card bill. I have done this since going into business as I didn't want to fall behind on any of the issues with government agency's that could close me. The cost is minimal ($23 for payroll each week, $150 a month for accounting, $1k for tax prep) in comparison to trying to do what I am not good at. I view it as subbing out something we don't do well lol.
While I too finance some of my work, I always buy all materials up front so we have them ready to go when the job starts, I still get a deposit of 10% with 50% of the balance due the morning work begins and the balance upon completion. This way I have about 55% of the money in hand before we begin work. DanT
>>I lend it to the corporation. During good times I pay myself back
It doesn't seem any different than just not paying yourself. Either way you don't have personal use of the money. Sounds like the cash-flow ups and downs that are completely normal in the business. Since my business started in September this is the time of year when the insurance renewals come up. I'm getting ready to choke on a big liability insurance bill. Funny how those guys want to bill me and be paid 45 days in advance of the policy period starting.
The difference is in when you do a health check on the company.Failing to pay yourself makes the company look healthier because of the reduced expenses and possible lack of recorded liabilities to yourself.When you do pay yourself, then loan the money back, it shows the true expenses and liabilities.The common things between the two methods is that the Operating Capital, personal income, and year end taxes are the same.SamT
The primary economic benefit of deferring a paycheck is that you are also deferring the tax liability. However, the deferred tax liability can become a heavy yoke also. The central point to both of your positions is that you have a simple system to monitor your financial position. I do find that there is a benefit of defining a fair wage for the owner and planning to pay it, as well as requiring the owner to live within that wage. Otherwise, it is easy to go on a binge when you shouldn't.
Bill
When I was setting up my specialty contrating business, I assigned a wage to every position from CEO down to Gofer. I would then track my time in each position and pay myself accordingly.This way if I saw that I was spending, say, 15 hours a week as a gofer, I would know it was time to hire a gofer and spend that time doing something more profitable for me and the company.SamT
Funny
I find being the gofer, as in getting materials for jobs, to be a crucial element of the job as that in picking materials I plan how to do the job and I take the opportunity to network and look for bargains to add to my arsenal of tools.
My gofer time is also used as my communication time and quality control.
I find that gofering in the remodeling business is a critical role and one to be rewarded as such.
ANDYSZ2WHY DO I HAVE TO EXPLAIN TO FRIENDS AND FAMILY THAT BEING A SOLE PROPRIETOR IS A REAL JOB?
REMODELER/PUNCHOUT SPECIALIST
Definitely agree. It takes a lot to be a good gofer. It is not the same as sending the new guy down to pick up 40 studs and 10 sheets of rock.
"...in picking materials I plan how to do the job and I take the opportunity to network and look for bargains to add to my arsenal of tools.My gofer time is also used as my communication time and quality control...."Most of that is not Gofer time. Planning, QC, and job communications = Supers' time. Networking = Sales time. Bargain hunting = Owners (CEO) time.Lifting the material onto the cart and the truck are definately Gofers'. Standing in line to pay could be CEOs', Sales' or Gofers', depends. Paying for the purchase at the counter, Gofers'.However, You have set things up so that a gofer would not be able to do the things you do while shopping. You can't use a Gofer.My situation would have been different, because I planned my systems differently.Let's say that you were putting in 66 hour weeks, which is a bad thing. I read somewhere that the single most telling attribute of small business owners was that the successful ones put in between 50 and 60 hours a week. That the rate of failure increased linearly as the time worked varied from that.Let's say that you spend 20 hours with your bags on and 16 hours in the office, 6 hours secretarial and bookkeeping and 10 hours CEO stuff and estimating. The first thing you want is to get your work time back in the success zone. Hiring an Office manager would do that, but it won't free you up to earn more for yourself or make more profit for the company.Hiring a lead carpenter trained to do all the things you do while wearing your bags will give you 14 hours you can divvie up among more profitable areas. Say you put 10 of those into sales. A salesman should be able to close %10 of well qualified leads. That would be 40 hours a month more sales time. At 4 hours per sale with a 10% closing rate that is a sale a month more than you were doing. A $100K sale should earn the salesman 5% or $5000 AND the company should see 5% profit.So a lead carpenter would be costing you personally 80 hours (month) of your own LCs' pay plus 80 hours of additional company payroll. At $25/hr that's $2000 out of yours and your company's respective pockets. And what did you get in return? 24 more hours a month with your family and a better chance of success, plus $5000 in your pocket and $5000 company profit. Think I forgot those other 4 hours a week? Hah, you get to earn some kind of pay for those too. Maybe estimators' pay for estimating that extra sale every month.Now this is just one beancounting system to decide when to hire and when to fire, there are hundreds of others just as effective. I like it because it keeps me honest. I never take out more than the labor is worth.SamT
What Sam said is true. However the reason I do it is also because if I don't pay myself on a regular basis then suddenly I don't pay myself at all as I can never afford it. Maybe a weakness on my part but once I get to paying something on a regular basis I mentally account for it. On the other hand if I don't pay it regularly..............I don't!
