owning your own company?

[bjones]

I know this may be a little too intimate to some, but realistic expectations of yearly or monthly income for owning your own business is what? I have heard anywhere from 50 to 1000000... So that really doesnt say anything. Im guessing the average Contractor makes 150000 to 200000 a year... am I way off ? close ? Im located in Dallas Texas so we can hopefully keep this relative. After all why would you want the headache of owning your business if it wasnt double or triple what you make working for someone.

How much you make depends on the size of your company and how profitable you are. In my opinion, you should make no less then 100K/yr. in a pay check and see a minimum 10% EBIT (profit). MINIMUM STARTING GOAL!

Salary and desired profit must be considered (along with all other expenses of course) when developing your business plan/budget for determining your prices and production capability needs. Most start ups fail to do this and never really know what to charge and never make any money.

Improper pricing (not charging enough) is the #1 reason busineses either fail or become nothing more then the worst job you could imagine. A prison sentence.

TIP-In addition to remembering to treat your salary as an expense, treat desired profit as an expense in your budget instead of treating profit as what's left over after all expenses are paid. If you do this right (at least in the begining) your more likely to realize the profit. After all, whats the point in being in business if you don't realize a return on your investment (ROI).

How long it takes you to get to this income in a start up business depends on how hard you are willing to work. And I don't mean the physical hands on technical work, but the work associated with learning necessary business pricipals, implementing and quantifing those business pricipals and systems into your business.

You should go into business with at least a six months of living expenses in the bank. A year is better.

I know a guy who makes over 200k/yr. in salary and delivers a 15.6% EBIT to the stockholders (he and his wife are the stock holders).

[flemsteele]

How much you make depends on the size of your company and how profitable you are. In my opinion, you should make no less then 100K/yr. in a pay check and see a minimum 10% EBIT (profit). MINIMUM STARTING GOAL!

Salary and desired profit must be considered (along with all other expenses of course) when developing your business plan/budget for determining your prices and production capability needs. Most start ups fail to do this and never really know what to charge and never make any money.

Improper pricing (not charging enough) is the #1 reason busineses either fail or become nothing more then the worst job you could imagine. A prison sentence.

TIP-In addition to remembering to treat your salary as an expense, treat desired profit as an expense in your budget instead of treating profit as what's left over after all expenses are paid. If you do this right (at least in the begining) your more likely to realize the profit. After all, whats the point in being in business if you don't realize a return on your investment (ROI).

How long it takes you to get to this income in a start up business depends on how hard you are willing to work. And I don't mean the physical hands on technical work, but the work associated with learning necessary business pricipals, implementing and quantifing those business pricipals and systems into your business.

You should go into business with at least a six months of living expenses in the bank. A year is better.

I know a guy who makes over 200k/yr. in salary and delivers a 15.6% EBIT to the stockholders (he and his wife are the stock holders).

First off this is a great thread.

I agree with what you are saying about the business side of this industry. I was a tech for over 20 yrs, very competant in the commercial - industrial side of this trade. Two years ago I took a job as a service manager for a large mechanical contractor that wanted to start a real service division. Let me tell you, it is a different world.
We as techs have to deal with the problem in front of us, fixing a chiller, fan etc.
Once you move inside-your world changes. You deal with different issues all the time. The first thing someone going into business needs to know is the difference between mark-up and margin. How many techs actually know the difference? I didn't...but found out REAL quick!
Calculating real labor costs? Most techs do not have a clue on how to do this. I work in a union enviorment, I am still a union member. Our costs are outrageous! If you don't price properly you will be doing a slow twirl down the drain from the very beginning.
If you want to be a one man shop that basically owns a job-that might be where your technical skills are needed. But if you want to build a business you can hire technical people. I think this is the problem alot of techs go through when they start a business, they want to be the guy that knows everything, basically they want to be the "show" so to speak. If that is what you are about and you go into business - great! Congratulations - you are the proud winner of a JOB!! But now you have to carry all the risk for a JOB! Why do it that way? Ego?
Then there are all the other aspects of this business, marketing, acct. pay, recieveables. These all require your attention-how do technical skills help you in these depts?
I entertain thoughts of owning a business someday-I have read E-Myth and Ron Smith's book-HVAC Spells Wealth. Great info for this business!
I have also looked into franchising-this is another route to go if you don't have the business skills you need to be sucessful.
My problem is I make some serious $$$ to run someone else's business-otherwise I would have already made the leap.

