Starting Your Career as a Contractor

How to Build and Run a Construction Business

Claudiu Fatu

• Publisher: Allworth
• Year: 2015
• Print ISBN: 9781621534587
• eBook ISBN: 9781621534709
• Topic: Personal Development
• Subtopic: Leadership

This incisive, practical guide provides a thorough breakdown of the ins and outs everyone needs to know when turning contracting skills into a business. From summoning the motivation to start your own business to the intricacies of being your own boss, Claudiu Fatu artfully turns his personal experiences and those of other successful contractors into advice on every aspect of building a business. The chapters focus on: Developing a business structure, including bank accounts, tax registration, insurance, and branding
Handling legal and accounting hurdles
Managing employees and dealing with clients
Using marketing systems to find and book work
Estimating and bidding on jobs
Writing contracts
Creating invoices and a billing system
Controlling costs, keeping records, and understanding profit margin
Planning retirement and other benefits for the self-employedBy teaching contractors to anticipate problems that can arise when dealing with clients, and to build a business plan that can support a contractor's talents in the best way possible, Starting Your Career as a Contractor is the ultimate manual to getting the job done right!Allworth Press, an imprint of Skyhorse Publishing, publishes a broad range of books on the visual and performing arts, with emphasis on the business of art. Our titles cover subjects such as graphic design, theater, branding, fine art, photography, interior design, writing, acting, film, how to start careers, business and legal forms, business practices, and more. While we don't aspire to publish a New York Times bestseller or a national bestseller, we are deeply committed to quality books that help creative professionals succeed and thrive. We often publish in areas overlooked by other publishers and welcome the author whose expertise can help our audience of readers.

Chapter 1

The Right Mindset

Why join the Navy if you can be a pirate?

—Steve Jobs

Modern society has set itself up for an unsettling scenario. We no longer live our lives. We work our lives. We spend most of our time working rather than living our lives. As much as anyone loves what he/she does for work, it still is work. Who would not trade work hours for time spent with loved ones, or time enjoying a hobby, or personal time away from the thought of work, or maybe just some extra sleep? Unfortunately, we are stuck. We spend more time with our coworkers than we do with our families. More than half of us working people wake up every morning cringing at the thought of having to go to work. Furthermore, when you have to answer to someone else, work gets even more depressing. Most of us have thought about the freedom owning your own business brings. The thought of setting your own hours and making your own decisions, while making money for yourself and not enriching someone else, is very appealing. But freedom comes with great responsibility and getting there means walking on shaky grounds. It all sounds like a dream too far from reality for most of us to achieve. The potential is, however, here for us all. I can think of no better place where entrepreneurs have achieved greatness than here in the United States, where the playing field is leveled for us all. And when it comes to construction, if you are handy and have some business sense, I can think of no other area that is more encouraging for starting your own enterprise.

Before you go off to pick a name for your newly minted business and start building skyscrapers, I would consider a few things:

• What do you really want to do in life? What makes you happy?

• Can you handle the stress of running your own business?

• Are you cut out for construction?

When the dust settles and you wake up one morning years down the road, are you excited to go to work? Planning is essential to success in life and in business. So before you jump headfirst into something new, you should consider all the alternatives and evaluate all prospects. While life is highly unpredictable, you should realize that you will encounter many challenges. This is also part of the planning. Plan for the unexpected.

You may just be starting your career and are new to the workforce. You may be changing your career by choice or because economic factors have forced you out of your current occupation. Or maybe you have been working in the construction field for some time and decided to go off on your own. Regardless of the motivation behind wanting to start your own construction business, you should know what you are getting yourself into. But most importantly, you should ask yourself if this is really what you want to do and what you wish to be doing five, ten, twenty years down the road. We grow up being molded by our environment. We look up to people we admire, while wishing to be in their shoes. Often, we follow the dreams that have been projected on to us by our parents and the society we live in. I know that you are probably excited at the prospect of starting your own construction business and you were not expecting any contrary advice in this book. Everyone’s priority in this short life should be to find happiness on all levels. Success in your career comes not just from the financial freedom you may gain, but also from the work enjoyment factor that is not so easily quantified. Your overall quality of life will be altered dramatically by your career choices. With all of that being said, we are a product of our experiences. Good or bad, we should learn from life’s challenges and grow on a personal level. If you ever find yourself trapped in a not-so-desirable scenario, all you have to do is move on. Life is full of choices and we are responsible for making the ones that best suit us. Make sure to do some soul searching and figure out what exactly you wish to be doing, and not what you should be doing. Before you start setting goals for your future and start working toward them, it is imperative that you understand what you want out of life. If you just go with the flow, you may just end up in a place you never intended.