So, I set a salary amount and in my case I pay myself monthly. The crew gets theirs weekly. That is simply because I am too lazy to deal with my personal checkbook on a regular basis. DanT
>I am a good estimator, I do know what the projects cost and if you don't have any advice to give that can help me and not insult me then just don't respond.<
If true then, you're not charging correctly. Or there's some aspect of the business that you're overlooking. Have you really looked at all aspects of your business with a critical eye to see what is essential vs non-essential. Even though some aspects are fun and rewarding to do, it may be better business practice to sub them out. Are you keeping any tasks even though you can get a better yield by having a sub do it? You may say you get better quality when you or your crew do it but I've found that I can get quality almost as good as my own by good/thorough communications with the sub. (some subs tolerate it, others don't ask for more). Getting that quality from a sub allows me to do the tasks where (I think) my time is better spent.
There's no magic wand to clear up the -$75k. What's more painful? Changing aspects of your business to increase profits/cash flow or bankruptcy?
I think SamT is pointing out an incongruency that you're unwilling to see or are turning a blind eye to. It hurts and you may even find that you ought to dump your core products in lieu of a better margin. CPA/business analyst might tell you the same thing.
Sorry dogfish but I agree with sam too. If you are indeed that good an estimator and believe you estimated these houses correctly, its time to look with in the organization cause somethings not right.
That wasn't condescending, that was a 2x4 up agin yer hed.
You're too busy thinking you are a great estimator that you can't see the trees.
Some quotes:
1 "only broke even or lost a little"
2 "probably just only break even"
3 "pulling together answers and decisions(and then acquiring those things) from customers as the various phases progress"
4 "don't believe my overhead is out of line"
5 "my estimates, they are good but in the beginning I guess I painted myself a rosier picture than what was actually there in order"
6 "couple of months ago used estimated and actual overhead figures"
7 "had to go back in and fix things" [Ed: ...at a loss.]
Are those the things a good estimator would be able to say?
Now go back to my 2x4 upside the hed post and read the 7 words before "you are a lousy estimator."
If you get it thru your head that there are only two people who can possibly be responsible for your company's condition, I can help you turn it around.
Someone hand me a 4x4. . . .SamT
Go ahead, help me turn it around! I see the forest not the tree's, not anymore! So what'ya got that hasn't already been said.
Bring the wisdom!
You never compromised to get something going? Even at the beginning or anytime since? You were a fantastic estimator right from the start? All your jobs have been profitable? Never had to eat something somebody else screwed up? Ever had to eat crow? Well, I'm eating crow and lots of it so go ahead, help me turn it around!
Oh yeah, I still say you must be lousy at something. Maybe I should ask your wife or boyfriend or something! Not that there's anything wrong with that!
Come around and start swinging 2x4's, we'll see who's still standing at the end!
dog.... you came here with a situation...