[Dowadudda]

You should go into business with at least a six months of living expenses in the bank. A year is better.

As well as start up capitol requirements, Right?

I will tell you one thing for certain. I tried to start with nothing 2x. And it was friggen too hard to get moving and gain momentum cash wise. Then. When I did catch the wind in my sail, IE: work coming in beyond what I could do, time to add van, guy ect, I did not have the capitol to go further. I could not get lines of credit to do so.

I went to 7 banks and all wanted to evaluate and use my gross, (small cause I was one man show), to use as the metric for how much I could get. It was not nearly enough, if you also figure your gonna need to go in debt for van and ect. And I wanted to do it so that I was not hiring a guy to just end up letting the guy go 6 months later when it did get slow, cause then I still got the van to pay for ect. I wanted some cash in the bank to hedge against getting a little slow so I could keep my new hire on board.

Then I just figured I'd get the momentum from that point to grow.

Now. I don't understand how others did it. I have good credit. The banks just would not give me much support. I had gotten from other guys that them saying the lines of credit thing I was talking about was BS. 7 banks later I was convinced that is how they work that. Tell me different.

Van financing was expensive. At least for me cause my business was not able to show great paper. I was not making big a$$ cash. With over a 700 personal FICO, I could not get better than 9.5 -10% on a 25000 van. That was at the height of the credit LAZZE FAIR. But I hear guys telling me they got 2 and 3%. How? WTF. I just figured guys were lying to me.

So you see the theme here. everywhere I looked, it was gonna cost me money and I had to fill that cup with revenue. How do I develop the revenue. Well. I may have figured that out slowly, had I been more properly capitalized from the beginning.

Cause I was so darn busy working in the field and working these other issues when I had time which was little, I never got it it together. I walked out of business 3 years ago, made money, no debt from it itself, cause of nothing but tired and fed up trying to figure out how to get into the shop and work on my business and not in my business. I gave up. Not because I was broke, not because I did not have customers, I had some good customers, not because I was in debt and insolvent. Just because I felt I was gonna have to kill myself for the next 20 years, fight all these financial obstacles on my own, saving and capitalizing on my own with no help, that I felt it was too damn much to do. I'd be dead.

And honestly. It's heartbreaking. Embarrassing. It can be sad and in the same minute Pi$$ Me OFF So Much I can not contain myself I have wanted to be my own guy since I was 15. No joke. I knew what I wanted to do the minute I figured out what my dad did/does. But I developed relationships with people as my own, then now I have to deal with them as not my own. That sucks. Try to eat that emotion and just forget it. I can tell you, you can't.

It's silently gut wrenching, insulting to listen to my boss talk to me as his inferior, as his non equal. 8 million things go through your head. It aint easy. I see things everyday where I work, every second where I think, "this is stupid". I see chaos. I see ridiculous. But. It aint my deal. I just work here. Go in and do my best. Eat the insults when I can't control nothing. I ask things like, where the hell did they get the cash. Where does the cash go now. I see waste like you have no idea and we carry on. And then I assume the coin coming in to feed that has to be way more than I have ever assumed and would love to know.

I could go on for hours. And now a days. I think I am losing it. Seriously. I aint getting younger, and life just goes on and here I am not doing what I thought I would be.

[Dowadudda]

First off this is a great thread.

