This is intended for new Craftsmen, but you should read it anyway since you opened it. You may need it.
So, you want to be a Craftsman. I hope it is not because your boss is an idiot, because he might not be enough of a negative influence on you, unless he is a complete idiot, and those are rare. Before you even start, you will need a business plan! Not just, “I am going to do the opposite of what the guy who is killing me daily would do.”
Now my dad may have been a plumber, I am not sure because I seldom listened to him. I cannot tell you what he would do because I did not listen. Also, he seldom discussed work at home. I learned very little while handing him the wrong tool and holding the flashlight poorly.
Chances are, if you are bothering to read this, you have already made the same mistakes, like not listening to someone who knew something you could use later. I am not writing this to be funny! So, if you did apprentice or were a helper, you may have seen what not to do and maybe what to do, but did you listen? The point is, listening is not enough, you need to apply it. You need a plan.
I am going to try and summarize a basic business plan as it applies to Craftsmen. I strongly urge you to get a real pro at this to help you with every step. My goal is to save you from starting too soon and being my nightmare, a money loser, who costs me jobs and time, all while preparing a going out of business sale with my Consumers. Going out of business is an experience I do not recommend, having experienced them from many viewpoints.
Before You Start Planning
First, you will need a couple of relationships that cost money.
An attorney, preferably one that specializes in Contractor Law, and a CPA, (no an accountant will not usually do) to advise you on your books.
Neither will cost much for the first consultation. They may even tell you to use some online application they like, and listening to them is something you need to do. It is way cheaper to hire them before you make a mistake that causes you to need them.
If you do not like either one of them, find another one. In any case, this is called prevention. They will keep you out of big trouble and you can call them and ask questions for money. The fee they charge will teach you to always charge for your services (I get paid to write this stuff). Never work for free, unless you donate your time to a charity (for which you get no tax deduction), good for you.
Business Plan and Executive Summary
You should begin to read everything you can about the industry. If you are a plumber, look at some of the online information relative to company size. A realistic goal may require a little research into how some competitors are doing.
Say you are a plumber, and have a degree (yay), or a license (rah). You were probably directed to do business plans. They already told you, you would go broke by not doing the job right. Now you can skip to the bankruptcy hearing anyway, or you can do what you need to do, plan. Plan, plan, and change plans. Every time you learn something new, you should revise your plans to incorporate it. Yes, do it better than I did. A hard worker may make money, flying by the seat of his pants, but in the long run, he may go out of business if he did not plan.
You need a business description and summary. Many of us determine how much we want to earn and try to go backwards from the goal to how much business you need to accomplish this. The problem with this approach is lack of planning experience. You should figure out how you will get the business. Next, you would have to figure out how much money and time you will waste getting to that number. You must update plans daily, at first, just to see where you are going.
Some Craftsmen are given a contract or some work or business and later figure out how to make it. Sometimes we buy a franchise or an existing business. But in any case, be sure you know where you are going and that you can get there.
So, if you are a Plumber, you need to list the tasks at which you excel and those that you don’t know, don’t like, or just don’t want. To be correct, you need to shop the competition, determine the size of the market, determine the area you are willing to work, and add up all the fixed and variable costs. Remember, billable hours need to be tracked, along with the time spent driving around looking for work.
Is there enough room for you to make what you need to make, in the geographic area in which you plan to work? Are your goals realistic? Will you make money next year? The year after? How much cash will your family have to invest to keep you going until you make money? This is not meant to be funny, please think before you leap. Making 100 dollars an hour does not guarantee you a profit if you do not get to keep any of it. Big money does not always mean big profits. I have actually had people ask me for help because they could not understand how they sold 300,000 dollars, installed it, and had no money left.
On the other end, I have a friend that completely changed his direction after starting. He came upon a contract with lower margins but daily work, even some overtime. When he got near the end of the year, he realized that he had made less money than when he was only working 70 percent of the time. He was essentially working harder for the same money. His accountant helped him adjust his plan. He walked away from that “great” contract because it was simply not incrementally profitable for him.
I also saw an HVAC contractor grow in a few good years from one truck to 16 trucks. He was running so hard that he did not recalculate his contracts. Insurance, employee raises, social security changes, and higher material costs ate up his profits. He came to me for help because he was now operating at a loss and did not know what to do. He was not able to renegotiate his contracts. He had to sell trucks, lay off good people, and work long hours just to stop the bleeding. The next year, he lost some of his contracts because he just had to move the price too far and his response rate had been slowing. He recovered but had he stopped to plan, his life would not have been on hold for a couple of years.
What exactly are you going to do?
Re-pipes, mains, drains, waste lines, remodels, fixture installations, water softeners, water heater replacements, rough plumbing etc. Residential, single family, multi-family, commercial, commercial high- rise, government contracts, schools, etc. I have a friend who only does well water systems in Los Angeles and makes money. So, my point is, there is no substitute for planning. I wish someone had pointed this out to me before I signed that one lease that about did me in.
How are you going to market?
Will you pay for leads? How much time did you budget for sales? Will you be out every night after work trying to fill schedules? Are you dependent on the plumbing guy at the local store? Do you have all your eggs in one basket? I hope not.
Who is going to keep track of needed upkeep, repairs, reorders, shipping dates and schedules? Or are you just going to react when you need to react? Have you scheduled daily, weekly, and monthly time to close the books? Do you have an organization chart? Are tasks clear for your team? Can you look at your financials monthly, weekly, daily? Are you going to work or just worry yourself to death?
You might say, wow this guy is nuts, the business is just me. What is it you want and is it in the plan? If it is not, you will likely have unexpected surprises and must stop and deal with them, costing you time and money. So, take the time up front to figure out when you will do what and stick with it. I am sorry this got so long but you will not know what you don’t know until you write it down in a plan. Plan it, fix it, and stick with it.
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