Start up costs

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Doctor Electric

Doctor Electric

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Ok so here in the near future I will be working for myself, I have between the two companies I provide electrical services for that I'm currently on the payroll for but they have agreed to take me on as a contractor when it be to that point, between that and all the side work that I've been building my name on for the past couple of years, and stacking cash I pretty much have that aspect down,

However my question is this: before I quit those jobs as far as payroll and now I'm on my own payroll, what is a good lump sum of cash to have on hand or maybe speak to an investor to get a bit more cash what's a good ball park range of cash to have before making the " Leap forward" and quitting my jobs officially or unofficially any thoughts on this would be awesome thanks guys
 
I go with the idea of having at least 6 months living expenses (including insurance) in the bank before jumping ship. If things don't go as planned, you can still pay the rent and go to the doctor. (And this doesn't even count business expenses- materials, insurance, licensing, lawyer retainer, etc. Most business that fail early do so because they didn't have enough cash at the beginning.)

If you're already getting a paycheck, and some benefits I hope, why go off on you're own just to work for the same people?
 
Florida requires you have a minimum of $10K in the bank to start a contracting business. Having started one three years ago I would say a minimum of $30K is more reasonable. There are a lot of startup expenses.

Here's an expense to avoid: advertising. Most of it is a waste. Don't wrap your vehicle, nobody notices. Don't do newspaper ads or any other print. Print up business cards and join a BNI group (google it). You want your business to run on word of mouth advertising only.
 
Coppersmith said:
Here's an expense to avoid: advertising. Most of it is a waste. Don't wrap your vehicle, nobody notices. Don't do newspaper ads or any other print. Print up business cards and join a BNI group (google it). You want your business to run on word of mouth advertising only.
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I would echo this and also add to avoid Angie's List unless you are gonna really get into it. It costs a ton and it's hard to work it so you make money on it.

I agree to skip the printing, everything is digital now. Get a website that looks professional and ask your customers to give you google reviews. The more reviews you have, the higher Google will display your site when people Google for an electrician in your area. Another thing that is popular around here is the NextDoor or similar app. We are in a few neighborhoods that they call us just because their neighbor put us in. You can't put yourself in, but you could request being added along with a google review.
 
MNSparky said:
I would echo this and also add to avoid Angie's List unless you are gonna really get into it. It costs a ton and it's hard to work it so you make money on it.

I agree to skip the printing, everything is digital now. Get a website that looks professional and ask your customers to give you google reviews. The more reviews you have, the higher Google will display your site when people Google for an electrician in your area. Another thing that is popular around here is the NextDoor or similar app. We are in a few neighborhoods that they call us just because their neighbor put us in. You can't put yourself in, but you could request being added along with a google review.
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Angie's List has generated a lot of revenue for my company. What works for one company may not work for another company.
 
Coppersmith said:
Florida requires you have a minimum of $10K in the bank to start a contracting business. Having started one three years ago I would say a minimum of $30K is more reasonable. There are a lot of startup expenses.

Here's an expense to avoid: advertising. Most of it is a waste. Don't wrap your vehicle, nobody notices. Don't do newspaper ads or any other print. Print up business cards and join a BNI group (google it). You want your business to run on word of mouth advertising only.
Click to expand...

Sounds like over regulation by the state of Florida requiring $10k to start a business.
 
Coppersmith said:
They are trying to protect consumers from under-financed contractors who fail mid-job.
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As a business, we pay a bond to the state which protects consumers should a company close and go out of business. The bond is renewed every two years. It's a $25k bond.
 
What exactly do you mean "have to have 10k"? One just has to show they have 10k then ur good? or it goes into escrow as a bond? WA requires a bond, but you can either put in a dedicated account signed over to the state, or you can hire a bond company for $100.
 
