Things you wish you would have known.

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Brandon B

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electrician.
Guys I am a third year journeyman down in New Orleans, LA. mostly industrial and commercial experience. Looking into starting up my own shop, I would like to keep it a small operation. I was wondering if you guys could let me know some of things you wish you would have known before or during your one start up. Things that may have caught you off guard or a mistake you learned from. I appreciate any input
 
Not a surprise to me as I had been warned, but you need to have either a spouse with a good income or have savings enough to cover your cost of living for about a year as times can get lean when first starting out.
I will add to not get frustrated when the phone doesn't ring much at first. It takes time to get your name out.
 
1. Form an LLC and have an accountant who knows how to use it. If you are paying over a grand or two in taxes per year, either you are doing incredibly well, or you dont have the right accountant.

2. Charge more.

3. If your state DMV is a PIA, register your LLC in montana and register your vehicles there.

4. Endeavor to keep learning and keep improving.
 
electrofelon said:
1. Form an LLC and have an accountant who knows how to use it. If you are paying over a grand or two in taxes per year, either you are doing incredibly well, or you dont have the right accountant.
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Huh???
If you are only claiming enough income to pay 1-2K$ in federal taxes per year you are either cheating or not doing too good.
$10K a year is roughly $1K in taxes. $20K is roughly $2K in taxes. This does not include self employment taxes.

I have know quite a few people that have been audited after their great tax person was able to find all kinds of deductions. The audits costed them 6 figures in back taxes and penalties.

If you get flagged by the IRS they will look at how you live and what you own. Even if they can not find the income they will base you taxes on what they feel if would cost to live the way you are.

LLC or Corp still have to pay taxes. The taxes are either going to be paid on the business income or personal income if you pull most income out.
 
Be frugal but don't be cheap; sometimes you just need to spend some $$ to get the right thing (tool, advice, materials, etc).

Be an expert electrician. Let other people to be experts in their fields- hire/retain a CPA* to look after the finances, a lawyer to look after the legal stuff, a good insurance agent to advise you about that, etc.

*you don't need them to do the bookkeeping, only to check things; get something like quickbooks and hire a contractor to set it up, it's actually pretty easy to use then.

As for an organizational setup, S corp, C corp, LLC, etc- ask the lawyer :D.

Oh, and build the cost of all that into your overhead and charge for it.
 
It's tough to do a "break even analysis" in our trade but you should try to do that before you take a dive into a new business. Think about what you need (in terms of $$) in order to stay alive and work from that point. There are going to be a lot of unexpected costs associated with opening a business like legal and accounting fees, licensing fees, a vehicle, insurance, etc. One of the most important things is health insurance. If you have a spouse that has a job and coverage (like Little Bill suggested) and you can be included under her plan that is a big plus. If not, that alone can cripple you.

Passing an inspection every time like LarryFine suggested is a worthwhile goal to aim for but may not be practical. I would suggest that you go out there and do the best, Code compliant job you possibly can but don't get hung up on spinning your wheel thinking about what the EI may fail you for. Think about Safety first and Code compliance next. Both are important and both are required but safety comes first IMHO.

Good luck !!!
 
curt swartz said:
Huh???
If you are only claiming enough income to pay 1-2K$ in federal taxes per year you are either cheating or not doing too good.
$10K a year is roughly $1K in taxes. $20K is roughly $2K in taxes. This does not include self employment taxes.

I have know quite a few people that have been audited after their great tax person was able to find all kinds of deductions. The audits costed them 6 figures in back taxes and penalties.

If you get flagged by the IRS they will look at how you live and what you own. Even if they can not find the income they will base you taxes on what they feel if would cost to live the way you are.

LLC or Corp still have to pay taxes. The taxes are either going to be paid on the business income or personal income if you pull most income out.
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Curt, looks like you are in the "do not have the right accountant" category ;). I dont want to derail the thread arguing about it, but its much more complicated than a simple percentage. Those tax bracket percentages are kinda meaningless. Structuring your income so that much of your income is "reimbursement" for your tools etc is one thing they should be doing. IRS only wants to see a small amount of salary and the rest can be reimbursements (My guy knows the figure, its small like 5k maybe, he told me years ago but I dont remember). That gets you out of most of the self employment tax.
 
