Small/New Business Startup and Financing

[MacFatty]

I started my own company as a side project this year. I was getting turned down on some "side jobs" due to the fact that I was not insured/licensed. I currently work for a mason contractor and have worked in the field for just over 10 years now. The mason contractor I work for is on his way out. The poor management and risk taking are getting out of control and due to either fines, injury or dare I say a death, things are going to come to an end. I've decided that I need to take my "side job" to the next level and make something of it. I don't have the capital necessary to take on the projects of a size that I could go full time. Loans and/or grants are the next step in my understanding. I could try the investor route but with the economy the way it is, I'm not sure that is the best way to go. Also, I don't want someone else telling me how to run my company. I am very safety oriented, also very well trained in the area, and want to make sure things are done right. Also I've never believed in half-ass'ing a job. The only way I can see to get things done the right way is to be the one running them.

Back on topic, I was curious if anyone has any experience starting their own company and more specifically in financing it in the beginning stages?

I welcome any and all advice or experiences that can be given.

 

[Fern]

I'm a CPA. I'm marking this for later. I must log off, but will try to remember to post back Monday (if I forget PM me).

Fern

 

[D1gger]

Before you can even contemplate getting financing from a bank or other lending institution, you will need to have a business plan documented. The plan will outline how your company is going to operate, who your customers (generically) are going to be, how you will use the funding, what your revenue, cost, profit projections are, which will detail how the financing will be paid back. It should also include a SWOT (Strengths/Weaknesses/Opportunities/Threats) analysis of your company.

The other choice, is to try to use friends & relatives to raise a small amount of capital and grow very slowly without an injection of substantial financing.

I've been there and done this (in the contracting business). It is very hard work, but it can be very personally and financially rewarding.

 

[Paladin3]

My wife just started her own business. You absolutely need to incorporate and get all the necessary licensing and insurance to protect your personal assets.

After that, start small while keeping your regular job and take what side jobs you can get. Save up for the necessary capital to eventually go full-time and accept larger contracts.

Forget about investors, unless you have a rich uncle. For every $1 you want to borrow they will normally want to see you pony up $1.5 dollars in matching capital or collateral. And grants are a joke and impossible to find.

Starting your own business will take time, unless you already have sufficient capital to fund the business start up, and 1-2 years worth of income to support yourself on before you turn a profit (if you are lucky).

 

[slayer202]

how much do you need

 

[Greenman]

I'm going to assume that you intend to become a masonry contractor. The first step is to get your license, then get your general liability, and workmens comp if you intend to have employees. This shouldn't cost you all that much out of pocket, 3k or less. The only financing you should need is for material and labor on the projects you do, that's short term stuff and easy to do with a visa card. The other option is to structure your contracts so you don't have to float very much for very long. Start small, take larger projects after you get a little capital built up.
Don't forget to get your lead cert, the fine for not having it is $37,500. That will put a real crimp in your wallet.

 

[BTA]

So your "side job" is basically unlicensed contracting work? Awesome, start off breaking the law.

How about you do shit legally first, then worry about expanding?

 

[Greenman]

So your "side job" is basically unlicensed contracting work? Awesome, start off breaking the law.

How about you do shit legally first, then worry about expanding?

How about you not jumping to conclusions. In some states you don't need a license, in others you only need one if the project is over a certain dollar value.

 

[Patranus]

Getting financing in this economy is not going to happen.

Unless you have the next billion dollar idea you are willing to give up 70% of to a VC, you are on your own.

 

[MacFatty]

So your "side job" is basically unlicensed contracting work? Awesome, start off breaking the law.

How about you do shit legally first, then worry about expanding?

How about you know what the fuck you're talking about first. Ohio only licenses in five areas (Plumbing. Electrical. HVAC. Refridgeration. Hydronics) I have licensed plumbers, electricians and HVAC guys who work for me. I don't get into Refrideration or Hydronics. I 1099 my guys and report my income. Anything I do of any size I run through the company I'm working at currently so that all taxes/licenses/permits/insurance requirements get taken care of as required.

I have my generaly liability insurance as well as my worker's compensation paid up to date. I've been going the slow start route, but I put myself in a big financial hole when I was younger and am still climbing out. Also, that put a big hurt on my credit. Building capital has been hard to do. I was fine with the slow route, but as I stated I am worried about how much longer my current job will be around.

I'm working on my business plan. I know this needs to be very solid in order to get any financiang. I'll probably be asking for advice regarding that in the future. Right now I was just looking for any insight into startup/financing.