I agree with what you are saying about the business side of this industry. I was a tech for over 20 yrs, very competant in the commercial - industrial side of this trade. Two years ago I took a job as a service manager for a large mechanical contractor that wanted to start a real service division. Let me tell you, it is a different world.
We as techs have to deal with the problem in front of us, fixing a chiller, fan etc.
Once you move inside-your world changes. You deal with different issues all the time. The first thing someone going into business needs to know is the difference between mark-up and margin. How many techs actually know the difference? I didn't...but found out REAL quick!
Calculating real labor costs? Most techs do not have a clue on how to do this. I work in a union enviorment, I am still a union member. Our costs are outrageous! If you don't price properly you will be doing a slow twirl down the drain from the very beginning.
If you want to be a one man shop that basically owns a job-that might be where your technical skills are needed. But if you want to build a business you can hire technical people. I think this is the problem alot of techs go through when they start a business, they want to be the guy that knows everything, basically they want to be the "show" so to speak. If that is what you are about and you go into business - great! Congratulations - you are the proud winner of a JOB!! But now you have to carry all the risk for a JOB! Why do it that way? Ego?
Then there are all the other aspects of this business, marketing, acct. pay, recieveables. These all require your attention-how do technical skills help you in these depts?
I entertain thoughts of owning a business someday-I have read E-Myth and Ron Smith's book-HVAC Spells Wealth. Great info for this business!
I have also looked into franchising-this is another route to go if you don't have the business skills you need to be sucessful.
My problem is I make some serious $$$ to run someone else's business-otherwise I would have already made the leap.

I read that and I am thinking. Would it not be awesome to see how the books look. I now work for such a company you describe. And I was the ego driven one man show. Which I think I now know won't work to get to freedom. That is not freedom at all.

But anyways. The money out the door is friggen incredible. And since I have no bearings on that I would love to see it in action on paper. Just to see, I aint crazy to think it's possible. You know what I am saying. Since the costs are so incredibly large, what must the revenue be?

How can a contractor like this be self insured and suffiicent. Meaning this. I know commercial work is slow money. You do the work and you don;t see it for 30 60 90 days. Industrial can be longer. How does the cash flow work in a company like that. They have to have a bank assisting that. Maybe they are factoring or something?

[flemsteele]

I read that and I am thinking. Would it not be awesome to see how the books look. I now work for such a company you describe. And I was the ego driven one man show. Which I think I now know won't work to get to freedom. That is not freedom at all.

But anyways. The money out the door is friggen incredible. And since I have no bearings on that I would love to see it in action on paper. Just to see, I aint crazy to think it's possible. You know what I am saying. Since the costs are so incredibly large, what must the revenue be?

How can a contractor like this be self insured and suffiicent. Meaning this. I know commercial work is slow money. You do the work and you don;t see it for 30 60 90 days. Industrial can be longer. How does the cash flow work in a company like that. They have to have a bank assisting that. Maybe they are factoring or something?

We are a piping company first and foremost. We do plumbing, pipefitting, and sprinkler.
Margins on these jobs are anywhere from 0%-20% - on average we get around 10% GROSS on construction work. We do around $100 million / year in construction. Do the math-they have the cash flow.

No service margins are a different story-average around 40%. Different ball game.

[bjones]

First off this is a great thread.

I agree with what you are saying about the business side of this industry. I was a tech for over 20 yrs, very competant in the commercial - industrial side of this trade. Two years ago I took a job as a service manager for a large mechanical contractor that wanted to start a real service division. Let me tell you, it is a different world.
We as techs have to deal with the problem in front of us, fixing a chiller, fan etc.
Once you move inside-your world changes. You deal with different issues all the time. The first thing someone going into business needs to know is the difference between mark-up and margin. How many techs actually know the difference? I didn't...but found out REAL quick!
Calculating real labor costs? Most techs do not have a clue on how to do this. I work in a union enviorment, I am still a union member. Our costs are outrageous! If you don't price properly you will be doing a slow twirl down the drain from the very beginning.
If you want to be a one man shop that basically owns a job-that might be where your technical skills are needed. But if you want to build a business you can hire technical people. I think this is the problem alot of techs go through when they start a business, they want to be the guy that knows everything, basically they want to be the "show" so to speak. If that is what you are about and you go into business - great! Congratulations - you are the proud winner of a JOB!! But now you have to carry all the risk for a JOB! Why do it that way? Ego?
Then there are all the other aspects of this business, marketing, acct. pay, recieveables. These all require your attention-how do technical skills help you in these depts?
I entertain thoughts of owning a business someday-I have read E-Myth and Ron Smith's book-HVAC Spells Wealth. Great info for this business!
I have also looked into franchising-this is another route to go if you don't have the business skills you need to be sucessful.
My problem is I make some serious $$$ to run someone else's business-otherwise I would have already made the leap.

