Hey all , my wife and I are in the process of opening our own excavation business . I have 7 years experience with oil field , heavy civil and residential excavations and would only target the residential market with our own thing . We have access to fill and gravel in place , my own skills would cover the residential market and I'm able to haul my own gear . We can borrow up to 225,000 but might be able to get started with 200,000 for a pit excavator , tandem truck and possible pup trailer , on site excavator ( 16 ton range) , 25 ton float , company truck , packer and various odds and ends . Our payments through the lender would be upwards of 2400 a month for 10 years and our projected profits looks ok seeing you don't have a major breakdown . My ultimate question is for the business owners out there that started with nothing is it worth the extra stress and financial risk going on your own vs working for someone else . A guy gets tired of earning someone else's assets and equity when I could work toward my own retirement in a sense . Our economy is good here and could handle another contractor . Thanks for the reply's and advise in advance .
Aaa, it's great being your own boss, working to everyone else's schedule. First in last out. Last one paid and you only have to answer too your clients, banker, several layers of government. If it's what you want, go for it but if you want security and days off.....
When you put it that way it doesn’t sound overly great lol , also what you said isn’t untrue but there is two sides to every coin too
When I went on my own I used my own capital to start and also had a good friend who needed me to work at his place a fair bit. As the business took off he was able to find other help and I just grew organically with what I could afford. But I run a service business, not an excavation one, so I know the capital costs are different.
Sure my dad ran his own electrical business for 30 years , I get a lot of info from him but he doesn’t understand excavation too much . Capital cost and start up costs are much higher but our hourly wages covers all that and then some figuring I can haul 15 loads of dirt a week and bill out 20 hours machine time for 6 months of the calinder year we should be good . At those numbers our profits come out to be 29 thousand and change after the expenses are paid for plus figuring 10,000 in repair .
Yes there are two sides to every coin. I could go on and on about the good and the bad. I went on my own about 10 years ago doing mainly farm type work. I started by renting a dozer for about 6 months before I bought my first one. Since then I have bought, sold and traded a few machines. I currently have 2 medium size dozers, a 20 ton excavator, a 14 yd scraper, support equipment and VERY LITTLE DEBT. The latter being the most important to me anyway. Don't get me wrong, I'm not against borrowing money but I am fairly confident that if I would have borrowed $200,000 on day one 10 yrs ago that I wouldn't be sitting here writing these exact words right now. That being said, it could very well work for you for the type of work you are after in your neck of the woods but it wouldn't have worked for me here. Just my $.02
This is one thing I’ve pondered quite a bit is renting the on site excavator , here the closest ( and only) rental place is cat and a 316 is almost 9000 a month , so .... a 16 ton machine goes for 150 a hr here so you punch that into my realistic billable hours (20 a week x4 weeks = 12,000) so by the time I pay insurance and fuel im left with nothing
maybe the rental rate or billable rates are different in your area that makes it make sense but am I missing something to my above comment about renting , sure I'm not on the hook for repair and such but it just seems I'm working for the rental company ?
One thing I like to say is if the business model is that cheap that renting a machine would not still turn a reasonable profit, then it is probably too cheap and you need to raise your rates or beg out of it. Around here even when the bigs, who have their own large fleets, get a rock bottom bid project for a road or something, half the equipment that shows up is rented from the same place as you would rent it from. In broader looking at the business plan from post #1, I see a 10 year assumption in there. If the broad economy turns south again, or "the plant" closes down and everybody moves away, what would happen then? No guarantee of work in 10 years or even 1 year.
All valid points , I actually work for one of 3 competitors in my area ( small town) and I know their rates also I went out and got quotes on a bogus job to find out the others prices so the 160 excavator rate matched the competition and my dirt sales also match so I feel I can’t charge anymore . The majority of our work here is hourly offset by the odd bid job ( demo or new home ) so being mostly hourly may be different than the bigger guys bidding I don’t know . The 10 year deal I feel leaves me room for the company to make a little and in the event I have a major break down ( going to happen ) I can cover it . The loan comes with the option to pay more if I can ( witch I would if I could ) but the economy here is a one horse ride and could **** the bed at any time ( scary part) .
I chose to rent initially mainly because I wasn't sure how much work I was going to get just starting out and it allowed me to set some money aside for when I did decide to pull the trigger and buy a machine. Since then I have rented a hand full of times when I needed something for a certain job. That being said, from my experience 20 hrs a week on a rented machine doesn't pencil out very well
The 15 loads and 20 hours are only myself operating and driving until things become more established, I generally bill out at least 35 hours ( sometimes 40 depending on the job out of a 50 hour week ,we do our own labour work and pit work) , at 30 billable hours it would make sense but then I’d need a truck driver and starting out not knowing how much work I’ll have I feel would be a mistake hiring someone in the beginning .... long story short I’m conflicted lol , I totally understand what your saying but I think my point of view also makes sense
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If things looked good for year two I hire a truck driver you could likely bill out 30 hours of machine time instead of 20 and 30 loads of dirt instead of 15 upping your gross income by 36,000 for the excavator and doubleing your gross for the truck by 64800 . Extra fuel , employee wage , matching ei , wear and tear you could surly afford to make extra payments on the 10 year loan maybe paying it off in 5 and still keeping some company money for breakdowns and such
Nice , thanks a lot . Some good points in there .
