More money as a contractor?

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frogneck77

Senior Member
Location
Shelton,CT
I own a small company-4 guys including myself in CT. We do a broad range of work and have always been busy since I started the company 3 years ago. I still feel like I could be making more money working for a company.Generally speaking(financial feedback only), how much money should I be taking home per year? I have been putting most of the profit back into the company-All the vans are paid for, benefits for employees, etc. Just curious what I "should" be taking home personally in your opinions.
Thanks,
Bill
 

satcom

Senior Member
Mid six figures, or better, and why would pay off your trucks? a few of the small shop owners are pulling down 10K every 2 weeks, but they are operating a business not self employeed electricians, they are in business to make money.
 
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frogneck77

Senior Member
Location
Shelton,CT
I paid off my trucks for the same reason I pay all my credit card bills in full(if possible), and the same reason I pay an extra couple of mortgage payments per year-I hate to be in debt. Im not making close to 10K take home every 2 weeks, still learning to be a businessman I guess
 

satcom

Senior Member
frogneck77 said:
I paid off my trucks for the same reason I pay all my credit card bills in full(if possible), and the same reason I pay an extra couple of mortgage payments per year-I hate to be in debt. Im not making close to 10K take home every 2 weeks, still learning to be a businessman I guess
Get a good accountant to help guide you thru the best way to grow assets in a company. as for the 5K a week, in the electrical contracting field that may as low as 20% in the sales, and service type contractors, if your working as a self employeed electrician, that is not usually a real figure you can reach, some small sales and installation companies in related fields, do better with owner income.
 

ITO

Senior Member
Location
Texas
frogneck77 said:
I paid off my trucks for the same reason I pay all my credit card bills in full(if possible), and the same reason I pay an extra couple of mortgage payments per year-I hate to be in debt. Im not making close to 10K take home every 2 weeks, still learning to be a businessman I guess
You are VERY smart for doing this, our business is cyclical not having those payments will help you in the lean times. I think you should keep at it a few more years and grow it some more. Sure you might be taking home a bigger paycheck working for the man, but you need to look at your asset list and what you have accomplished for the real picture or your success.
 
I'm in a similiar situation. Two guys plus myself, been at it 4 years and feel I could be making more money working somewhere else. There is a larger back story that I won't take the time to get into but for part of those 4 years there was a real question if this is what I wanted to do when I grow up so I feel that there was some wasted time in terms of growing the company. I am working on it and learning as I go with help from this site and other sources and looking to get a real handle on expenses, pricing, profit etc. One thing that I truly look at though is that being in control of my own time is a reward that you can't put a dollar figure on. When I have friends come in from out of town or one of my kids has a school function during the day or I feel that we are slow enough to take a day off and I want to take the guys skiing, I'm the one who gets to make the decision about taking time. I've yet to get rich being an EC, but those types of fringe benefits are hard to calculate.

And hopefully w/ a bit more diligence and knowledge the money part won't be too terribly far behind.
 

aline

Senior Member
Location
Utah
frogneck77 said:
I own a small company-4 guys including myself in CT. We do a broad range of work and have always been busy since I started the company 3 years ago. I still feel like I could be making more money working for a company.Generally speaking(financial feedback only), how much money should I be taking home per year? I have been putting most of the profit back into the company-All the vans are paid for, benefits for employees, etc. Just curious what I "should" be taking home personally in your opinions.
Thanks,
Bill
Before becoming a contractor I worked at a large industrial plant as a maintenance electrician. I had been there for 12 years.

My gross pay ranged between 60k to 80k per year. I had 4 weeks paid vacation, 1 week paid sick leave, paid holidays, I had all days from christmas to new years day off with pay, a retirement plan, good medical & dental insurace and a company matched 401k plan. I worked almost entirely indoors. The company provided all my tools.

So for me to give all that up I feel I should be getting over 100k a year.
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
i don't know if there is a good answer to this. A lot of small business owners make less than they could working for someone else, but they like doing their own thing, so that makes it worthwhile to them.

I knew a couple that owned a small business and worked 60 and 70 hour weeks for a net of less than $50k a year. Both were well educated and hard workers, and I doubt either would have had any real trouble finding a 40 hour a week job making close to what their combined income was with both of them working 60 hours a week. And they would have had company paid benefits to boot.

I second getting a good small business accountant. Paying off your trucks may make you feel better, but it may not be the best thing to do financially. Putting the money in the bank might be a better answer. What you may really be doing is spending your profits on capital investments and not even realizing it. Your profits may be a lot more than you know if a lot of the money is going back into the business. The accountant can help you get a good feel for where you really are financially, and then you can decide what makes you comfortable. Personally, I would not be a big fan of paying off the trucks. yes, there are some minor benefits if you run into some slow times, but taking that money and putting it in the bank is also a good way to prepare for the leaner times, and there is a lot more flexibility with cash in the bank, than a paid off truck sitting idle.
 
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ceb58

Senior Member
Location
Raeford, NC
petersonra said:
i don't know if there is a good answer to this. A lot of small business owners make less than they could working for someone else, but they like doing their own thing, so that makes it worthwhile to them.

I knew a couple that owned a small business and worked 60 and 70 hour weeks for a net of less than $50k a year. Both were well educated and hard workers, and I doubt either would have had any real trouble finding a 40 hour a week job making close to what their combined income was with both of them working 60 hours a week. And they would have had company paid benefits to boot.