Your right, this really is a great thread and your post adds significantly to it. You hit on some very important points. Your observations are spot on.

You’re absolutely right when you say “costs are outrageous”. The margins are very small it’s one of the reasons why the risk of failure is so high. Not knowing the numbers, not knowing the true cost of doing business and pricing properly is at the top of the list why 98% of the businesses started today will fail within the next 5 years. Most techs/aspiring entrepreneurs don’t understand the numbers and have no idea how to find out or worse yet they ask the wrong people. Hell, many company owners who have been in business for decades don’t know their numbers. They simply don’t know how to correctly price their services. The sad reality is that the 95% of the 2% of owners whose businesses do survive the first 5 years really own nothing more than a job; and a lousy job at that. A job with lousy pay, long stressful hours, without benefits, vacations, paid sick days or financial security. A job that keeps them in debt trying to keep it afloat and in the end is of no value. They won’t have a business worth anything to sell, to cash in on and get them through retirement comfortably. This is so sad and so true.

And, God forbid they should decide to hire employees! These will be the very same employees who will say; “why should I work for this jerk that doesn’t pay me well, never has steady work and when he does works and treats me like a slave. Hell, if this jerk is able to run his own business so can I.” So he goes into business and becomes the very person (the jerk) he used to work for. It’s a cycle of madness, the rat in the cage syndrome. I don’t blame them for wanting to go into their own business. They do it out of desperation. It’s a matter of survival. It’s the contractors who don’t know what they are doing and who start businesses that are responsible for creating and perpetuating this cycle of insanity.

Do you see the irony here? Here’s a list of what happens when we contractors don’t know our numbers:

1. When the business owner doesn’t know the numbers they don’t have a profitable business model to not only be in a position to pay their employees excellent wages, but provide incentives and opportunity for income growth and advancement opportunities.
So, employees and their families lose.

2. When the business owner doesn’t know the numbers they don’t have the money to build a world class company. When you don’t have a world class company you can’t deliver world class service to your customers.
So, the customer’s lose.

3. When you don’t know the numbers you don’t have the money to pay yourself the salary commensurate with your position in the company and you don’t receive the return on investment (ROI) (profit) you deserve. Without profit you are unable to invest in the growth of your company. Without growth they won’t have the infrastructure and people in place that allows it to run profitably even when they’re not there, which allows them to go on nice vacations with their family, knowing everything is running fine back at the business. It means if something happens to them, an accident or health issue and they can’t go into work the business will continue to run smoothly and profitably even though they’re not there and if you’re really lucky, like me, it’ll run even better when they’re not there, because your people are better at it than they are!
So, if you don’t get this out of your business you and your family lose.

So, whenever I read or hear a comment like, “I can’t charge that kind of money in my area”, or “people will never pay that around here”, or “I could never charge that much because that’s ripping people off”, or “that company charged those poor people $xxx for that repair and they are nothing but a bunch of rip off artists” etc. etc, I know right away that they are clueless about the numbers and they should not be in business or start a business because their illusions have nothing to do with the reality of what the numbers need to be to be successful.

This paradigm, which is their personal price objection, usually stems from their negative financial situation or history. They can’t afford to pay it so neither can anyone else.

This is a very difficult paradigm to get past. It’s not easy to put it all together, understand it and get past it, I know, I went through it; but isn’t it interesting to see the consequences of not knowing the numbers?

Flemsteel, you obviously get it, as does the company you work for. That’s why they pay you well and why you don’t need to go into your own business and if you do, it won't be for the wrong reasons.

This is just the tip of the iceberg on this subject.

Cheers!

[Dowadudda]

the numbers you say. Okay. We got thousands upon thousands of pages of guys using the term "the numbers" in a hundred different possible ways.