Starting from scratch a 200,000 loan might as well be $2,000,000. It'll sink you for sure. Get down to brass tacks and hire out trucking etc. Around here you can hire out the trucking as cheap, sometimes cheaper, than you can own and operate yourself. Buy what gives you an edge and MAKES you money not what keeps you busy. Doing business without making profit is like eating soup with a fork. You stay busy but you also stay hungry. Find a niche. Don't do what everybody else is doing. If bids are towards the lower end of profitable why even bother. Don't go borrow $200,000 to buy yourself a job. I wrestle with going back to my own thing all the time. In the 25 or so years I've worked I have done my own thing dang near 20 of them. No debt. No debt. No debt. Barter, rent, work deals, get creative. It's ok to start with older stuff. In reality I know it's virtually impossible to start without debt. However, if you start with the mindset of avoiding debt and REALLY analyzing each potential purchase for profit soon you will be able to determine what's worth owning, renting or avoiding all together. You're in business for one reason and one reason only. To MAKE money. Profit. Not break even. It will take time yes. The longer you run lean and mean the better off you'll be in the long run.
Funny I have heard that very same line from my father “ so you’re going to borrow 200,000 for a job “ and .... in a lot of ways you and him aren’t wrong but that job could potentially turn into much more ( or a failure) . Hiring out trucks here isn’t a option cause the only trucks in the area would be my direct completion . I’ve fathomed the idea about a mini just doing small jobs but everyone has a mini and a lot of homeowners have the small kabota tractors here besides your just too limited with a mini in the heavily rocky ground here . I honestly thought 200 k is quite cheap to buy into dirt work considering a new 20 ton machine is that much if not more .
As far as an excavating business goes you're right it's not much but it's a helluva lot to service debt wise as a new venture. Just because you start small in one niche doesn't mean you stay there. I have several friends doing what you're contemplating. They work together all the time. Surely there are guys that are willing to hire out trucks to help. Around here we have quite a few independent dump truck guys plus the guys that haul out of the quarry for set tonnage rates. Based on my experience I would not borrow more than I can pay back in 48 months. If that's $50,000 then start there. Make yourself really look at which piece of iron will make you the most $$. Maybe it's a truck to haul for the current guys. Work your *** off and get it paid for. Then look at your next piece. An 8 ton excavator would do real well around here for residential work, repairs for water district etc. Maybe there's a piece that will do the same there. Get it bought and repeat the same busting your *** to get it paid for. Repeat that cycle a few times and before you know it you've got 4-5 pieces of iron paid for and no debt. I betcha a steak dinner it's done in less than 10 years and it's considerably less stressful than jumping out into $200k worth of debt. Just because you own a certain piece doesn't mean you have to keep it forever. If it pays it's way then keep it. If there's a piece you get that ends up subsidized by the other iron then it needs to go. Be smart about what you buy. Will it make you money and how hard will it be to get rid of should the need arise. It's good to have a plan, a dream so to speak, but don't be in a rush to get there. 10 years of smart decisions isn't very long in the grand scheme of things. I betcha a second steak dinner one or two of the guys currently doing what you want to do won't be around in 10 years.....
Funny because the 8 ton machine I’ve really looked hard at , getting a dually and a trailer to haul it and start from there . But the problem arises if you need dirt ( witch you will ) my competition here isn’t going to take away from there own work to help me ( they have the only dirt haulers within 100’s of km’s . So you go by a truck and you’re still limited to smaller jobs with 2/3 of the debt I’d have buying a 160 and be able to tackle most every job in my area . Don’t get me wrong I’m not trying to argue with you at all and the things you say I don’t disagree with , either way I don’t think is wrong nor is there any easy answer .
In your OP you said that you "have access to fill and gravel in place". Does that mean you already own the ground or that it is accessible in your area to purchase?
Yes to buy it by the yard or truck load , fill is 15 bucks a tandem truck load and gravel is 1.50 a yard .
Also crushed bed rock 3/4 “ minus and 2 “ minus plus 1 1/8 “ stone for more fancy work , 3/4 and 2” is just under 12 bucks a ton
I wish gravel was that cheap in my neck of the woods. You mentioned a pit excavator a few times which I assumed you owned the ground.
