Thread: Considering running my own carpentry business?

Starting out on your own is a BIG step, before doing that, I'd keep working for someone else while you gain more experience and the everdemanding money. Try to get experience dealing with people, as that is a big thing, learning not to oversell or undersell yourself, learn how to quote jobs and estimations on time, that is the big secret, time management.
While you're working, get some afterhours work, so you build up a clientele basis, word of mouth is the best advertising.
I wouldn't entertain the thought of it unless I had $100K behind me!!!
Money for licenses, in SA you need a builders license and a supervisors licence to supervise yourself, Insurances, sickness and accident for yourself, public indemnity, product liability. Money for your holidays, unless you want to work 7/52?? There will be times you can't work, raining, building site closed down, due to workers/contractors lien (they haven't been paid for 2 months). Supplies haven't turned up, or the wrong stuff delivered, it happens!! Getting a good accountant, learning basic accountancy, keeping track of purchases, and stock are all important parts of self employment, with good accountancy skills, it will save the accountant time which in turn save you money.
Workcover if you have someone working for you, even a casual, you'll need money for their wages, they don't like being paid a month down the track. Builders/homeowners pay sub/contractors when the jobs finished, not weekly like a wage. Also for your tools (theft). Then theres ATO, creditors, incase you've done the job and they don't want to pay because it's not what they wanted, don't like the workmanship, any excuse under the sun not to pay and get a free job done, believe me, it happens. Builders running into financial troubles and expecting you to work for nothing, while they've transfered everything they own into the wifes name, so they can't be touched.
Purchase of tools, because you don't have the right tool for the job, or a more efficient model comes available?
Yes, it does have it's rewards, but more headaches than reward I feel.
I hope this doesn't put you off, but you asked, by the way I'm not a chippy but have had several businesses doing steel work.
Kryn

I would add to the above a business management course, can help a great deal, I completed one in my post trade course it can be a eye opener, and as above don't be put just be informed before you start and you never look back
it was best thing I ever did and for the first couple of years you will work harder and longer than you ever did as a employee as the saying "no pain no gain"

All of the above is good sound comment and advice.
Time management is critical ie:
Time administration (all the legal compliance) computers are wonderful so long as you have the essential software
Join either the HIA (preferred) or Master Builders association, they are a valuable source of expertise and great for networking
Accounting, suppliers, sub trades, working capital or lines of credit BUT MAKE SURE YOU CAN SERVICE IT,it is crucial to develop a good credit rating
Yes you will work 15 hr days (including office work) but keep a dedicated day for self & family, a healthy mental and home life is crucial
ALWAYS WORK WITH A SIGNED CONTRACT and GET SIGNED variations from your client and never work on a hand shake, it never holds up in court.
Even though its tedious, accurate detailed estimating and quoting is paramount.

"Without troops all you command is a desk, without communication all you command is your thoughts"

A very little under estimated facet of building for the private sector is that for the life of the project you become an extension of your clients family, how you treat them is how you will be treated, they are the cheapest advertising agency you will ever have.

The overall environment here is apparently drastically different from that in Australia. We have construction, plumbing electrical, zoning and fire codes but enforcement is spotty to the point of being a farce in most cases. Builders are 'registered' not licensed. Only registered builders can pull construction permits but since permit enforcement is almost non-existent we have a huge population of unlicensed operators that will do practically anything to make money. I point all of this out because it alters the labor market in the building trades and fosters the way work is done in Texas.

The most important problem here for the aspiring construction contractor is finding skilled or even unskilled employees. This is because those workers who have training or who gain enough skills working for somebody else quickly decide that they want the profits for themselves. The result is that those people who remain in the employee/helper pool are the ones who can't or won't pick up the skills they need to become independent, i.e. the dummies. This state of affairs makes building a contracting business extremely difficult in Texas. We have professional builders but they only take on big jobs such as commercial construction or residential construction on a commercial scale. There are a very few companies that do remodeling but they are by comparison very expensive and they also have a hard time finding skilled hands.