What are we talking about? Numbers?

Lets start talking about real numbers then, which may move this thread to the private area. But seriously. Lets start talking numbers. Real numbers.

Okay?

Costs. One example. Employee. Their wage. Their Taxes. FICA. Everything including your contribution. Including a benefit package. Including everything.

Vehicle, tools, advertizing. Ect ect ect. Lets start talking numbers, screw this generic vanilla crap.

I explained how difficult I had trying to obtain a line of credit. And I had many guys who were in this forum and many out there in the world tell me I was full of it at the time. I didn't know how things worked. Made me feel like an idiot. I went to seven banks. All looked at the Gross as a metric for an amount they would award you for a line of credit. But no one I talked to told me that. Only the bank. SO who was full of it? How would I know?

So instead of saying numbers as if it was a general term, lets start talking real friggen numbers and decimal points.

[Dowadudda]

We are a piping company first and foremost. We do plumbing, pipefitting, and sprinkler.
Margins on these jobs are anywhere from 0%-20% - on average we get around 10% GROSS on construction work. We do around $100 million / year in construction. Do the math-they have the cash flow.

No service margins are a different story-average around 40%. Different ball game.

So the way to start is bid a significant money job, have enough in the bank to get you to the second draw, and your on your way hey?

I have actually figured that is how one could do it. Tell me I am wrong.

[bjones]

[QUOTE=Dowadudda;3924542]

I would humbly and kindly ask you to really explain this in detail. For me and everyone else. I think you have a lot to offer. I need to see it from another perspective so I can digest both sides. We technical guys always want to be in business because of our technical expertise.

We reach a certain level and we say, "well, I am better than anyone at my shop, I am ready". I was not and have done it twice to only give it up because of the fact I did not have any real clarity to my plan. I had some customers who said "were with you". I said. "how can I go wrong". I held myself above water and did okay, but I never really got the thing where it should have been.

SO please. Tell me if not anyone else.

As far as biz goes and who desires to. Here is my take on this. This is mother effin America. Gol Darn it all. This trade is opportunity every where. SO. Every guy with a desire for anything would naturally think that "down the road I want to try". And you know what? For anyone and everyone who wants to or has tried God Love ya and God speed. I can tell you, the guy your working for now, he was there too. He was absolutely the guy at one time thinking the same thing you are. And he knows that your thinking it.

The technical knowledge of the owner is not necessary to run a profitable business. It is however the single biggest misconception leading to one of the top reasons why 98% of the businesses started today will fail within the next five years.

Before facing any other challenge, that single act of not being able to take off the tool belt at the right time is one of biggest barriers to success we face because it’s the most difficult thing for us to do. After all, it’s what we are most comfortable doing. It’s how we got started. It’s who we are. It’s what we are most proud of. It’s what we enjoy doing. It’s that satisfaction of diagnosing and solving the problem, of installing the equipment, turning it on and seeing it work, getting it going. It’s what we know best, fixing’ stuff; yet it is critical for us to give all that up in order to learn the skills necessary to build a successful (profitable) business.

In order to fully understand why it is almost impossible to run a successful business while continuing to wear the tool belt, we must first define what a successful (profitable) business is. We must be very clear and comfortable with our definition of a successful (profitable) business. We have to set aside our paradigms and agree on the definition. We have to agree that anything less than a successful (profitable) business is nothing more than a job and a lousy job at that. If we’re able to do that, then it’ll be easy to see why we have to take off the tool belt sooner than later in order to get to the definition of what a successful (profitable) business is.

In order for us technicians to understand what a profitable business is we have to define what profit is. Somewhere along the line we all learned that profit is what you have left over after everything is paid, right? Unfortunately, for most of us, that simple definition isn’t enough. Even when we learn the more sophisticated accounting definition of profit, we still really don’t get it.

The mistake a lot of us made in the early years, even with both definitions, is that we still didn’t pay ourselves enough or worse yet didn’t pay ourselves at all, because after all, we were just getting started. Then to make matters worse we asked our poor unsuspecting wives to do the books for free; because after all, we were just getting started.

