I recently received an email from a journeyman plumber describing how he had been reading CONTRACTOR magazine in his company’s main office. He didn’t say which issue he had read, but apparently a reference in an article to “getting started in the business” caught his attention. His letter was well written. He asked for advice about how he should, or could, go about getting into business for himself.
Giving his question some thought, it came to mind that for every “Top 100 Contractors” listed in our trade, there are perhaps 50 times as many small, medium-small, medium and medium-large companies operating at any given time nationally, maybe more.
Admittedly, I have not researched the actual number, but it is empirically true that in any market, competition dictates that there are several (or more than several) shops in direct competition for available work. So addressing his question prompted several exchanges; not the least of which was the admonition that advice is worth exactly what you pay for it. Since circumstance and situations vary widely and it is neither ethical nor practical for me to provide instructions for such an undertaking, it is still possible to generally address the issue.
The best advice anyone can give is merely “advice.” Unless you are a paid consultant, that advice carries no weight and bears no consequence to the “adviser,” save some time and possibly an email or two. That being said, getting into business does require planning and forethought. Moving from being gainfully employed to having to make the money to pay one’s bills can be daunting. However, once the decision is made, being totally committed is the only way to be successful. You can’t do a half-hearted business.
Things to be considered before going into business for yourself include, in no particular order of importance: licensing, insurance, supply house credit, tax accounts, tools, truck(s), office space (even if it is in your house), material storage (even if it is in your garage), advertising, work on hand, work moving forward, employees (if any) and employee taxes, just to name a few of the more obvious. There are other issues that a person new in business has to address, but the preceding are the main ones, in my opinion.
Making the actual move can be gut wrenching or it can be the easiest decision you’ve ever made. It all depends on circumstance. If you’ve been out of work, or can’t find work and things are getting tight, starting your own company is an easy decision. If, like my reader, you’ve worked for a good company for a while, and they’ve been fair to you, it is a much harder choice. Something like the difference between necessity and desire. This column is not a primer, but a cautionary tale to any one that is contemplating starting a business. In any event, if you decide to go out on your own, do it by the numbers:
Remember this ... nothing, and I mean nothing, can replace good old fashioned hard work coupled with honesty and integrity.
No. 1 — What are you going to be? Sole proprietor? LLC? Subchapter S? In order to protect yourself and your family from lawsuits, frivolous or otherwise, and other legal sanctions, it is best to invoke what is referred to as “the corporate veil” in one form or another. In our litigious society, being a sole proprietor can be a risk you don’t want to take. You should become a legal entity.
No. 2 — Get a license if one is required. Doing so can save you from embarrassment at the least and legal troubles at worst. Working unlicensed severely limits the type and amount of work you can contract.
No. 3 — Buy insurance. Insurance is a necessary evil. Protecting whatever assets you own is very important, as well as giving your customers some peace of mind should you burn or flood their house or business down.
No. 4 — Establish credit at one or more supply houses. Without the ability to get material, and the ability to pay for it at a later date, you will be limited to the work you can do. Nothing says “fly-by-night” contractor louder than having to ask your customer for money up front or to pay for material because you can’t.
No. 5 — Set up a business bank account. This will usually require a license number, but not always. It will definitely require your personal information (Social Security and driver’s license, at the least).
No. 6 — Set up tax accounts. The IRS, State and municipal revenue departments are notoriously unforgiving. Make absolutely sure that you set aside their tax money and pay it on time. The best interaction with the government is “none.”
If you have decided to enter the world of contracting, we can assume you have tools, a truck and, most importantly, trade skills. Adding the other items contained above to that list will help you start off on the right foot and, hopefully, keep you moving ahead as you build your business. Remember this ... nothing, and I mean nothing, can replace good old fashioned hard work coupled with honesty and integrity. Good luck! You will need it!
The Brooklyn, N.Y.-born author is a retired third generation master plumber. He founded Sunflower Plumbing & Heating in Shirley, N.Y., in 1975 and A Professional Commercial Plumbing Inc. in Phoenix in 1980. He holds residential, commercial, industrial and solar plumbing licenses and is certified in welding, clean rooms, polypropylene gas fusion and medical gas piping. He can be reached at [email protected].