Thus the average small remodeling contractor here works pretty much as a singleton, doing most of the work himself and using an ever changing parade of more or less useless schlubs to do things like carry trash. This is a viable but very much hand to mouth existence that works as long as you're physically able. As these guys age however the wear and tear on their bodies begins to tell. The more aware set of small contractors recognizes this and finds alternative work. Some guys get into house flipping for instance.

So once you get past all of the above listed issues I suspect you'll find that finding, training and retaining the employees that fuel the profits of your business is going to be your biggest concern. Good leaders are good followers.

leaving aside issues such as licencing, and do you have the requisite "documented experience" to become licensed and obtain a gold card for the trade in which you wish to practice, there is what do you want to pay yourself.

A basic calculation would go like this
The building industry generally works a 38 hour week, over 52 weeks that works out at 52 x 38 = 1976 hours
"Normal" is
10 public holidays per year = 80 hours
20 sick days per year = 160 hours
4 weeks annual leave = 320 hours
so the work year contains 1976 - 560 = 1416 hours.

If you want to pay yourself $100,000 per year (before Tax) you need to generate $71 per hour, plus 9.5% to superannuation = $78 per hour.

If 15% of your time is spent running the business (Tax, monthly BAS, accounting, correspondence, quoting, research, etc) your rate per "earning hour" needs to be adjusted upwards to account for this non-earning time. (15% equates to around 1 day a week spent running the business.)

Then it's extremely unlikely that you will be 100% busy, even once you are established -- so you need to make a guess as to how busy you actually will be.
80% utilisation is pretty much as good as it gets for long term (>3 months continuous) work in most industries, more typically it might be 65 to 70%.
So your "earning hour" rate needs to be adjusted accordingly.

Then there are your overheads.
you still have to meet your financial commitments if you are ill or injured, so some form of income protection insurance is probably a must.
Then there will be your public liability and professional indemnity insurance.
And vehicle running expenses, including providing for the eventual replacement of your work vehicle.
and essential tools of trade that can't be recovered from each client. e.g. you mobile phone account.
Together these may add as much as $5 to your rate per "earning hour"


working on the back of an envelope, all the above suggests that paying yourself $100,000 per year, requires that you earn around $140 per earning hour.

Of course these numbers will calculate differently if you decide that you want to pay yourself substantially less than $100,000 per year and/or time spend running the business and chasing work is additional to the standard 38 hour week, or that for the first few years you won't take leave -- but the building industry generally shuts down in December/January so no annual planned leave might equate to a period when the bills still need to be paid, but there is no income.



Only you can decide if the effort of running a business is worth the stress in self fulfillment

Working for yourself? Well not exactly. You are actually working for a different boss each and every job. You are also doing most of the ATO's work for them and jumping through State and Federal Government hoops. As an employee, these are your boss's worries. A good job on good wages has a lot going for it. But some, myself included, prefer to make their own decisions and run their own race. These are the people who get the most satisfaction from self employment and would probably suffer the most being an employee.
I have had the pleasure of working in both capacities over the years and still would find it difficult to make a choice one way or the other. Experience is a commodity of which you can never have too much. Inexperience can be fatal. Being a good tradesman doesn't necessarily make a good businessman - yet another skill to acquire before taking the plunge. Book-keeping and accountancy knowledge are also going to help promote survival in the dog-eat-dog world that is private enterprise. Add to this a good dose of beginners luck and you just might scrape through unscathed.

Starting a small business in the building industry is like shooting yourself in both feet. I run a small property maintenance company in WA and I will just say it has been tough going for the last 3 years.

It does not take much to fall on hard times. Late payment from clients (especially from bigger building companies), lack of work, projects going wrong, vehicles breaking down, getting sick or plain just burnt out from working your 4th 90 hour week trying to get everything done.

You will need to invest time and money into learning Building Codes and Australian Standards. The NBC is free but the standards cost money. For building there is around 70 different standards.