We do this because we buy into the notion that this is what we are supposed to do when starting a business. We’re supposed to work hard, take less and sacrifice in the beginning. This mind set is based on the premise that “someday” we’ll get the company to the point where we can pay ourselves what we should be getting. However, what happens almost every time with rare exception is that we never “get there”. We fail and go out of business. If we are incredibly lucky we get out in one piece. More commonly we suffer the embarrassment of corporate and personal bankruptcy with non dischargeable debt that will take years to pay off. If we were lucky we still have our homes even though we’ve sucked every bit of equity out of it to keep the doomed business going. If we were lucky our marriage survived and maybe, if we’re young enough, we’ll be able to save the money to put the kids through college.

So, yes I’m saying you’re going to need to take off the tool belt very early in your business life to run a successful company. You cannot sustain a successful business working in the field. You will become a prisoner, trapped and unable to get out. You’re better off working for someone else. If you work in the field in your own business you have traded one bad job for a worse job. You’ll never have a life and you’ll never have a business worth anything to get you through your years. See post #46

Doing the technical work is usually the distraction we default to as an excuse to avoid doing what really needs to be done to run a successful business.

Unprofitable companies are the result of inexperience in business practices rather than inexperience in the technical knowledge of what his company does.

The sooner a technician, now turned entrepreneur, takes off the tool belt the faster she will get the company to the true definition of a successful business.

Now, before you all flame me on this let me be clear on this.

I totally believe technical competence is critical to the survival of any company. We are in the business of providing the technical expertise to keep people safe and comfortable in their homes and businesses and it couldn’t be done without dedicated, well trained, experienced technicians. We as business owners have the responsibility to hire technically competent people and provide ongoing training to develop both technical and communication skills.

Cheers!

[Dowadudda]

Bjones,

with all due respect. what you just said you have said before. It was predictable. I understand clearly and I comprehend exactly what you mean. I have been there. I lived it. It's burned into my hard drive called a brain. I got it. Got ya.

It takes money to do what your saying. Bottom line. Money.

[bjones]

Bjones,

with all due respect. what you just said you have said before. It was predictable. I understand clearly and I comprehend exactly what you mean. I have been there. I lived it. It's burned into my hard drive called a brain. I got it. Got ya.

It takes money to do what your saying. Bottom line. Money.

OK… I feel your pain and frustration, especially after reading #43, so I’m going to give you a pass on your sarcastic, condescending, impatient tone in #47, #48 and #50. Lighten up Francis, I’m not the enemy, I’m the guy willing to help out.

So what kind of business do you want to be in? If it's residential & light commercial service and replacement only, with no new construction, than I can help with, "your real friggin numbers" and I'll be more than happy to get them out to you, but I might want you answer some more questions either privately or right here in public before I do.

If you’re not interested in the residential & light commercial service and replacement market then I have no further comment and will take myself out of the conversation; at least with you anyway.

As far as borrowing money is concerned, I can't help you. I built my business without borrowing any bank money. When I failed the first time in 1990 there was no way a bank would loan me money.

It forced me to learn how to manage money and pay cash for everything. I only financed trucks. Actually I didn’t finance them I leased them because I couldn’t qualify for a loan.

I don't believe in being on the paying side of the interest formula. I enjoy being on the collecting of interest side of the formula.

Let me know what you want to do.

Cheers!

[quickcat46]

Ok bjones, please continue with your opinions. While I emphasize with dowadudda, money problems. I sure do not have a silver spoon or a big pile of $$$ to lean on. Neither do I believe it will stop me from being sucessful. I may have to work like a dog to get there, but I for one want to work like a smart dog.
Ok what we need is a line by line calculator to set up pricing guidelines. i just started this year and while trying to get my foot in a couple of doors I believe ended up hurting instead with my pricing of helping myself.