Only 10 percent of newly founded construction companies survive after their first couple of years. That’s not to say that 90 percent of new contractors go bankrupt. Some of them realize that running their own business is simply not for them. Many find the challenges, long hours, and stress to not pay off. The small profits incurred in the beginning of a new business make choosing a steadier career a better choice for some. Regardless of the statistics, running your own business, successful or not, is a worthy experience. It will teach you things about others and about yourself. You will learn invaluable lessons about society and the business world. Taking on such a challenge can only enhance your abilities to do even better at your next endeavor.

In 2012, Construction and Remodeling Services had 1.5 million inquiries with the Better Business Bureau, ranking at number eight for most complaints in any industry. (There are thousands of industries listed with the BBB.) If we add all the other construction specific services and businesses, we can see inquiries in the tens of millions for one year alone. These statistics not only show that there are a lot of players in our industry not equipped for the job, but also that construction is a tough market with a hard-to-please audience. In light of this fact, there is that much room for growth for the new contractor who is skilled and meticulous, and has a passion for seeing a job done right.

There is a great old saying: We are not here for a long time, but for a good time. In a nutshell, this summarizes all of the above. Always remind yourself what you are here for.

THE APPEAL

Here are many of the positive aspects of owning your own contracting business:

We all dream of being independent. After all, it is a value our country is built on. Being financially free is liberating. Running your own business has the sound of a success story and the fulfillment of The American Dream. More than half a billion new businesses are founded each year. Being your own boss is empowering, but remember that it comes with great responsibility. Working for oneself is a common ambition among contractors. Entrepreneurs who run their own construction businesses like the challenge of solving problems, and they like being in control and making their own decisions. Being in the driver’s seat saves business owners from having to work for and answer to someone else. Even though you will not be going on any formal job interviews, you will still need to sell yourself and your services everyday.

By being your own boss, you create your own work–life balance. Running a business brings you the opportunity to work as little or as much as you want. You can work from and where you want to. You can live where you chose to, not where your job dictates. There is plenty of construction work available across the country. You may even have the time or the ability to incorporate some of your other hobbies into your work schedule. Some of the guys on my crew even bring their kids to work at times if the work and site are at a safe enough stage. I see no reason why you couldn’t hang out with friends, family, or even your dog while you do your office work or put finishing touches on a project. Sometimes sharing your achievements with others brings even more personal fulfillment and pride. And let us not forget the fun-filled days of playing with the toughest and biggest power tools around. Big toys for big kids keep us young forever.

You make your own choices about the direction you want for your business and for your life. You also generally get to choose the people you want to work for and the folks you want to work with. Even though it may take quite a few trials, you ultimately can create your own dream team, and take on projects that stimulate your creativity and simplify your life. You can surround yourself with people who move you forward and fire those who set you back.

Owning your own construction business gives you a platform to meet many new people from a variety of backgrounds. If you are a social person, you will make a ton of new friends. Even if you are not a people person, you will be able to make some lasting connections and at least have acquaintances in many fields. You will be working with and involving many people in your community. Inevitably, you will eventually be a connecting link to individuals and businesses, from the businesses you buy supplies from to the subcontractors you employ, to the workers you hire and the clients you service. This also makes you a valuable member of your community. You can be as involved as you would like and eventually you will have the opportunity to give something back to society.