I wish I did own some land with gravel on it , it’s quite a long haul at times but it’s only generally found in one area here and a lot of that is gone , bought up or not worth building a road to get it sadly
i work with my competition all the time it does work and it keeps me from having to own dump trucks and deal with truck drivers. in my area i cant put a truck on the road at cost for what i can hire one for and its one less headache it may be different there. you have listed a lot of iron for one guy to run especially starting out. if people are slow to pay ( expect it ) it gets ugly quick. those payments on a loan start immediately not to mention overhead you may not get a check from your first job till 2 months after the day you completed it (sometimes more or never). most new outfits struggle with cash flow now add debt that is at or close to your annual gross revenue the cash flow struggle becomes a domino effect every time you need to replace or add equipment you have to borrow for it. you can never get ahead a lot of guys start like this in times like now you can trip over work and make money but get a slow month or 2 when your revenue is down 25 percent or more a lot of guys go out as fast as they started. think small start small and work into your dreams cause everybody thats been in business through more than one economy slow down will tell you they didnt start out big.
Man, I LOVE to see this type of ambition. I LOVE this type of ambition even more with little to no debt. Your first mistake is assuming that there will be 10 years of steady work.......wrong. I'm not trying to discourage you, but you better be smart about this. Borrow as little as you possibly can and start off small. You can build a good reputation doing so, and let the bigger stuff come to you later. You wont be sorry.
As much as I hate to admit it probably starting small would be the best option , doing that comes with its own limitation and problems for me but be it those better than financial problems I get it . I’m still torn between the two options and with the cash flow issues ( borrowing 200 k) it’s easy to lay it out on paper and see how it could become a issue .
Some of the guys mentioned it, but I'm curious why you need a excavator for a pit that you don't own. If you need a excavator on each end, a truck in the middle, and its just you, I don't see that working. By me the quarries all load you. If you're borrowing 200k, you better have 100k of your own money/ assets/ equity to operate on. If you don't have that kind of money on your own, you're probably borrowing too much. Yes, you have to spend money to make $, but you have to be realistic also. If you only have 20,000, you don't have any business borrowing that kind of money. Sure, there's all kinds of people that do, but they really shouldn't. They're the ones that when times get tough, end up having to take a bankruptcy and start all over. Not that a bankruptcy is the end of the world either, its just something I'd rather not go through. You mentioned your "profits" at the end of the year, and how that depends on breakdowns. The equipment is going to breakdown, and when you least want it too. And they can all break down at the same time. Really. The site excavator can launch a rod through the side of the block, and you're going to have to spend 15k, right then, in order to keep working. And it could eat the hydraulic pumps the very next day. The same goes for the dump truck. And it probably won't happen at the end of the year when you have the profits from the year to work with, it could happen on day 2. Have you got 30k to fix it with? Want to go to the banker on day 2 and ask for the money? They will break when you can least afford to fix them, and /or when you need them the most to finish up a job. Then not only are you not billing money, but you're spending $. That goes back to the having a pretty big nest egg. Just another what if: You finish your first job, the second job you have all lined up, and now there's permit issues. Every week they tell you: "next monday, we're starting". They may be the big contractor that you really want to get in with and do their work, so you want to be there when they say, but that could go on for a month. Two months. That job may never happen. But even if you only miss the first month, that's a hole you have to climb back out of, and they aren't going to pay you for. I bring this up, because I've had it happen. Multiple times. I even bought a crane for a job that was supposed to be three years ago, and hasn't happened yet, but is "still in the works". That I had a "start date" for. Now I've gone and done a lot of other work with that equipment, but if it was the only job I had lined up, that could get ugly in a hurry. I don't know how familiar you are with the insurance requirements, or plates, registration, taxes,business permits, etc. But just be aware that it all costs way more than you think it will. Your dad has 30 years in running his own business, and isn't steering you wrong, listen to him. It doesn't matter a lot that it wasn't in the excavation game, its still a matter of managing expenses and assets and return on investment. Its a lot of $, no matter who you are, to step into another 200k of debt, a lot worse just starting out. If you want to try it, buy the site excavator, pay to have it hauled, and buy the dirt/gravel, delivered. If it doesn't work out, sell the excavator and go back to work for someone. If you can't afford to buy the first excavator, of the list of equipment you want, you don't have enough $. As far as the business owning and satisfaction thing. I think if you enjoy working, and what you do (whether that be dirt work, banking, plumbing, or greeting people at walmart) owning a business can be a good thing. If you're unhappy now, working for someone else, I generally think you won't be any happier working for yourself. You'll be just as unhappy, only with a lot more stress and pressures. Double those pressures if you and your wife are both quitting jobs and doing this "together". If she works now, don't let her quit until a year later, you'll need the income. If you think owning the business is the way to riches, you're probably doing it for the wrong reasons. I've actually never made as much money working for myself, as I have working for other people. That's the paycheck money, at the end of the year money, not counting what I've put back into the company. But you can't go out and spend money that you've invested in the business, on a trip to hawaii. I can say that I enjoy what I do, but if I lost it all tomorrow, or sold it all, I would be just as happy to go hop in a seat of a crane for someone else.