LarryFine said:
Don't be in a hurry to hire a crew. Just you and a helper to start.
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That’s the game plan. I’ve taken a few guys under my wing at the company I work for now. Hopefully I can get one of those guys to help me out. I don’t expect to keep any person working for me forever, but what do you think is the best way to keep someone wanting to work for you?
 
LarryFine said:
Another tip: gain the reputation of passing every inspection every time.

Remember that you and the inspector (should) have a common goal.
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That is always the goal and that’s what I will strive for I just know that I have a few mistakes left to make that I will learn from. I’m only 25
 
figure out what it will cost just to run the business, figure out other job expenses, and figure out what profit you want to make. Then charge enough to cover all of it.
Dont charge the same hourly rate your getting paid as an employee. Ive seen lots of guys go out on their own, and charge couple dollars more than they are making now, and think theyve won the jackpot
 
I ran my own business back in the mid 80s-92. When we hit the recession in 91-92 I got out of it...no work. I made a few mistakes and basically did 90% of my work for 2 mechanical contractors and 1 home builder and they were good to me. But, I wasn't deversified enough and had too few customers even though the few I had kept us busy (2 man operation) when the recession hit they had no work so I didn't either.

I got out of it and didn't stick anyone paid off all my bills and came out of it with a few $ so I am proud of that at least.

When work is slow the overhead continues, still have to pay the insurance and workers comp. etc etc. I was incorporated "C" corp

I think the three most important thing is:

1. Somebody you can trust to do the books (I did my own and that helped me get burnt out)
2. Charge enough. Wen I started my accountant told me I should charge 3x what I want to get paid......thought he was nuts...he was probably right.
3. Get you invoices out every day. If you don't no money comes in :) :cry::):cry:
 
best thread ever!
I had to write a check to irs once for $46k- ouch!

"too busy working to run a business"
 
Right on all three of those, especially charging enough, both for time and for materials. Time- you want to be paid, but then the feds and state -also- want money from the payroll (company contribution), etc etc etc. It mounts up and unless you're getting 8+ billable hours a day, the money's gotta come from somewhere. Same for material markup....

Oh, and try not to extend more credit than you mind losing. (I encourage you to search the contracting/business forum for a lot more thoughts about running a business.)
 
Charge enough.
You want what everyone else wants...
Good salary for hard work.
Also charge enough to cover insurance for you and your family.
also charge enough to fill an IRA. Max it out every year if possible.
Also charge enough to have a savings account
you don’t want to pull wire forever.
 
My old boss used to say, out of an 8 hour day you usually only get 6 hours of actual work out of most workers, coffee, bathroom, chit chat etc. Probably not far from being right
 
The number one most important thing is to charge enough as has been mentioned above. The number one wrong way to figure out how much to charge is to see what everybody else is charging. Do you know how THEY figured out what to charge? Most likely it was either: they looked to see what others were charging; or a wild ass guess. I suggest you read this book available on Amazon: "How Much Should I Charge?" by Ellen Rohr. It's a fast read and has extremely valuable information in it.

Secondly, as a small shop you will most likely be doing residential repair work. It's the easiest to get and pays well. If you have never done residential repair before, find a mentor who has. It's a very different kind of electrical work than commercial or industrial. Stay away from new residential construction. It pays very poorly. Remodeling and additions are OK.
 
Lots of people so far, including me, have said charge enough/charge more/etc. I would just like to talk a little more about this. This is really a tough one. I have paid off all my debts, own my house, have 100k savings/retirement, built up a pretty good client base, so I am quite secure and its easy for me to say "charge more". I must say I TOTALLY REMEMBER having a mortgage (had to borrow money form mom for that a few times), being nervous when I only had a week or so of work booked, being worried about charging too much and not getting the job and its potential contacts and referrals, never knowing when a slowdown was coming, having all my hopes and dreams hinge on getting that next job. It can be really tough and scary to "charge more" . I know hindsight is 20/20, but if I could go back I think I definitely could have charged more.
 
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