View Full Version : Growing the Business - Pitfalls
03-25-2006, 09:11 AM
It happens to many contractors that, while they are successful in getting jobs, a few years go by and they find their debt growing and are unable to pay their bills.
It's easy to say that they're bad business men and need to get their sh*t together, but I'd like to hear from the forum members some specific suggestions on common pitfalls, good guidelines and solutions.
I know it's a big topic, but I think it's relevant and important.
03-25-2006, 09:22 AM
What kind of debt are we talking about here?
03-25-2006, 09:48 AM
I assuming debt relating to growing business expenses such as overhead. Warehouse/office space, communications, van/truck, labor, taxes, gas, tools, equipment, advertising, warranties, the list goes on.
Or are you referring to something else?
I am looking at debt on a ledger, not debt similar to credit cards.
03-25-2006, 11:18 AM
The question comes from my discussions with distributors who share with me that many of their contractor customers fall behind bigtime in paying on their accounts.
03-25-2006, 11:30 AM
Heres a few things that have worked for me:
-Send out invoice for work done immediately after work is complete
-Pay bills religiously- go through at least once a week and pay supplier invoices for which those completed jobs apply to. In other words pay bills when you get paid yourself by the client.
-Keep inventory tight. I buy thousands of dollars a week in supplies & the way i look at it, my suppliers can have more materials to me the following business day or sometimes same day by truck, SO dont overbuy. The bills really add up by over stocking.
-Dont ever plan on checks (payments) coming in by a certain day, they never do.
-If your having trouble paying bills, you're either not charging enough, not hustling hard enough (or smart enough), or your company is inefficient.
i'll list more later
03-25-2006, 03:33 PM
I see it all the time in other green industry areas. Guys over buy equipment, trucks, stock etc. My way of doing it has always been start out on the light end of things and only buy up when its nessacary. I keep my overhead low (shops located on my property at my house).
I only stock what i will be neededing asap. Some smaller things (blades for mowers oil etc) I might buy ahead of time but only on cash.
One thing about credit is its EASY to just order what you need. Then you get the 5000 check from the job thinking there is a ton of profit but forget about that supply bill still lingering. You rush out and buy new toys or things you want and then there is no money left.
On our business acct we have a debit card. All my suppliers have my debit card and I ask them to run it at the time i pick up the supplies. Bills paid and nothing lingering.
Very few suppliers of mine do I go on net 30 terms with. I could with any of them but I always prepay it. Just keeps me out of trouble. I would be out of business without them.
I dont know if you guys consider this smart business but it works for me. At least on the scale that i am operating on as of now.
03-25-2006, 06:59 PM
Well I know where you guys are coming from. For me it has been a learning curve. Just like alot of companies out there I can do the work and sell the job. But I suck at the other end of things. Straight out of high school with no schooling at all. I'm learning this business thing straight from the hip..
03-25-2006, 08:31 PM
I thought about this while working in our own yard this afternoon.
I really think bottom line poor management skills or lack of knowledge in the managment end of it.
Keep meticulous records of inflow and outflow. If your bottom line isnt as high as you want it either your not charging enough (if your getting ALL your jobs that are not from refferal your probably cheap) or your not controlling your overhead. I manage my overhead carfully. I think long and hard before I buy something new and ask myself if I really need it or not yet.
A note on what Steve said about being behind with your debts. Finance charges will kill you. Especially if your using credit cards and not paying them off monthly. I am strict about using only DEBIT cards where it comes out right away.
Im sure we have all seen the guy with the overkill set up. there is a solo guy I know here.. 2 ZTRS and a WB. I have talked to him and he ALWAYS works alone. He wonders why he aint making what he wants.
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