Very well said. Sometimes people start a good business and then for various reasons it doesn't work out. The problem is some people who have been self employed get too much of an ego or something(feel sorry for themselves or were wronged, etc.) and feel too proud or it is below them to work for someone else. They either want a management position or figure they should be getting paid more. Not a lot different than kids getting out of high school and figuring they should be getting $30/hr. right off the bat. When my dad got screwed by his former partner, all the customers knew my dad was the core of the business. The business had the market share by a big margin. It took a while (10-12 years?) but after a couple difficult years my dad went to work for the biggest competitor ( he stared his career with them). He increased sales 110% in the first year. It forced his former partner to sell the business and in a few years the business closed. My dad had the expertise but was more than happy to work for someone else and share his knowledge.
The quarry supply’s a loader for their crushed stuff but the fill and gravel is all privately owned . Everyone here has a pit loader or excavator and the truck drivers load them selfs . I certainly don’t have 100 k saved ( who does in the low middle class) but i do have assists I can borrow against but that doesn’t get me too far . As far as insurance we have a quote from my insurance company for 2 mill coverage , every piece insured and life insurance on the loan . Went to the dmv and got exact numbers on registering trucks and the permits I need so I have surely done my homework on that end of it meaning our numbers are on point except for the two major variables break downs and how much work comes in. This isn’t a angle for me to get rich no but you have to understand that the 3 competeters in my area are all small family owned so ... having said that those are a direct dead end job , I’m at where I will be for the rest of my working life ( I’m 34) . A young man with some ambition and drive doesn’t like dead end jobs . I’m not unhappy at my job they are actually good people but excavation is my career not just a job if you understand .
no one is telling you not to start a business but the term be careful what you wish for comes to mind. dreams are awesome but it doesnt take much for those dreams to become a nightmare. owning a business is like having a pet monster now you have it now you have to feed it or it will eat you. mix some debt in on top of low cash reserve and it will make you eager and desperate. when your desperate to stay afloat your eager to take jobs you shouldn't touch and remember doing the job is only part of it keeping the outfit going is another and getting paid is a whole thing unto itself one bad job the size you want to start out at will break you nothing flat in your first and probably second year and like crane op said i hope your wife has that income cause you will need it. i would say to float that much iron you better be grossing over 25000 a month and you need at least 60 days of full throttle operating money in the bank just to open your doors. even if you run your billing on net 30 it still will be like 45 days to get paid from the time you roll the cash out for the job expenses. so how you going to buy fuel let alone anything else you will need starting out. start small it will surprise you how you can grow healthy from that with minimal debt and if its anything like my outfit you may not end up not wanting to work for the customers you chased first cause you feel into better ones with a completely different niche you have come to a good place to ask questions most everybody here likes there job so much they come here and talk about it after work. and almost all the advice given is from people who have been in your shoes and had dreams of there own, the experience and advice they offer cannot be bought.
Had the delusion illusion for awhile myself. Saw trucking in and around my area as a tad bit high until priced equipment, maintenance(and I do most of my own) insurance, license, fees for bond for certain jobs, cannot perform government work as not registered correctly or able to short time line supply large volumes machines/workers as contractor but could sub contract which knocked rates in the head. Then considered small time pond building or light excavating, LOTS of foreseeable issues as to engineering, runoff control, time frames in and required out or done by. Working as a one man show did not allow much free time or spare convenience time as sick or injured where contracts can be called forfeit. Thought about general trucking, too many locally already having issues making loads, grain hauls same, then equipment and so on. I am still working for someone else.
I understand wanting to run your own business, but you may not be able to do it in your area, or maybe on the scale you want, or in the time frame you want. I'm just throwing out things that I've had happen to me, and to people I know, and you have to be realistic about the debt load. Look at your competitors. You say they are all small family owned operations. If you are going to go compete with them, but their debt load is nothing like yours, they make more $ every job, and that means you can't really compete. You may be the best operator in the world, but that isn't going to be what will sink you, the debt will. Use your age to your advantage. You have time, I understand wanting it all, but you have to live with what you can afford, and you really can't afford the debt, unless you have someone that is going to bail you out if you need $50,000 tomorrow. I've never had that other person. The banker is not going to be that person, and you don't want him to be. You may have family that could do it- but that's a whole different set of problems, and it doesn't mean much if its not your money. You have to be that "bailout" person yourself. It may mean you get rid of any car you own newer than 15 years (for sure no car/truck payments), and a nice house that has a house payment, and live in a small house, and drive junkers for the next five years, and eat peanut butter sandwiches, and save every nickel. Then in 5 years from now you can roll the dice and lay it all on the line, throwing in the saved money, equity in your house, and cash in all your pension/ ira/ 401k money, and pray it works - (and if it doesn't you don't burn your bridges), and with the 5 years of savings you might make it. And you might not make it, and have to be able to live with that. That's about my story. I was older than you are now, and I had saved for more than 5 years. I bought out a retiring guy who hadn't even had insurance in his last year, and bought the shop facility and the one crane he had