<<<
Been in business for myself for a little over 2 years(12 years residential construction experience total). Started out small and after the first year - blammo! - growth! Recently had 3 new houses(approx. $400,000 each) under construction at the same time with as many as six employees -- 5 carpenters/laborers and 1 superintendent and myself. Just finished 1 project - a spec. house that sold without even advertising it but really only broke even or lost a little. Would have been great to make some money on it but also being the first new house my company has done it really shows what we are capable of. Good portfolio builder. Second house is also a good portfolio builder but will probably just only break even. Third house is a T&M plus a fixed fee. Already spent the fixed fee to help finance the first 2 and the next project is a renovation that is also T&M plus a fixed fee but have pretty much spent the fixed fee keeping up with the other three. Part of the reason for the breaking even has to do with myself being stretched too thin to properly manage and control costs. I estimated properly and what I thought was realistic but not executed very effectively.
I now find myself approximately $75,000 in debt to a supplier(specifically for 2 of the projects above -- both for cabinets) and credit cards. I started the business with $0 which probably wasn't a good idea but working in construction I would never have been able to raise the large chunk of capital experts reccomend a new business has before it opens the doors. I have a good reputation, am a realistic estimator although 9.5 out of 10 don't have a budget large enough to afford what they find out it costs to build in this area. I believe I can turn this around with better oversight, marketing and working hard to land the right jobs but I'm not quite sure what avenue to take in order to get the debt down to a reasonable amount. My book keeper suggested going to the bank and trying to get a businness loan of maybe $100,00, maybe an interest only loan so that in the short term I can use it as capital and work on getting ahead and then start making principle payments. There's credit counseling, etc.
Any ideas? Surely some of y'all almost went down the crapper before you became the upstanding, succesful business people that you are now.>>>>
now that some are giving you advice you don't want to hear ,you get nasty
what's up with that ?
Mike Smith Rhode Island : Design / Build / Repair / Restore
Only to one person. Look at the "To:" line on that one.
Count to 10. Breath.Sam's using a metaphor with the 2x4 stuff. He's a good guy.Everyone here is giving you thoughtful responses. This isn't the time for a chip on your shoulder. I learned a lot of the practices I now follow from the guys here. Stuff about estimating and estimates, contracts, invoicing, and more. Some of the rest I learned the hard way. You're getting one helluva education here, and it's not costing you a penny. Follow it or don't, but don't get chippy.Consider the alternative. We could have all said, "Hang in there df, you'll be ok. You're doing great." What good would that do you?
dogfish, Can I ask how you got yourself into 3 spec houses worth over $4000,000 ea. without substantial working capital? One thing I did notice was that you said you sold the first one before completion , how could you know what to price it at ? That alone suggests some problems with estimating costs. if you are as accurate as you say then the building would have turned a profit. Also just out of curiosity , who does your books? More than one contractor I know who showed losses on what should have been profitable jobs discovered embezzlement was the culprit. Wives, book keepers, auditors, I have seen all three steal ."Poor is not the person who has too little, but the person who craves more."...Seneca
92318.53 in reply to 92318.41
dogfish,
Can I ask how you got yourself into 3 spec houses worth over $4000,000 ea. without substantial working capital?
As a banker, I wondered that, too. But I know that in some places, that's kind of a modest home, so I passed it off as that. Sometimes a person's loan officer doesn't do them any favors by making a loan, whether it's the first one, or whether it's the 2nd or 3rd, making them so the builder has something going so that he can pay the proverbial "bills".
I guess I wasn't clear on that description. Only 1 was a spec. the other 2 are customs. The reason I knew what to ask for the spec. was because there had to be an appraisal done before I started in order to get the loan in the first place.
I probably should have had another appraisal done near the end to see if the value had improved a little over time. And I should have looked more closely at what I had in it before I determined my asking price. Considering the location, it being on a rarely found lot in a nice, older established neighborhood I probably could have gotten more than the appraisal value. I think fear of possibly not being able to sell it and the joy of having a potential buyer distracted me from checking the numbers closely. Hindsight, right?