[justbud38134]

And I know I may be lucky in 1 respect. I have a little company, but I also have a full time job that takes care of everything and gives me time to work extra also. I'm off 26 weeks a year plus vacation. I only do service type work and dryer vent cleanings (small potatos for most of the guys on here.) But I do ok even with lower prices. I started with a used pick-up, older tools and pawn shop stuff. Some of it I'm still using. I invest $25.00 a week from my regular paycheck into my business and $25 into sharebuilder (I also put 10% into a nice 401k that is matched dollar for dollar)I offer freon, filter checks, and condenser cleaning for only $49.00. Anything else I charge fair but not HIGH prices for. Do I make money? Sure, but not a ton, do I like it YEP! I have a larger company that I turn leads over to for stuff bigger that I don't want to mess with and all I ask in return is for them to take care of my people. So far they have done well. I am currently using business profits to fund other avenues of revenue, pay down debt and sometimes have a little fun with. I can feel the load on my back getting less all the time and when its gone I can turn to building a nice nest egg to walk away with. Its not perfect, but I find that if you are good to people it will come back to you in time. And business wise I owe not one penny!!! Thats the best feeling

[WhoIsThat?]

is to have my own HVAC practice within 10 years.

How much you need to start, and survive the startup?
At 7% interest, $30k becomes $60k in ~10 years.

[tlchvac]

edit

[Dowadudda]

OK… I feel your pain and frustration, especially after reading #43, so I’m going to give you a pass on your sarcastic, condescending, impatient tone in #47, #48 and #50. Lighten up Francis, I’m not the enemy, I’m the guy willing to help out.

So what kind of business do you want to be in? If it's residential & light commercial service and replacement only, with no new construction, than I can help with, "your real friggin numbers" and I'll be more than happy to get them out to you, but I might want you answer some more questions either privately or right here in public before I do.

If you’re not interested in the residential & light commercial service and replacement market then I have no further comment and will take myself out of the conversation; at least with you anyway.

As far as borrowing money is concerned, I can't help you. I built my business without borrowing any bank money. When I failed the first time in 1990 there was no way a bank would loan me money.

It forced me to learn how to manage money and pay cash for everything. I only financed trucks. Actually I didn’t finance them I leased them because I couldn’t qualify for a loan.

I don't believe in being on the paying side of the interest formula. I enjoy being on the collecting of interest side of the formula.

Let me know what you want to do.

Cheers!

It may sound that way in written form, but it's not meant the way it seems. I apologize.

I get to pegging on the keyboard and it just takes over. LOL.

So you did start over, as you in the field to get the ball rolling, and so you got to a point during that period where you had enough cash to put another guy on so you could slowly move from truck to business side. Is this correct?

[bmac]

For those that are interested here are some numbers from industry statistics, different consultants and from averaging some other contractors I know.

Average owners salary 5-7% of sales. This doesn't include bonuses. Those that don't pay rent or have the wife working for free etc. might do more. This is for an average company with an office and employees. This is for a managing owner. If your doing both the calls and managing, should be higher.

Cash on hand- at least 10% of annual sales. No bonuses until you have that. This is not your personal savings when doing a startup, this is the business cash to tide you through the slow months, accounts receivable etc.

When figuring your rates, allow for about 40% billable for service, 75% for install. 160 monthly hours means only 64 billable service hours and 120 for install. Don't set your prices thinking you will bill 160 hours a month. These are a rule of thumb to use until you know for sure what your numbers really are.

Revenue per employee varies by area but accepted average is about $130,000. If your not getting this, someone in the office needs to go.

Field help should outnumber office help by about 3 to 1. Difficult for real small companies but should be your goal to get to this.

Just thought I would share these in case they were helpful to someone. I'm sure there are some that will disagree, that's ok. There's always exceptions, these are not numbers I came up with, they are actual numbers from successful companies.

Wish I had known some of it when I started. This info and a lot more is out there on the internet, various books, and seminars that suppliers put on.

[Richard Kletty]

Started at age 40. Gonna be 3 years this September. I love it and wouldnt trade it for anything.

[bjones]

For those that are interested here are some numbers from industry statistics, different consultants and from averaging some other contractors I know.