Business ownership can be very profitable on a material level and on a personal level. There is very good money to be made from renovations if you apply sound business rules and have good judgment. A home or a commercial space is built once and renovated many, many times in its lifetime. There is much more business in remodeling than there is in new construction. You can charge a very nice premium for quality work and your risk is much lower. It is also extremely rewarding to be the business owner. You will get the satisfaction of solving many problems. You will see progress in the work you have directed others to do, and you will see your projects come to completion. There is so much personal pride when you walk into a place you renovated. Years down the road you see the beautiful job that made someone happy for all this time, and you can say, “I did that!”

Also, the remodeling business is much easier to get into than new construction. The amount of time and financial investment required for building something new is extremely high. In renovations, all you need are a few tools and good work ethic. The job is sold before you even start, and generally you take a deposit up front to cover your initial expenses. If something goes wrong, you won’t blow up your entire business model and go bankrupt. You just move on to the next job and the next opportunity to make money.

As with two of my previous careers, I can say that in construction there is never a boring day. (I used to be in the military and also used to work on a trading floor for a financial firm. I see many similarities between going to war, being on a trading floor, and running a contracting business.) Construction work is always challenging and ever changing. No two projects will ever be the same. This can be exciting but also very stressful for the faint-of-heart. If you are the adventurous type, then you will find yourself right at home. At the end of the day, we just have to laugh at all the crises that arise on a daily basis.

To reiterate the point I started the book with, owning your own business lets you pursue your passion. You will spend most of your time at work, so why not make it exciting. Work should be fun for you, and you should enjoy yourself. As a contractor, you should love what you do and take pride in your work. If successful, you will have done it all on your own. You started from scratch, and through your own abilities and leadership, you were able to make your business shine. There is no greater satisfaction than knowing that you are living the life you’ve always wanted, and through your own efforts you have made it all happen.

ROADBLOCKS

For all the positives you read above, there are negative aspects that come with being your own boss as a contractor. Here are a few to watch out for:

Being your own boss comes with many risks. If having a set schedule at a steady job that earns you an income you can anticipate is of importance to you, then you should probably not venture off into starting your own business. Working for yourself means that you make your own money and are responsible for finding and securing your own jobs. There is no one there to hold your hand and tell you how you need to go about your work. There is no one to hold you accountable for missing the mark. Other than, of course, your clients, you must hold yourself accountable for missing deadlines, missing cost estimates, and just missing out on work. On the bright side, if you look around in today’s job market, there is no such thing as job security anywhere anymore. The quite frequent economic downturns have left many of us without jobs over and over. So maybe next time unemployment spikes over 10 percent and all your friends are out looking for a career change, you might just be able to hand them a hammer and put them to work.

In the beginning of your new construction business you will face long hours and little pay. You will have to make many personal sacrifices. Most of your relationships will be tested, whether friends or loved ones. You will find yourself up early before your crew starts work, taking deliveries or picking up materials for the day ahead. You will be the last to leave the job site as you set everything up for the next day. You will be running to other potential jobs for estimates after the workday ends. You will be at home late in the evening preparing tools and making plans for the next day. And you will spend your weekends writing proposals, sending out bids, doing payroll and taxes, and filing a lot of other paperwork. Your business will be your life. However, it is yours and only yours and there is no one else who will profit from your efforts but you.

I mentioned earlier that remodeling work can be quite profitable. I also have to remind you that it can also be quite unprofitable if the business is not run properly. If you are disorganized and you let your cost get out of control, you will quickly be out of business. Low bid estimates are also something to watch for. Getting your foot in the door is important, but making a living is more important. So please always consider if a job is worth taking on for the budget that’s available. In the finance world, traders used to say that sometimes your best trade is the trade you never put on. So not having a job is sometimes better than doing a job that costs you money.