There is also making sure you have a full suite of SWMS/SWP/JHA documents to cover your type of work. Doing this yourself takes a lot of time and it can cost a fair chunk of money to have someone else do it. But if an accident happens on your work site, these are one of the first things Work Safe will ask for. SWMS are also required if you start subcontracting for bigger companies. You will also need to make sure any of your employees/sub-contractors read and understand these.

But it's not all bad. I enjoy the freedom running my own business has given me. I get to see a lot more of kids school stuff. If I want an early finish the only person I have to answer to is my wife.

Regards

Dane

Small quick jobs would be where I would go, get it done, get the money and move on. I have done both the employer/employee gig and the back end office work these days to have employees is totally out of proportion to the rewards. No way would I ever employ anyone again, keep it small and compact. This ensures you have no obligations to employees, you can work to suit your self etc.

Originally Posted by Chris Parks

Small quick jobs would be where I would go, get it done, get the money and move on. I have done both the employer/employee gig and the back end office work these days to have employees is totally out of proportion to the rewards. No way would I ever employ anyone again, keep it small and compact. This ensures you have no obligations to employees, you can work to suit your self etc.

That's the Texas method. You can make a living, particularly if you have a string of regular clients who have the money to pay what you're worth but if you get hurt, get old or get sick you're toast.

Originally Posted by Chris Parks

Small quick jobs would be where I would go, get it done, get the money and move on. I have done both the employer/employee gig and the back end office work these days to have employees is totally out of proportion to the rewards. No way would I ever employ anyone again, keep it small and compact. This ensures you have no obligations to employees, you can work to suit your self etc.

This is the bases of my small handy man business
Get in work we'll get out.
That means cash flow we want invoices going to clients every week.
I don't work for builders(sorry if I upset anyone here)$$$$$
Small jobs kitchens decks extra,
Clients get grumpy after seeing you for months and what they see as no progress.
AND KEEP UP ON THE PAPER WORK AND TAX

Cheers Matt

Originally Posted by Simplicity

Clients get grumpy after seeing you for months and what they see as no progress.

Funny that isn't it? Most of them last about 3 weeks before they start getting anxious.

I have a client, my last, that I've been semi-continuously working on for near three years. The last bit I signed on for is a few cabinets in the kitchen that are due to arrive day after tomorrow. This phase (kitchen) has been going for a year. Total tear out, expansion and complete re-fit. 6 months solid at first and sporadically since as the client sources in bits and pieces.

There's a concept in the investing world that says the greater the risk the greater the reward. This applies to running your own business. However the "rewards" isn't neccesarily financial. It could be being your own boss, picking your own hours, working from home/closer to home etc etc. So its entirely up to you to determine whether the risk is worth it. Plus what works for some won't necessarily work for you.

Working for yourself isnt something that you can take light hearted as others have touched on, there will be times especially early on when you'll be struggling to put food on the table. So make sure you've got a safety net, have heard of plenty of stories of people having to sell their cars, wedding rings etc to stay afloat. When i say early on its because a significant number of businesses go bust within the first 12 months of operation.

If I was to think about a carpentry building business I would have one rule....No sub contract work at all. Cash flow is the name of the game, no debtors or creditors. A mate of mine was a fencing contractor and he used to get the material delivered and the customer paid the supply and delivery, all he needed to get from the customer was the labour he put in and payment for filling the holes with cement. Working this way simplified things and he did not have big material overheads he had to effectively finance even for a short period and the customer knew there was no added margin for material supply. Working for over $100 / hour there is no way you want to be standing in Bunnings trying to organise materials. This way also means you never have to walk away from a job without full payment. These days I would go so far as having the facilities to accept CC payments which would make progressive payments easier to accept on site.

One other small thing are you a peoples person.
Can you comfortably talk to clients and do quotes.
You may be a gun on the tools but you need to be able to sell your self to clients as well(without sounding cocky)
Before I started my business I worked as a panel beater.
I regularly saw bosses put there best guy on the tools into management,not always the best decision sure the guy was great with his hands,but not always great with his mouth.
At the end of the day your selling your self.

Cheers Matt