So I have been a licensed electrician for sometime now and get alot of customers who want me and only me to do the work. I also get alot of leads and new customers. So with this idea I have thaught about venturing out on my own. My biggest worry right now is getting enough money or backing to start up. IE a van, advertising, insurance, bonds, equipment, stock and etc.
So how much should I shoot for in funding and where would my best bet for getting any backing be?
I would take it one step at a time and try to avoid a big loan. Try by getting your insurance & truck first.
First you need to ask yourself if all those jobs you have now will pay a rate to cover your business. I can't tell you how much but it could be $60-70/hr. Many guys start out doing side work for a bit more than the day job pays. Because it's cash, they have no overhead, & a steady pay check it seems like good money.
You need to have some $$ in the bank to cover your personal needs for at least 3-6 months.
Then you need operating cash to buy material a pay bills while you wait for your income to clear. IMO for a 1 guy start up $5-10K. Depends on your OH, size of jobs, & time to collect payments.\
When you figure out your overhead I would make sure you that much for 3-6 months.
You can spend a few thousand on material stock with out having much. You don't need a huge stock but as time gos you can build it up. This does seem to eat away from your early profits.
You know what tools you need. It also depends on what you wnat to do. Not haveing a piece of equipment can limit you. But also figure the first year or so buying a lot more things you did not think of or take for granted because your boss has it. Example rachet cutters, punch down tool, socket set, more drill bits, KO punch, stud punch. That's about 1K right there. The point is a cordless set & hand tools will only get you so far.
You can also get in a rut where you have no $$, no jobs, and nothing left for advertising. Figure so much per month for advertising. Where I'm at I would not spend too much on a phone book starting out. Try to spread your advertising on several places.
I would not buy a new van for a start up. Just get something that looks clean and newer.
You don't want loan money out starting up because money will be tight. Try to pay off your personal debt.
I also suggest that you obtain, and maintain, your license for a few years before you "go it alone." The best deal is if you can find someone who needs a "qualified employee" to operate.
Why? Because everyone "knows" that most new business fail, so when the time does come to "go it alone," the age of your licence will do two things: - it will fool the paper-shufflers into thinking you're already established; and, - it will discourage thos cretins who look for new guys to jerk around.
Let me be the first to tell you that starting your own business has its trying moments. Here is my story... I put my business together in February of this year. I made a list of everything I needed for truck stock, tools, etc... I took out ads in local papers, yellow book ad. I quit my full time job with benefits when I was hired as a subcontractor to remodel apartment buildings through a General Contractor. He "misrepresented" the amount of work he had and it only lasted two weeks. I then landed some work with family friends and neighboors and worked my ass off to build up a customer base, I even gave them lowered rates to help spread the word. Well, since all that took place from Feb to March, During the month of April until now, I have only had one lousy phone call from my Yellow Book ad, and one lousy phone call from my newspaper ad. I have an anxious wife who is dropping hints of finding a full-time job, alot of stress in the house as you can imagine, sex isn't what it should be, as you can imagine... since April I have returned thousands of dollars worth of stock to Home Depot and Lowe's, some large tools I haven't even used, just to get them off my credit card. Money wasn't a problem getting this business going, just when the phone doesn't ring, even after I sent out targeted post cards to specific potential customers, I am scratching my head. Now I have my mother-in-law dropping hints to my wife about "who might be hiring". Ok, so today, I invited myself into the business of an established local electrician and introduced myself cold turkey, faxed my resume over first and he has that. He has a large shop with alot of parts. He gave me a tour of his place and showed me a bucket truck, and going to get another one, etc... I guess he was interested in me. He doesn't do old work that much and does alot of Sunoco gas stations. We discussed working me either as a subcontractor and he would pay me more for using my vehicle or hiring me full-time where I would be covered workmans comp, etc... I think I might do full-time but willing to take any advice from you guys on here? Any advice? So anyway, I don't know why the phone hasn't rung. I have a professional image, clean truck, late model and I keep it washed. I have t-shirts with my logo. I'm not a dirtbag, I speak intelligently, have all my teeth, I once dated Miss Louisiana 1985,(I met her on match.com) so I know its not me that I am not getting calls. I know and realize that starting a business can take several years but when I am not even getting Joe Blow Ragman jobs offered to me I have to wonder.
Maybe I jumped into this too fast? Perhaps I should have found my "niche" and stuck with that? Most of my experience is with machine electrical and mechanical. So I am applying for full-time work all around the midwest hoping to land a good job where I can do field service work again, the wife says she will relocate with me no problem. (plus we get away from the mother-in-law) hehehe
I hope I have said something to help you and not bore you stiff...