Although, the housing market in a lot of areas is depressed right now, in my area it's still going gangbusters. There's a few builders who are sitting on several $700,000 spec. houses but overall people are still building. A few realtors have said that anything under $500,000 is selling well and anything over $1,000,000 is moving too. Everything in between is somewhat stagnant.
What area of WNC? Have I asked that before? I moved from Asheville to W-S recently.The >$1M market is interesting there. See the prices on some of the houses down beyond Fairview? $3 million plus for nothing all that distinctive. They're in a race to price higher than their neighbor. Insane prices. It's like they think they're the Hamptons! Don't know if they're selling or not, but hard to see them holding that kind of value. But hey, whadda I know?!
dog i want you to read what you wrote:
I probably should have had another appraisal done near the end to see if the value had improved a little over time. And I should have looked more closely at what I had in it before I determined my asking price. Considering the location, it being on a rarely found lot in a nice, older established neighborhood I probably could have gotten more than the appraisal value. I think fear of possibly not being able to sell it and the joy of having a potential buyer distracted me from checking the numbers closely. Hindsight, right?
Although, the housing market in a lot of areas is depressed right now, in my area it's still going gangbusters. There's a few builders who are sitting on several $700,000 spec. houses but overall people are still building. A few realtors have said that anything under $500,000 is selling well and anything over $1,000,000 is moving too. Everything in between is somewhat stagnant.
there is one big problem with your spec house deal, you had a hard to get pc of ground,prices are going up,you sold off the appraisal before ground was broke.i'll bet the buyer could make 10%-20% profit on that house today and sell it in 2 weeks at that. build it,believe in it, and don't short change yourself on your inventory you have in stock,cause you just can't get another one tommorrow. 20/20 larryhand me the chainsaw, i need to trim the casing just a hair.
If you estimated everything correctly, why didn't you figure in some profit?Legal Disclaimer: The preceeding comments are for entertainment purposes only and are in no way to be construed as professional advice. The reader of these comments agrees to hold harmless the poster, EJCinc, from any and all claims that EJCinc offered professional advice, ideas, or comments to the reader that may or may not have resulted in the damage, injury, or death to the readers property or person.
Pay the high interest notes off first. Talk to the vendors that your in debt to. Let them know what the problem is and how you plan to resolve it. They don't want to loose a customer that will pay their debt, but they need to sue you if you're not going to pay. Answer their every phone call or message. Don't keep them in the dark. You'll be suprised how patient most construction vendors are if they think they'll get their money and keep you as a regular.
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http://grantlogan.net/
I'm wearing Mr. T's pants.
You say...... a realistic estimator...I don't nderstand that comment if you're broke.
Edited 7/14/2007 8:09 pm ET by shellbuilder
Best way to get financially healthy is to cash flow quickly. Consider smaller T&M jobs or sub work.
Best to you and yours, Chris.
Building as thou art paranoid never harmed anyone.
Being in debt $75,000 is nothing if you are using the money to make money. Being in debt $75,000 is suicide if you are losing money.
Your only option is to figure out how to make money. If you don't make significant changes to your business it doesn't matter how much money you borrow. It will only be bigger bad debt.
If you sell $20 million, and you spend $21 million, you lose a million dollars. If you sell $1 million, and spend $600,000, you make $400k. Which makes more sense?
The only number that means anything is the bottom line.
It's not too late, it's never too late.
>Just finished 1 project - a spec. house that sold without even advertising it but really only broke even or lost a little.
I come back to this one. Can't think of any question but........WHY?!?! If it sold that fast, then wouldn't a bit of time and advertising have maybe resulted in a profit? Why agree to sell it at a loss when you hadn't even tried to sell it for a profit? At least that's what's I infer from the no advertising.
> I started the business with $0 which probably wasn't a good idea but working in construction I would never have been able to raise the large chunk of capital experts recommend a new business has before it opens the doors.
