Business Tips/Advice Welcome

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Eli1211

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Location
Wisconsin
Occupation
Electrician
I am a newly Licensed Master Electrician, I recently decided to go into business for myself. Yesterday, I spent what felt like a small fortune on a decent work van and I am filling it up with typical van stock this coming week. I have all my licensing and insurance required by the state of WI to be in business for myself as well. Monday morning, I have a meeting with a home remodeling contractor. This is my first meeting with a company that could potentially fill up my schedule in a significant way. Any advise from the guys here who have been in the trade for a while, met with a hundred companies, just any insight/tips would be appreciated. Thanks!
 
First, CONGRATULATIONS!

I caution against having one contractor be almost all of your business.

Understand your costs, and make sure you charge enough. Being you are just coming into the business, you will be given "opportunities" in exchange for low pricing. If you load yourself up with low margin (or no margin) work, then you won't have time to do the highly profitable work that needs to be done now. If you do want to work at a discount to get in the door, instead of lowering your price, let the customer know what your real price is and then given them an opportunity discount. Same money, but you send the message this is not your normal price.

Try not to take a job you can't afford to not be paid for, or at least don't let the customer get so far out in payments that you cannot recover from being stiffed.

Create a retirement account (check out a SIMPLE IRA), and FUND IT!

You want to have holidays paid and vacation time paid, make sure you charge for it.

The customer is not always right, but the customer is always the customer.

Treat your customers the way you expect to be treated as a customer.

There are lots more others will post, I wish you the best of success.
 
One more thing I learned, customers that beat you up on price are the worst customers to work for. Weed them out by having a higher price.

Don't get me wrong, I understand that there are limits to how high we can go with our pricing. I had the reputation of not being the lowest price, but people kept calling because of my service attitude and work ethics. (now I'm just a lazy bum)
 
I made the mistake of having 3 major customers that were probably 80% of my work. They all paid on time , everything was good ............until we hit the recession in 91'-92'. It was like someone shut off the faucet phone just stopped ringing.

I got out with some money and didn't owe anyone a penny.............kinda proud of that. It wasn't for me I guess


Best of luck to you!!!!!
 
Almost every contractor charges too little when starting. Then they wise up over time. Instead of wasting a lot of time wising up, I recommend you read this tiny book which will help you determine the correct amount to charge: "How much should I charge" by Ellen Rohr. You can get it on Amazon. Here's a starting hint: if your labor rate is not three digits, it's too low.
 
Eddie702 said:
My accountant had told me to charge 3x what you pay yourself. Don't know if it's right or not
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I don't know how close that would come out, but it sounds ridiculous for your accountant to make such a blanket statement. The correct amount is based on the total of your expenses, desired profit, and available billable hours. It's also very important to realize that your time is valuable and to NEVER give it away for free.
 
Eli1211 said:
I am a newly Licensed Master Electrician, I recently decided to go into business for myself. Yesterday, I spent what felt like a small fortune on a decent work van and I am filling it up with typical van stock this coming week. I have all my licensing and insurance required by the state of WI to be in business for myself as well. Monday morning, I have a meeting with a home remodeling contractor. This is my first meeting with a company that could potentially fill up my schedule in a significant way. Any advise from the guys here who have been in the trade for a while, met with a hundred companies, just any insight/tips would be appreciated. Thanks!
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What you have to know is that contractor is only looking for someone to be less expensive than what’s he’s paying now.

You’ve got to start somewhere though. If you can manage to pay the bills with that, fine; the goal is to build a reputation where people are specifically asking for you to be on their project. Took me a solid 4/yrs to get to that point. Probably 6/yrs in I could pick and choose which jobs I wanted to do.


Sent from my iPhone using Tapatalk
 
Are you in a rural area of Wisconsin or one of the larger metro areas? How much of your time will be spent traveling between projects?
 
Coppersmith said:
I don't know how close that would come out, but it sounds ridiculous for your accountant to make such a blanket statement. The correct amount is based on the total of your expenses, desired profit, and available billable hours. It's also very important to realize that your time is valuable and to NEVER give it away for free.
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As a ballpark figure, I've seen that successful businesses tend to charge about 3X cost of goods sold (COGS). Let's put it this way, if someone said "Quick, give me a labor price" it would be at least triple digits for my own labor, based on what my company pays me. Oddly enough, even though I'm salary, they pay me an equivalent hourly rate. I think it has to do with the fact I'm working for an MEP firm and they sometimes need to disclose what they pay me on an hourly basis.
 
What I did was added up all my expenses for the quarter, insurance, car note, any overhead that I had for the business. Then I knew I wanted to make a salary of 100k a year. I need To make 25k per quarter for salary and added my overhead per quarter. There are around 62 working days per quarter on average . So what you do multiply 62 x 8 hours a day, that equals 496 hours. Then you take your quarter expenses example 31,500 divided by 496 hour, equals 63.50. Then you multiply 63.50 x 3, because on average you should be billing at least 3 sold hours a day. Then you take that number 190.52 and divid it by .50 which equals 381.04 . The reason why you want to double the 190.52 is that you want to make as close as you can to a 50% gross profit. Thats how you get an hourly rate of $381.04.
Make sure that you have a clear scope of work for each job and if there is anything that changes or is not in that scope charge for it.
Make sure you get 30% down on a job if it is a large, then you get 30% halfway through, and then you get final payment when job is finished.
Don’t let a builder or contractor keep you behind in payments if they don’t pay stop all jobs with them until they do.

Remember this is how you feed and put a roof over your head don’t let anybody take it from you.
There is a guy on YouTube you might want to check out his channel is The contractor fight and he has a lot of great information.
I wish you the best of luck.
 
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