It is not you, and what you wrote, is something a lot of us have experienced, starting a business from scratch is very difficult, and only a small number make a go of it, the area your in, the economy, the population all have an impact on sucess of a business.
We have between 8 to 12 new contractors a year start up new businesses in our area, all with the intention of making a go of it, and they are by most all excellant electricians, by years end there may be 2 or 3 of them still in business.
If i had to do it over again, i would find an existing business, with real profit on the books, and accounts with long term contracts, and invest in a going business.
On the yellow book ad's, it took almost 2 years before we started getting any good amount of calls from it.
[This message has been edited by LK (edited 05-21-2005).]
Being in business for yourself can be very rewarding, but in general, it lacks the security that you have now. When business is good, the money is good. When it's not good, there's no money, yet the bills continue to come.
Take it slow. It looks like you have a lot of business, but is it repeatable? If you have a few weeks work lined up now, do you have more when you complete those projects?
You need to be a very good estimator, salesperson, installer, marketer, financer, etc. If you fail in more than one major area, your business is likely to fail.
A simple example is...a contractor who does a super job, but neglects to keep in touch with their client. Seven years later the client has another project. Can they find your number, or do they have to look for someone else?
I recently completed a service upgrade with a dryer outlet and circuit for a client I hadn't seen in over 10 years. My cost to keep in touch with her was well under $100.
Someone else may know the cost to gain a new client, but I'd guess it's in the $50-$200 range.
There are probably 50 things like this that you can do well, or not at all. Your success will reflect your abilities.
The best work I have ever gotten has always been from referals. The best way to get referral is to get out there and be working. I would approach it the same way if I started now as I did back in 1996. I got myself a cheap van and minimum tools and got out there. Keep your prices low. As you get too much work to handle bump your prices. Cancel smaller noprofitable jobs for better ones only if you have to. Only time and experience will teach who is a waste of time and who is a good contact.
Buy tools as you need them. No reason to have brand new tools revolving on the charge account if you have no reason to plug in yet. All the time & money spent on advertising, shirts, etc., forget it. Those things are great as growth tools, but I wouldn't count on them to drum up much to start with. Instead, think of it this way:
Rather than charge $75/ hour, charge $50. Work 10 hours for $250 less. $500 more than you would have earned sitting at home waiting for the phone to ring with $250 being invested in a referal. And if your cheap, the referals are almost a guarenteed sell. Now when you have 30-40 hrs a week consistantly booked 2-3 weeks out, keep looking at and estimating, but bump that price a little. Keeping your overhead low is the only way to make this work.
As time goes on all those contacts you've made over the years will really start to pay dividends. The contact base grows exponentially, but the only way to get it started and keep it going is to be out there and stay out there.
The way I started was I had a full time job working 7:00 am to 3:30. After that I was doing my own work, in order to get "in the door" on some work I had to "cut" my hourly cost a little, mind you, I wasn't worrying about health insurance cost or retirement because I had them with my daily job, all other insurances and liabilites I did have. I fianlly landed a maintenance contract with a local business and that is when it took off. After proving yourself, your reliability, your competance, your trust worthyness, your openess and honesty, and professionalism, this customer was willing to "pay" for my service. When they had a maufacturing machine or test station go down and they call you and you are there and fix the problem, they realise your importance, you cost 85 - 90.00 an hour, that machine, broken down is costing thousands in lost productivity. Now this is were it got interesting. The owner of this company takes notice of you, right now, you are worth more then his employees not working because the equipment is not working, he has lunch with his suppliers, his buyers, his counter parts and he is telling this story to them, he is now my salesman because I replaced a 9.00 fuse and my business is booming. He is giving my number out, I am "running" to these people and when you fix the problem, they are happy, I am a one man band, my over head is low, yes I could hire another guy and I may in the near future. I guess I rambled on to give you a little something to work toward. As far as financing goes, as was metioned in another post, get you your truck, your license, ALL insurance and set up an account with a supply house, this will work out best for you, to have a monthly loan payment (other then maybe the van) that you have to make is not the best way to start off, build your capitol and don't be buy the fancy tools you don't really need all at once, instead put the money in the bank, you WILL need it one day. I have had much sucess renting 881 benders, super tuggers and other large tools that a) I don't have the room to store and b) I don't have the need for on a daily basis. thats all I got for now.
[This message has been edited by rcksmith127 (edited 05-23-2005).]