You will undoubtedly have to deal with difficult people. You are getting yourself into a service industry and pleasing your clients is your number one priority. Ultimately, they are the ones writing you a check. As you probably already know, there are many types of people with a wide range of personalities. You will encounter your fair share of characters, to say the least. Sometimes you will be able to spot problem clients ahead of time, and you will save yourself the hassle by not taking on that job. Other times, fires get fueled long after you’ve started and you must mediate situations before you get paid. More people problems will arise even from within your company. You will have to deal with employees who do not show up for work when you need them, are late for work at a critical time, or get confrontational at the wrong moment. And be ready for the subcontractor who cannot get along with your client or your crew and the work goes nowhere. In this field, interpersonal skills are important, and you will get some firsthand experiences in dealing with people.

On the same topic, there will be times when some of the work will get messed up. Something needs to be done a certain way, and when you check the job at the end of the day, it is not up to standard. Your own workers and subcontractors make mistakes or just forget what they were told. It is your responsibility to fix the problem or redo the work. Unfortunately it is also at your cost. This will happen and you should plan for it.

I say the following with deep regret. The government makes it very tough for small businesses. I love our country and believe this place still is the land of opportunities. However, our government makes it really tough for us small entrepreneurs to make good money in the beginning. As you will learn soon, there are way too many taxes and filing requirements by federal, state, and local governments. There are also strict rules about insurance, bonds, worker’s comp, and disability benefits that business owners must adhere by. All of these cost us thousands of dollars up front, before we even get to see a paycheck. And after we do get some cash flow, somehow most of it evaporates into thin air at the end of each month and each quarter. You will learn to prioritize things and set money aside for required business filings. But just as a warning, be prepared to be shocked on how much of your hard earned money has to go away to entities that do not seem to be supporting your business but just profiting from it. On top of money flushed down the drain, the amount of paperwork required of small businesses is overwhelming. From payroll filings to sales tax filings, to federal and state tax filings, to unemployment insurance, to loads of other seemingly worthless bureaucratic waste of trees, you are in for a treat. Of course, you have the option to hire an accountant, but you wouldn’t quite understand your business entirely. I prepare all of my own paperwork and have been quite successful at it. In this modern age of the Internet where all the information is readily available for research, if someone else could learn to do something, then why couldn’t I?

To link the above together, you should be aware that in the initial stages of your new business, you will need to do everything or at least understand all aspects of your business. If you do not have a solid understanding of the pieces that comprise your construction company, then you are not in control. The empire collapses under a ruler who loses control. You will of course have to understand how to frame a wall and how to tile a backsplash. Basic construction skills are a must, and even if you do not perform most of the daily duties, you should understand how they are done. When watching your guys install a sink, or a subcontractor pour concrete to level a floor, you have to know if what they are doing is right. If you do not, then you may get a call back for a leaking sink and a cracked subfloor. Generally, especially in the beginning, the contractors work hand in hand with their crews to see the job done. You will be a day laborer during the workday, a sales person at lunch, a financier and lawyer in the afternoon, and an accountant on the weekends. You must be comfortable wearing all these hats or have trust in others to have your best interest. You still own all the parts of your business so you must still understand how they all fit together. I personally see no other person out there that has the best interest of my company but me. So I choose to have a closet full of hats for different occasions.

I must not omit one very important drawback of owning your own business: The job comes with no benefits; you must make your own. No one will offer you and your family medical benefits. You will not be given paid vacations. There is no such thing as a retirement plan. All of the above must be thoroughly planned by you. You do, however, have some options, and you should always plan ahead. Your income will also vary widely depending on how busy you are and the type of jobs you take on. So you must balance your fruitful business times with the sedentary workdays.

I do not live in fear. I have a strong belief in making my own destiny and hav...

Table of contents

• Cover
• Title Page
• Copyright
• Table of Contents
• Introduction
• Chapter 1. The Right Mindset
• Chapter 2. Setting Up Your New Business
• Chapter 3. Where Do I Start?
• Chapter 4. Getting the Job Done
• Chapter 5. Being the Boss
• Chapter 6. The Client
• Chapter 7. Contracts
• Chapter 8. Bidding
• Chapter 9. Bookkeeping
• Chapter 10. Benefits Planning
• Chapter 11. Good Luck!
• Index