While I admire your pluck, and acknowledge that running a small business is one of the hardest things you can do, there's a reason such a high percentage of new businesses fail within the first few years. This is one of them. Hard to overcome under-capitalization. Can't just wish it away and think it will all just work out regardless of that, especially when you sell at no profit or a loss.
Also, limiting your hours is nice for the family, but maybe not consistent with growing a business. You can limit hours when you're established. Prior to that, it's a luxury you might not be able to afford. You want to limit hours? Work for someone else. I've always found truth in the old joke: "I started a company so I could set my own hours. Now I work any 90 hours of the week I want to."
>I estimated properly and what I thought was realistic but not executed very effectively.
Then with all due respect, you don't estimate properly. Estimating isn't about what you'd do if everything flowed as planned. It's about anticipating your actual execution. Knowing your execution is ineffective, your estimates need to reflect THAT, and not how you wish you executed.
I know a builder who estimated a job properly according to the standards of good construction. Unfortunately he left the (out of state) job every Thu and returned the next Tue so he could attend his kid's go-cart races. Admirable family loyalty. Of course the job got screwed up by the underlings left alone and the clients were pissed and he lost money...
You're estimating for a way that you aren't executing. You're under-capitalized. You're selling at no profit or a loss. And now you're borrowing from one job to fund the prior. And you're thinking of getting a loan? Which will require your house or first born as collateral? Dog, when you're in a hole, quit digging. You aren't running according to a profitable model, so how are you going to service the debt?
Best advice I got from my CPA was twofold: Control your fixed costs, and you have to break even before you can profit. The second means that you have to set prices to AT LEAST pay for your costs. Focus on balancing income with outgo. Only then can you work on profit. And the first means that you have to limit your fixed costs, because you're responsible for them whether you have work or not. Too many business owners take on too much overhead--employees, tools, trucks, phones--when they aren't even making a dime. You have too high fixed costs. You can't afford that. Turn some of them into variable costs that you use only when the money's there, else they'll eat you alive week by week.
>I believe I can turn this around with better oversight, marketing and working hard to land the right jobs
I believe the only way you can turn this around is to get real. The right jobs aren't the answer. You should be able to profit on any job, else why would you take it? You aren't estimating for how you're executing, you aren't pricing to cover your costs, and your fixed costs are out of line with your resources. Oversight, marketing, and right jobs won't change that. Borrowing money won't help either. Until you find a profitable business model, if you borrow money now, you'll just lose it faster.
Sorry I can't sugar coat it better, but your saying, "I can turn this around with better oversight, marketing and working hard to land the right jobs" means you don't see the real problems. And your bookkeeper doesn't either if he's recommending a loan--and interest only, for God's sake!--when you haven't shown you yet know how to break even.
So, after reading through this, what is your next step? How do you plan to right the ship?
I strongly urge you not to borrow against the equity in your home. If all else fails and you end up in bankruptcy (which of course I hope won't happen), you don't want to end up homeless as well. Most states have homestead exemptions that allow you to exempt substantial equity in a primary residence when bankrupt.
You might just need some advice from a more experienced and successful builder on how to plan projects and keep track of cash flows, etc. so you see what is profitable and what isn't. Your reference to execution problems is troubling, but you should be encouraged by the fact that you finished the jobs and sold the first house.
Good luck
dogfish im afraid to say much to you as i dont wanna sound negative, i have been in the spot where i had all sorts of jobs and employees yet no money, For years i was a trim carpenter then went into roofing of all things, But i found i could make money doing it, My point may be although its nice to be the builder sometimes its nicer to make the money, If maybe you were good at running a framing crew or siding or small specs find your niche. People love you and word gets out if your the go to guy to hire and the guy that makes no money. carpenter friends used to laugh and hold there noses up when i drove by with my tar pot smoking, I could retire if i wanted to and they still have nothing, Old rule of thumb was a builder would make 10 to 20 percent profit on top so you should have had at least 40 grand on a house in your pocket 3 times 40 would be 120 you should be ahead yet your 75 down. On the flip side you have a crew, jobs done behind you your in a position to go ahead, Maybe advertise a house you built saying you can build it for X no of dollars, Hold a open house and you can say, Hey this house sold but i can build you one just like it, Go to the realtors with the plans and see if theres anyone wanting to build
bobbys
I just wanted to say that I enjoyed your last post-----because it contains one of the most valuable lessons here----and one most people refuse to believe,or consider or put into practice.
something theoretically simple---like roofing----pays---because it is hard work, reasoably dangerous,hot,dirty etc.