left. The numbers were close to yours, only I was buying a shop facility and less equipment (banker was happier, real estate doesn't drop in value with use quite like equipment). I still have some debt from the shop. And there have been a lot of times where it was touch and go, and I had saved the nest egg/bailout money that I'm talking about, on a low middle class income (and my wife didn't work after we had our first, who just went to college this fall). My kids are all in high school/college now, and can remember only one family "vacation" that lasted more than a weekend. I don't think I've ever bought a car made in the same decade that I have owned it. We've got big holes in the vinyl floor of our kitchen, there's plywood showing through under my feet right now. Our appliances certainly don't match. I run some equipment made in the late 70's. Daily. And fix it ourselves. I don't want to say any of this to brag, or want you to think I've got it all figured out. It could all end tomorrow if one of my guys dumps a crane and someone is hurt, or they run into someone at a stoplight. I've been blessed to have some good guys work for me, and had some great customers, who I'd like to think would want me to come work for them again if they needed me. I just have been in your shoes, and had those numbers, and if you don't have $75,000 to get started with, you probably shouldn't borrow the $200,000. And $75,000 is what I would consider the minimum. If you only have $20,000, don't do it. You could lose the 20,000, the banker will sell the equipment at auction if you miss for 3 months straight, and send you a bill for the difference plus lawyer fees. You'd recover, but it would take a while. If you want to do it with the $20,000, buy a $20,000 excavator. Spend 10, borrow 10. Use the other 10,000 as operating capital. Get it hauled for you. Hire the trucking. Keep your wife working. If you can't make it with the $20,000 start up, you sure cant make it with $200,000.
The thing that has hurt me over the years are the things you have no control over. I was making great money and had plenty of work in my11th year of self employment then BAM!........9/11/2001. Everything died almost immediately. Jobs got cancelled or delayed indefinitely. Speculation was that things would be back to normal within 6 months........I struggled for 5+ years after that, and things were never the same. I went from having perfect credit and debt control.........to losing my home, vehicles, and my credit destroyed. I recovered without having to bankrupt but it was a long and painful road. I changed the way I did my business from lessons learned and did very well again then The end of 2013 BAM! Oil takes a record tumble and I watch companies I have worked for years start going under and I'm trying to keep them from taking me with them. I again struggled for years but was better prepared this time. I avoided debt, made sure I had 1 years income saved, and diversified your customer base even more. To this day I refuse to borrow money and will never have another banker own me. I guess the moral is......You can never be too prepared. Too many times things happen that you have no control over. You have done everything you are supposed to do.......and trust me, it's an awful feeling knowing there is nothing you can do, and you watch everything you ever worked for start to disappear before your eyes. I still have survived and am again busy.......still wondering when the next disaster may occur and hope I'm ready for it.
One more thought. When I started my business I was working for someone else in a good job. People knew my skill set and I had done a little on the side and were practically jumping up and down telling me to go into this business full time. That way I knew the market was open so I jumped in. There were no strong competitors and still aren't. I would not want to try to wedge myself into a new venture with good competitors already established. If they are hostile enough they won't haul for you or whatever, they could easily put a squeeze on you by lowering their rates until you are gone, or something like that.
No doubt about it, banksters will gleefully hand you all the rope you need to hang yourself.
You know .... oddly enough you sound similar to myself in some ways . So you did make it going to the bank but you had some cash flow of your own ... I will surly consider that as we have been doing a cash flow projection tonight and it’s easy to see what almost everyone is saying . Starting small (a mini ) in my area is tricky cause we don’t have infrastructure going up like others ( subdivisions and such you could do well just digging electrical trenches for example) im quite rural and the rocks here are retarded so you become out matched easily ( my current boss has a 6 ton mini and I run it a lot) . Renting equipment I feel the rental company makes the dividends ( as they’re in business to make money no different than anyone else and I’m sure they’ve done their homework to know what the market can stand for a rental rate) and you're left with a potential customer hopefully . I’m 34 with a wife and 3 year old , we out right own our home , basically zero personal debt but her car and my truck . My point to that is I almost always say if we can’t outright buy it we don’t need it right now BUT with business and heavy equipment your talking much higher stakes and figures , it would be very very difficult to save 75,000 dollars .
Trucks. Easy to own. Many owner-operators competing with each other for work (and, in the process, "buying" their jobs)). Almost none of them set aside money for equipment replacement for when the truck wears out and a newer truck is needed. Ergo, it's usually cheaper to hire trucking than to operate your own. And in thos steady, future economy in a smallish town (which has never occurred in my 70+ years), is there in your budget dollars to set aside for the reserves for replacement oh your equipment when it needs replacing, which the aforementioned truck owner-operators so seldom do? Before you act, I strongly encourage you to sit down with an accountant who is well--versed in your industry. God speed and good luck.
this is all great advice, I don't want sound negative but some things to think about. 1) my dads neighbor was logging and his foot slipped off of a wet track hit his blade on the way down and passed away 3 days latter from blood clot. or you get permanently disabled. dumps the whole mess on your wife and child. 2) when she gets tired of breaking even and leaves. 3) I bought a d5h xl did a few jobs and in the middle of a job lost the transmission 22,000.00 dollars latter it was fixed , the only thing that saved it I was working fulltime , and I could take small loan because I had a full time job.