My main line of work will be masonry, but I do not want to limit myself as I have the resources to do more.

Forget about investors, unless you have a rich uncle

I have one. I work for him. You see the problem with borrowing to start a competing business.

 

[paperfist]

If you 1099 your workers you don't need workers comp, but 1099ing your workers is a whole other can of worms to begin with. The IRS has some extremely strict rules for determining if someone is a sub contractor or not.

As said above you want to incorporate or go the LLC route, it's cheap insurance for protecting your personal wealth. As I found out it's a PITA to convert to one of those from a sole proprietor.

Like suggested it's best to start off small if you don't have any financing and build up from there. Starting off big is nice, but 1) you no longer work for yourself 2) you start off behind the 8 ball with debt 3) you immediately have to hustle to compete with the big boys and that's hard to do with out a reputation as an owner.

 

[chusteczka]

I have one. I work for him. You see the problem with borrowing to start a competing business.

Maybe you can work with your rich uncle instead of for him. I am sure he would like your help on a higher level than just an employee. Your interest in his life's work would be the biggest compliment and it sounds like he can use the help.

Many small businesses get lost in the administration of that business. He is probably knowledgeable of many requirements that could serve as an asset for you.

Sideline him if you have to. He may be feeling overwhelmed and may appreciate the help.

 

[MacFatty]

I have tried working with him. He has the mentalitly that "this is my company and I'll do what I want with it and you can't tell me how to do it".

He is yet to take any of my suggestions, even though they would save him money in regards to materials and labor costs. The company has a reputation for getting the job done quickly with little regard to safety regulations while doing subpar work. There are several general contractors who will not work with us because he has gone into their offices and screamed at them. So we work in obscure areas on small jobs and haven't seen a job over $50k in almost two years.

He is a perpetual child who refuses to grow up. He consistenly goes home at least twice a week to sleep through his hang over and it has been this way since I started working there over six years ago. He turned 50 this year.

When I started we ran three to four crews of 20-50 guys running at all times. We currently have eight employees working for us including my self and my boss. He equipment is all old, run down and in desperate need of a scrap yard. While he could be an assest because of his knowledge, there is still nothing from him that I want. He has done all he can for me by teaching me as much as I have learned working there.

So to be completely honest. I have no chance of advancement with this company. Nor do I want to spend my life rebuilding his company and his "good" name. I have started a name of my own and want to build it up.

I do appreciate your point of view. I did try that first, but there was only so much he was willing to let me do.

 

[Gibson486]

Angel investors, but you need to have a business plan. Also, most start ups today are geared towards making a company profitable and then selling it. The building an empire from the ground up mentality is getting smaller every year. In other words, this is not a simple question because it depends on your goals.

Seeing how you are doing contractor stuff, I think the best route would be to build a team with the arsenel that you need. That means you need to find someone with a license or get one yourself. Getting investors for your industry is tough because its more general labor and the market dictates business. My advice would be to try to find someone who has done what you want to do successfully, and bait him to join your company. It's tough, but if it were easy, every would be doing it.

Also, as you can see, the best marketing for your industry is to have happy clients.From the sounds of it, the guy you are working for works a lot in the municipal market. Bid Low, get work. That is probably his mentality. Also, the disregard for safety will bite him in the butt. Lots of engineering firms will not tolerate construction firms that do not follow regulations.

 

[olds]

"Safety Director & Owner, Caldwell Contractors"

Sounds like you already have a business.

 

[Greenman]

I've never heard of anyone investing in a construction company, I sure as hell wouldn't do it.

Edit: I have met several fellows that got their license, landed a 250k project (usually stolen from their former employer) and figured they were on easy street. They ran out and baught 50k trucks and all new tools. Not a single one survived 2 years.

 

[MacFatty]

"Safety Director & Owner, Caldwell Contractors" Sounds like you already have a business.

You know a little reading goes a long way. I discussed my situation in the OP. And again in a later post with different details. I'll not cover it again. See above.

 

[olds]

You know a little reading goes a long way. I discussed my situation in the OP. And again in a later post with different details. I'll not cover it again. See above.

I less interested in your "business" and more interested in what your other account was.

 

[MacFatty]

I less interested in your "business" and more interested in what your other account was.

Other account? Not sure what you mean by that, care to elaborate?

 

[alkemyst]

Other account? Not sure what you mean by that, care to elaborate?

you come here first to ask this question?