I second getting a good small business accountant. Paying off your trucks may make you feel better, but it may not be the best thing to do financially. Putting the money in the bank might be a better answer. What you may really be doing is spending your profits on capital investments and not even realizing it. Your profits may be a lot more than you know if a lot of the money is going back into the business. The accountant can help you get a good feel for where you really are financially, and then you can decide what makes you comfortable. Personally, I would not be a big fan of paying off the trucks. yes, there are some minor benefits if you run into some slow times, but taking that money and putting it in the bank is also a good way to prepare for the leaner times, and there is a lot more flexibility with cash in the bank, than a paid off truck sitting idle.
I agree with what you are saying, one EC I know put the business in his wife's name so he could bid as a minority business. He has landed some nice contracts due to this over the last few years and has made a nice sum of money. I say that to get to a point you should consider. I went by to see this guy one day to sub out some digging for me. He has a nice new ditch-witch with matching trailer, new backhoe with new trailer and dump truck to pull it with. He told me I could use the equipment any time I wanted. The ditch-witch had not been use in 8 months and the backhoe had not moved in three. But he was proud of his equipment and that it was all paid for. Until I pointed out he could have taken that money, found a nice retirement plan for him self, rented the equipment when ever he finally did have a need for it and write it off the top on taxes. The paid off equipment did not look so good any more. Your trucks are not the same as other equipment but you need some one who knows the In's and out's of business accounting and taxes to find out what is best for you and your company.
 

Rewire

Senior Member
petersonra said:
i don't know if there is a good answer to this. A lot of small business owners make less than they could working for someone else, but they like doing their own thing, so that makes it worthwhile to them.
the money is secondary the fact is I love what I am doing

I second getting a good small business accountant. Paying off your trucks may make you feel better, but it may not be the best thing to do financially. Putting the money in the bank might be a better answer. What you may really be doing is spending your profits on capital investments and not even realizing it. Your profits may be a lot more than you know if a lot of the money is going back into the business. The accountant can help you get a good feel for where you really are financially, and then you can decide what makes you comfortable. Personally, I would not be a big fan of paying off the trucks. yes, there are some minor benefits if you run into some slow times, but taking that money and putting it in the bank is also a good way to prepare for the leaner times, and there is a lot more flexibility with cash in the bank, than a paid off truck sitting idle.
I would much rather have paid for trucks than money in the bank during lean times.Missing or being late on a payment can reek havoc with other creditors some bankcards will raise your APR even if you have never missed their payment.Nothing like the stress of having no work and 5 days to make a 6 hundred dollar truck payment with only 4 hundred in the bank.
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
Rewire said:
the money is secondary the fact is I love what I am doing


I would much rather have paid for trucks than money in the bank during lean times.Missing or being late on a payment can reek havoc with other creditors some bankcards will raise your APR even if you have never missed their payment.Nothing like the stress of having no work and 5 days to make a 6 hundred dollar truck payment with only 4 hundred in the bank.
if you had the money in the bank you could make take the money out of the bank and make your truck payments. i am not suggesting spending the money that would have otherwise gone to paying for the trucks, but rather salting it away. if you run across a lean time you can spend the saved money on truck payments, or other things that might come up. Its not available for something else if you already spent it on the truck.

BTW, leasing trucks is often a winning proposition, but not always. A good small business accountant can help you decide when it is appropriate to lease versus buy. Same thing for your office space. A lot of small business owners are hung up on owning their equipment and property and do not realize how much money they have tied up that could be put to good use elsewhere. Money is very cheap these days, and using someone else's money is often (but not always) a bargain.
 

Rewire

Senior Member
petersonra said:
if you had the money in the bank you could make take the money out of the bank and make your truck payments. i am not suggesting spending the money that would have otherwise gone to paying for the trucks, but rather salting it away. if you run across a lean time you can spend the saved money on truck payments, or other things that might come up. Its not available for something else if you already spent it on the truck.

BTW, leasing trucks is often a winning proposition, but not always. A good small business accountant can help you decide when it is appropriate to lease versus buy. Same thing for your office space. A lot of small business owners are hung up on owning their equipment and property and do not realize how much money they have tied up that could be put to good use elsewhere. Money is very cheap these days, and using someone else's money is often (but not always) a bargain.
You forget that your truck payment includes interest usually 6-12% depending on the bank.Putting money in the bank earns 2-3%.By not paying off your note and banking the money you are loosing the difference between what the bank pays and what they charge 4-10 %.
 

C3PO

Senior Member
Location
Tennessee
Personally I think it is much more important to have equipment/vehicles paid for and be debt free and have an emergency fund then to be makeing payments just to get a tax write off. Both in personal and business. But that is just me I try to follow Dave Ramsey's plan.
 

ITO

Senior Member
Location
Texas
C3PO said:
Personally I think it is much more important to have equipment/vehicles paid for and be debt free and have an emergency fund then to be makeing payments just to get a tax write off. Both in personal and business. But that is just me I try to follow Dave Ramsey's plan.
Works for me too.

I would also like to add this country would not be in a recession if most Americans had the same attitude.
 
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petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
Rewire said:
You forget that your truck payment includes interest usually 6-12% depending on the bank.Putting money in the bank earns 2-3%.By not paying off your note and banking the money you are loosing the difference between what the bank pays and what they charge 4-10 %.
If you are paying 12% to buy a truck, you are not getting the best deal.

It may seem really out there, but it is often possible to lease this kind of equipment and be financially ahead on a net basis. The reason is because the leasing company often gets a much better price on the truck, they get better deals on the money, and there are some tax angles for both you and the leasing company that come together to sometimes make leasing very practical from a financial perspective.

OTOH, it seems important to you to pay off your trucks, and if it is going to make you sleep better at night, its probably to your benefit to do so, regardless of any financial issues.
 
L

Lxnxjxhx

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if you can find one of these for your area

if you can find one of these for your area

you can figure out how much you'd make working for a company.

http://www.bls.gov/ncs/ocs/sp/ncbl0873.pdf

If you go to work for a company and get a supervisor right out of a Dilbert cartoon, you may wish you were back working for yourself.
 
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