I've made it this far. Who knows what tomorrow brings? According to the US labor figures, half of new business don't last 5 years. Only 30 percent make it to ten. Most business guys's story are kind of the same and always a little different. Especially guys that start with nothing. Very few are 20. Most are 30's and 40's. And it takes 20 years to "make" it. Maybe more. Second and third generation ownership- family business is a totally different category. My opinion on that was learned from my grandpa- First generation makes it, second generation maintains it (they saw how hard the first worked to get it) and the third generation looses it (they've grown up with money, always had it, always been given it, and it means nothing). That's some old Iowa farmer logic there, and its not true all the time, but its true a lot of the time. (if you're a third generation owner reading this and offended, you had great parents and are the exception- and I'm perfectly willing to be wrong in your case- sorry). Slow and steady. Your competitors didn't get there overnight, you won't either. No- its not easy to save that kind of money, but its not impossible. I've done it. Other guys here have too. If you and her are both working and get rid of the car and truck payments, you could do that in less than 5. Less if you sell the house and rent. Depends how you want to live. I don't know what a house goes for in nova scotia, but if its a 100,000 house, sell it. If its a $200,000 house even better. Sell the new car and truck and pay cash for older vehicles. I've driven a lot of miles in a $2,000 vehicle. Take $30-40,000 of it and buy a nice older 20-30 ton excavator. Or a mini and a skid steer. Or a shovel and a transit. Whatever you can make money with. If you get to the end of the first year and you still have money left, you can go another year. If it doesn't work, sell the excavator and decide what to do next. You're actually selling your house either way, because your banker is using it as the equity for the note, and if you don't make it, he's going to take it out of your house, with your personal signature. Selling the house makes you into the banker, and if you aren't willing to risk that, why should a banker? If you are looking at doing this with a partner, family, or someone else co-signing on the note, don't. If its your dad- that is his retirement and your future that you're putting on the line. I'm always willing to risk my own future, I'm not so willing to risk someone else's. You have time to make another retirements worth of money, your dad doesn't.
To compound the above advice. When I was single I worked overtime and such and just let it languish in the bank account. When I got married, at first, we ate out and such a little too often, and I saw that slip away. We switched to beans and rice and hardly look back. No steak for us, bone in meat target is $1/lb, boneless $2, won't pay much more than that. Maybe $2.50 with inflation. Dry beans and rice in 20 lb sacks. Same vehicle as when I was just out of school. Worked a lot of overtime to build up a war chest. Gaining experience all the way. Always maxed out Roth IRAs for both of us and have not had to touch them, although the principal contributions are fully available as cash. That way I have a back stop but have never touched them yet. I may have passed some opportunities but I also left alone some pitfalls by sticking to what I could pay cash for. ----- One other thing on finance vs. rentals. If you finance, you are paying heaps of interest. If you rent, are as well. But if there is a downturn the rental bill does not just keep on coming.
I don't know if this applies to you or not but I'm going to say it anyway. If you have children you need to take that into consideration as well. Especially if they are fairly young. If you think you are still going to be able to attend all of their school functions and ball games etc because you have that option being your own boss you are probably in for a big surprise. Your 50 hr weeks will most likely turn into 80+ hr weeks real fast. It sure did for me anyway. I missed alot of my kids activities over the years mostly because I was either trying to get a job finished before a the rain moved in or trying to get a piece of equipment moved before sunset etc. On the flip side I was able to attend some activities that I very well wouldn't have if I was an employee but these were few and far between. Just my $.02
I started my business here when I was 27. The hours working steadily increased every year and at 1 point in the 90's I was working 80+ hours a week, 7 days a week......and did it for 3 years straight. I missed so much of my kids functions, and the wifes as well. She wanted a bigger nicer house, which she got. Nicer vehicles which she got.......and got to stay home and not work. An ideal situation for her and I was ok with it because times were good. Then I walk in one day and she has decided that I need to be home more, then it became a demand. I'm a good 250K in debt because of the things YOU wanted, and now you want me home more? How in the hell do you think we can afford that? I told her if she was willing to put ourselves in the position that I could be home more, then so be it. Come to find out, she wasn't willing to take a dive in lifestyle at that point and within 2 years I found myself divorced after 18 years. There was no way I could be home more and keep up the lifestyle we had at the time........so I was in a catch 22 with no winning scenario. Money is a funny thing. It can change things for the better, but also comes at a price. Ive been on both sides of the fence now at 54 years old and I can honestly say I'm much happier now with less of it. I have a modest home on 40 acres all paid for, good health, a great wife and 9 grandkids. In the grand scheme of things, I consider myself very wealthy.