Plumbing might fall into the some category
simple , HARD things,done well---pay.
in the 10-12 years I have been coming to breaktime----- I don't think I can ever recall anyone who specialized in those types of nasty jobs-----EVER complaining about $$$$
( maybe we complained enough about other things?)
but how many times to we read threads from some hyper talented artiste----" i started my business 3 years ago specializing in building custom left handed bubinga sided dog houses-----and ----well i am having trouble making ends meet. BTW i am located in a rural area 63 miles from any town with a population over 12,000"
on a related note, Stanley & Danko's book" the millionaire next door"------- directly pointed out what a large percentage of actual millionaires made their money doing pretty mundane things-----and investing their proceeds.
difficult to get into trouble when you get a 50% deposit, average job takes 2 days and you are paid in full BEFORE the bill arrives from the material supplier. minimal capital required----and you can turn that over 2,3 ,4 times a WEEK.(try that building spec houses!)
but what the hell --------we are just dumb talentless roofers( snicker)
Here is to early retirement-------!!!!
stephen
9 Necessary Numbers You Need To Know From Construction Business Owner Magazine online.
Goddard Construction Services: Our Team's Step by Step Manual for Marketing Written by a company that emphasises Quality above all.
Providing Great Customer Service Again from CBO Mag online.
Roadmap for Success: The Business Plan
The Accidental Project Manager
http://www.constructionbusinessowner.com/
SamT
Thank You SamT. I formally apologize for blowing up at you. My bad. I thought I was losing everything and went on the defensive. Time and consultation with some other business owners(and a kick in the teeth from everybody here) has made me realize that I can recover from this. I will be improving both my estimating and my execution in order to complete jobs profitably. It will require more of my time and effort which means time away from the wife and kids but the wife and kids are the whole reason I am doing all this, to provide some level of financial security in this crazy mixed up world. Otherwise I'd find a a 8-5er and pursue some hobbies during my free time. Again thanks for the links SamT and everybody for the advice and encouragement.
Dogfish,Apology not needed. I been where you were. I knew you first needed to get out of the emotional space you were in, and attacking your pride in estimating was the fastest. I regret that it was also the most painful, but speed was a priority.Forget about improving your estimating techniques right now, I'm sure they are as good as you think. Thought. IMO, you have an issue in knowing your true costs of business. Have a look at post #22 in "hourly rate problem" here in the business folder. Without knowing your cost of business, no bid can garuntee profitability no matter how good the estimate.Here is NAHBs' full Charts of Accounts:
http://www.nahb.org/generic.aspx?genericContentID=29577They will give you every possible expense a construction company will encounter. You won't use all of them, but. . .I can also reccommend:
http://360difference.com/Freeware/PILAOExcel.cfm
as a good worksheet for seeing your true cost of business and suggested markup.AUDIT YOUR BOOKS
AUDIT YOUR BOOKS
AUDIT YOUR BOOKS
AUDIT YOUR BOOKS
AUDIT YOUR BOOKSSamT
SamT throws down the tough love... bear your soul at your own risk!
Pity gets in the way of true love.Ya gotta be ruthless, I tell ya, ruthless.SamT
I just reread this entire thread.Man, there are some real pearls of wisdom in here...I'll be a while following all the links.Thanks Sam T and all for sharing your sage advice...I can use lots of it
myself.silver
Hey Dog, I just pulled this thread out of my favorites to re-read.........
Curious how it's going for you.
Care to get back to the thread and give us an update?
Eric[email protected]