Average owners salary 5-7% of sales. This doesn't include bonuses. Those that don't pay rent or have the wife working for free etc. might do more. This is for an average company with an office and employees. This is for a managing owner. If your doing both the calls and managing, should be higher.

Cash on hand- at least 10% of annual sales. No bonuses until you have that. This is not your personal savings when doing a startup, this is the business cash to tide you through the slow months, accounts receivable etc.

When figuring your rates, allow for about 40% billable for service, 75% for install. 160 monthly hours means only 64 billable service hours and 120 for install. Don't set your prices thinking you will bill 160 hours a month. These are a rule of thumb to use until you know for sure what your numbers really are.

There is so much more to this.

Revenue per employee varies by area but accepted average is about $130,000. If your not getting this, someone in the office needs to go.

Field help should outnumber office help by about 3 to 1. Difficult for real small companies but should be your goal to get to this.

Just thought I would share these in case they were helpful to someone. I'm sure there are some that will disagree, that's ok. There's always exceptions, these are not numbers I came up with, they are actual numbers from successful companies.

Wish I had known some of it when I started. This info and a lot more is out there on the internet, various books, and seminars that suppliers put on.

These numbers have been around for awhile and I would agree they are pretty accurate although it’s been my experience, over the last 5 years, that revenue per time ticket hour and the average replacement job is going up. Even in this economy. The reason for this is that many contractors are learning how to develop a more sales driven organization.

Contractors are becoming more sophisticated on how they go to market. This can be attributed to many better practices organizations like Nexstar, Air Time 500, ISL, Charlie Greer, Maio Systems, Service Roundtable, ContractorSelling.com and people like Ron Smith, Ruth King, Jim Abrams, John Young, Frank Blau, John Cameron, Milt Baum, Joe Crisara and many others that have helped so much to improve this industry.

I attribute my success to one of these organizations and several of the people mentioned above.

Back to the numbers:

Demand Service:
4-5 Customers per day
2-2.5 hours per call
Hourly labor rate (built into flat rate)
Top hourly pay x 10 (minimum)
Service Agreements – 2 out of 4
Service Agreement Renewals – 86%
Replacement leads – 1 out of 5

Replacement 80% 1 Day Install
Minimum Installed Job Price
Crew labor per day x 16 (unburdened labor)
Closing % - 50% average for new and existing customers

Customer Service:
90% of all incoming calls should result in a booked appointment

Our revenue per employee is $170,000 compared to $130,000.
Average demand service ticket is $582
Average replacement job is $5,020

[JohnnyB60]

I got my Contractors license in 1978. I was real excited about it for about 6 years and I worked 12 to 16 hours a day 7 days a week. My own kids did not even know me. I finally got burned out after 10 years. I got tired of having to run down money due to me and having customers trying to rip me off. I always got the job done on time and expected to be paid on time. A lot of my customers were lawyers and they were always trying to rip apart my contract.

And then there were employees. They always had excuses for not showing up or taking too long to get the job done. They were always stealing from me or the customers. I hired one person sight unseen because I was in the middle of a big job and had to fire someone. I was shocked to find out that I had hired a lesbian bull dyke and she was immediately making demands like rest room facilities among other things. I was also get complaints from female customers that she was sexually harassing them. I got sued for letting her go, which I settled out of court.

I finally realized that you have to be a certain type of person to be a successful contractor and I wasn’t it. I think I would have done better being a General Contractor than a subcontractor.

I finally got a chance through a friend to manage a large service and repair facility and now I can go home to my family after 8 hours work with weekends off. I also have paid vacation and holidays. As a contractor if you take a vacation without someone in charge, you may lose an important customer to the competition. There’s no loyalty among customers. I sold almost everything except a few necessary tools, because I thought I might do some weekend jobs to compensate my income. It turned out that I was so burned out, that I just couldn’t do another job.

I used to read success stories all the time and it doesn’t matter how much you know about you tech skills, its being good at business that counts. I’ve learned a few things since then like being able to delegate authority. I could not trust anybody and had to be involved with everything. I asked a contractor friend of mine how it was that he was so successful and I was Struggling. He told me he had a BA in business and he worked as a carpenter while attending college.