Doctor Electric said:
Ok so here in the near future I will be working for myself, I have between the two companies I provide electrical services for that I'm currently on the payroll for but they have agreed to take me on as a contractor when it be to that point, between that and all the side work that I've been building my name on for the past couple of years, and stacking cash I pretty much have that aspect down,

However my question is this: before I quit those jobs as far as payroll and now I'm on my own payroll, what is a good lump sum of cash to have on hand or maybe speak to an investor to get a bit more cash what's a good ball park range of cash to have before making the " Leap forward" and quitting my jobs officially or unofficially any thoughts on this would be awesome thanks guys
Click to expand...


a business plan, with all the numbers filled in.
https://ellenrohr.com/catalog/the-bare-bones-biz-plan/
don't even consider going out to seek fortune till you do this.

six months living expenses, in the bank. not in theory.

your largest customer is no more that 15% of your net income.
gross doesn't count. and if your gross is waaaaayyyy out of ratio
to your net income, your risk factor escalates.

how much money are you putting into a job for the yield?
that is your risk.

normal contracting, if your profit is 20%, you are doing awfully
well. that means to make $100k a year, you are going to roll
the dice with half a million, that anything can happen with.

my "bad" customers are my most valuable asset. i have to go
talk to more people and get more customers, so they aren't
two thirds of my business.

when my least desirable customer is 15% or less of my income,
i'm good. when they are 65% of my income, i'm screwed.

i'm blessed that i have generally excellent customers. that is
the result of a business plan, and some amazing luck.

no plan, is you take whatever washes up on shore.

i am probably more fortunate than i honestly deserve.
i took a look back thru receipts last week, i had my
first deadbeat loss.

it was $500, on almost $4M in receipts. that is stupid good.
ask on here about losses... the point is, how much can
you afford to lose, and not end up over a steam vent?

any losses come right out of that six months prudent reserve.

good luck, and have fun. remember, the devil isn't in the
details, the profit is.
 
electrofelon said:
What exactly do you mean "have to have 10k"? One just has to show they have 10k then ur good? or it goes into escrow as a bond? WA requires a bond, but you can either put in a dedicated account signed over to the state, or you can hire a bond company for $100.
Click to expand...

Requirements below from Department of Professional Regulation website. Note no bond requirement.


Application Requirements:

  • EDUCATION/EXPERIENCE: The required experience must include at least 40% of work that is in 3-phase services. You must demonstrate you meet one of the experience requirements set forth in the instruction pages of the application.
  • EXAMINATION: You must have passed both parts of the State of Florida Electrical Contractors exam and your scores can not be more than 2 years old on the date of application.
  • PERSONAL FINANCIAL/CREDIT: You must provide a personal credit report and a personal financial statement demonstrating a positive net worth.
  • BUSINESS FINANCIAL/CREDIT: You must provide a Business Credit Report and Business Financial Statement showing a net worth of at least $10,000.
  • FEE: Pay the required fee as provided in the application. Make check payable to the Department of Business and Professional Regulation. Military veterans, their spouses and Florida National Guard members may be eligible for a fee waiver, fee reimbursement, and/or fee discount. Please visit our DBPR Military Services page for more information.
  • APPLICATION: Complete the application by clicking on the "Printable Application" link at the bottom of the page.
 
Coppersmith said:
Here's an expense to avoid: advertising. Most of it is a waste. Don't wrap your vehicle, nobody notices. Don't do newspaper ads or any other print. Print up business cards and join a BNI group (google it). You want your business to run on word of mouth advertising only.
Click to expand...

I wouldn't agree entirely; it depends on what type of business you have.

We used to maintain a pretty booming residential service division; we shifted focus and purposely dialed it back.

But we had a couple of wrapped vans and a wrapped truck, and a lot of calls came in from the visibility. Mention the company name to anyone, and they'd say, "yeh I've seen your van." So it can work. Take those vehicles into a subdivision and everyone sees it parked outside. We also had door hangers made that we would leave on the doors of neighboring houses with coupons; it worked.

What I think was a waste was newspaper ads and yellow pages. I did a billboard once also; waste of money.

New customers come in now through word of mouth or internet searches. Make yourself a really decent looking webpage and get it in the search engines. I've checked out websites of local competitors and they look horrible. I made ours myself on Wix and it's really clean, really sharp, and gets the point across. Today's generation is completely online when it comes to looking for service professionals.

We also get ITB's on decent projects from GC's searching locally online for a contractor to bid. I do the same thing when I'm looking for subs in other towns to bid projects with me.


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