I'm 36 and was in a similar position 9 years ago. I started small with a skid steer, my personal diesel pickup, and a $200 trailer I built out of $#it I scavenged all over. I started doing little grading jobs and water diversion. Later that year I traded four cords of firewood for a well used and abused skid steer backhoe. I retrofitted that to fit my machine and started doing a little utility work, culvert replacement, and residential water leak repair. The next year I sold my cheap dirty hoe for the down payment on a bargain priced mini ex. I started doing a little more utility work and repair and started picking up jobs like pond dam repairs and little small clearing jobs. The next year I paid cash for my first dump truck which was a POS 81 Chevy single axle with an 8.2 Detroit. I rented a 20 ton how's a few weeks over the next two years and got into cleaning out ponds and building a few more small ponds. Started fixing washed out farm terraces. It turned off dry that year and I lined up 5 ponds to clean out. That's when I bought my 953 and worked out a deal with a buddy to haul it for me when needed. Two years later I was cleaning out ponds, building new ponds, clearing timber and brush and picking up jobs steadily. All the while my mini ex was dollar for dollar the best money maker. I traded my old skid steer on a good looking 06 tl130 and was doing good. I got talked into taking on my first small commercial job from clearing, to storm sewer, to building pad to final grade and some retaining walls. That was a great gig but it nearly broke me and I hardly saw my kids for 14 months. All the while my regular customers still had stuff they needed done. I picked up a backhoe for a bargain to do the commercial job and it paid for itself on that job. This past fall I bought my second truck and a well used trailer big enough to move all my own equipment. I've borrowed some money on my machines but kept my payments under $500 total a month and kept my full time shift work job. Here it is the end of February and I'm hoping the ground dries up enough to finish a pond before the banker and the insurance man hungry. Through it all I've grown steadily and I've made good money but I'd never think of taking on $200,000 in debt even where I'm at right now and keeping my full time job. For me my business is a stress relief from my full time job and my plan B. My full time job is my plan B to my business if that makes sense. My advice is go slow and watch it grow. Good luck John
as a second generation to my dads business i take no offense to that statement its true most of the time. the old man wouldnt let me have anything easy, growing working for dad was not optional it was just a realty cause dad taught us from as long as i can remember that this business was what put food on the table and boy did me and my brothers own our groceries. by the time i was 12 dad had grown to well over a crew of 15 guys and a dam lot of iron ( the worst of witch was the end dumps) dad only had a mechanic on pay roll 2 years there the rest of the stuff that was not under warranty was fixed by us. it really was a good way to grow up. when i turned 16 someone offered me a part time job after school i didnt want to take it so dad fired me to leave me no option its really funny now and it was some great experience cause i had no clue what it was like to be an employee let alone work less than 40 a week when not in school. so basically 10 years went by of doing other things when i was 25 i was a jr manager of a pretty good size farm and got burned out decided it was time to go back to work with dad. that took 6 months to get him to agree cause he had scaled all the way back to being just an owner operator with a backhoe it took another year of part time for him and a full time day job before there was any wage out of it and finally about last august i went full time for the business its has been an adventure wouldnt trade any of it so far while i have not sacrificed and struggled like dad did 40 years ago i had to come up with enough money to buy in to go back like i said dad wont give anything. the best thing a guy that has a company can do for his kids it to push them out for at least 2 years go make it somewhere else cause that reality will change there perspective i know it did mine. it has been easier for me to get in the game but i sure have not had a silver spoon because of it our success is based on us being debt free if we cant pay cash we dont buy it witch is why i still rent my backhoe that i run daily cause it was sure nice in December when there was no work to send that machine back to the store and not have to pay for it
As a member of a fourth generation family owned equipment business, I only play in the dirt for fun- there is a ton of good info here. At 50+ years of age, 9/11 and the 08-12 recession has scared me from debt. Hate using junk equipment, but don't like a monthly bill either. And as my own boss, missed many years of my kid's activities. First there, last gone is the boss' life.
Im 22, started off with a 5000hr 5 ton kubota and 8 wheeler truck with 1.8mil kms on the clock. Had debt but it was on the lower scale. Don't go berserk to begin with, buy second hand but don't just jump at the first thing you see. Shop round, test gear out and most importantly TRUST YOUR GUT. We've just sold the kubota and now have a 900 hr zx50 hitachi and a 8900 hr zx120 hitachi as well as the truck.
I love this discussion, have sort of thought about going on my own now and then and I can see someday it will probably make sense, really like hearing about others experiences, thank you for sharing.
Here is my take from an electrical point of view and you father has probably said all this already: When I was working, I ran jobs from a crew of just my apprentice and myself up to 300 people on the payroll. I did work from a 1 hour service call to a 28 million dollar budget. I was asked all the time ‘you are a good foreman, general foreman, electrician, why don’t you go out on your own? My stock response was the same every time; “yes I am, however, I am not a business person.” Bidding, collecting the bills and all that pencil pushing work was not my forte, I pushed enough pencil doing what I did for 40 years. To do more was not in the cards. I never wanted to get in the hole where you bid a job “because you need to keep things moving” and end up underbidding. Two successful contractors I knew: One was a one man band, he spent three days a week with the tools and three days a week with the pencil. One day off a week until he sold out after 20 years. The other; he worked 14 hours a day, 7 days a week for the first 10 years, then cut back to 12 hours a day 7 days a week for the next 10 years. He is a multi-millionaire I will admit, but I think I had a better life. He also went through three wives in the process and gets to share his money with them now. The real question you have to ask yourself is what kind of a life do you want? Me, I was happy with a 40 hour week and a bit of OT once in a great while. Perhaps I was lazy, but I enjoyed my family, we had and have lots of time together, again, it all depends what you want from life.
Let's go back to accounting for a moment. One of the hardest things for me to understand when I, a North Carolina farm boy, went back to school after the Army was the following: "A normal profit is part of cost." This kind of goes along with your dad's saying, as you quoted, that you would be "buying" your job. "A normal profit is part of cost." Let me try to explain. What that means is that from the business' annual income, after you pay all of your hard and soft costs, as well as a competitive salary to yourself, the business itself must turn a normal profit. ("Normal profit" differs by industry.) If the business is not generating a normal profit after all expenses, including your salary, are paid, and all you are getting out of it is competitive salary, why would you take the risks and headaches of operating a business just to say that you work for yourself? Another old saying is "Excessive profit breeds ruinous competition." Are your competitors making an excess profit on their jobs that will allow you to get into the business, take some business from them at a lesser price, but still make a normal profit? Sometimes growth in the area can open room for another business, but if your competitors are making only a normal profit and you go into the business, will you all suffer, you probably more than they, because in the beginning you will have no equity in your business as I understand what you have explained here. Again, sit down and talk with an accountant who is familiar with your industry so that you will have a good understanding of all costs that you might incur. I really admire you for having started and responded to this thread. My impression is that everyone who has responded has your very best interests at heart. And remember that interest is rent on money borrowed.
Small business here- Farm drainage and some excavating stuff in the summer. Been at it for 10 years, grow slow. When at the bottom of a flight of stairs, no matter how big of a run at it you have, you can only take one or two steps at a time. There was a time when a 7000 dollar repair bill was more than i could take. Now we have 50-70,000 budgeted for repairs and maintenance. One other thing I'll throw out is a high percentage, don't know exactly, of small business go out of business or go broke after their most profitable year.
I saw it working quarry mechanic, different truck names, Blah Blah Excavating, Hmph Hmph Trenching, So So Hauling where the truck names and colors changed but not the faces or names driving them, equipment bought, sold, resold or LLC's flowing in and out of business all trying to catch up to the Old Fart down the road that started his off normal business when the quarry opened decades prior on a wing a prayer and NO regulations as have today. Not in at the ground floor being half a flight behind, catching up on that stair climb just is not so easy.
Depends on you and your area. You either have the desire or don't. When I was young someone told me there's no money in it, I said,"I'll live in my pickup if I have to", that's how bad I wanted it. Came from a family with nothing fancy, started with a pos 1976 f-750, an 1970 Allis-Chalmers 655. It was a freaking nightmare for the first two years, it was tough but better to be 18 than 50 starting! Depends on the area. Some are hot and could make real good but I live in a rural area, not a lot of work. I don't make a fortune but only work a combined maybe 25-40% of the year and make a living, I like my off time and do fab projects. I'm 32 now so I'm well over the hump, thank god, the struggles were worth it but there are tough times with no work, a lot of rain sometimes like now, breakdowns on breakdowns and customers bitching. I'd have it no other way because this is me, it's in my blood since the first time I saw heavy equipment running, pushing sand in the huge sandbox my parents built (my brothers and I would line equipment up for lube truck!) as a child (still have the ertl case rubber tire loader, wore that thing out!!! it literally has wear on the cutting edge because I have the new model of it next to it), I collect the diecast equipment too. I have iron fever like you don't know, IT'S A SERIOUS THING!!!!! To say it's in my blood is an understatement. If there was a hot model to my left or an A-C motor wagon to the right, I'd be to the right.......but maybe glance to the left!!!!! lol
Also what others say, grow slow. I've seen many come and go. Steady wins the race, save in the good times because I absolutely guarantee there will be bad. Borrow as little as possible, keep low overhead. I like no employees myself, to each their own. You can buy 15-25 year old stuff as long as its GOOD stuff. As my friend says, "your stuff is used, not abused", there is a huge difference, and good used is hard to find. My cat 943 was 21 years old when I bought it (I was too), has over 18k hours, it runs like a new one for 11 years. Bought it for 25k! Everyone running 953 now, I think the 943 is underrated by people myself. Buy quality, your equipment is EVERYTHING