# Shop Owners: Looking for Start-Up Advice



## Switched (Dec 23, 2012)

First piece of advice is to see if your union will even allow you to both own the business and work in the field. Many will not. That will entail you needing to employ possibly a Jman as well as a Foreman, even on a small job.

There are a lot of rules specific to unions, and they vary from local to local.


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## JimmyJawn (Jan 22, 2020)

Switched said:


> First piece of advice is to see if your union will even allow you to both own the business and work in the field. Many will not.


That doesn't apply in my local. As long as I have my ticket I can work and be an owner.


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## HackWork (Oct 2, 2009)

What Switched said is right on target.

Be aware that many locals also require you to pay in a full year's benefit package for yourself as the owner. In my local it is over $30/hr for 2,000 hours. Sure, you get great healthcare, annuity, and a pension credit for that, but does a brand new company have $60K extra per year to pay for those things?

Starting a union company from scratch is very hard. Most start non-union and then are brought it to the union. My local helps us do that.

Talk to a good BA at your local.


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## Switched (Dec 23, 2012)

JimmyJawn said:


> That doesn't apply in my local. As long as I have my ticket I can work and be an owner.


I would make sure to have something like that in writing, you have a lot to lose if that isn't really the case. A lot goes on that they allow, but one disgruntled moron can screw everything up for you. 

A lot of businesses where the owner is also working, the owner is a minority share holder of a corporation. I can own 49% in all the locals around me, but 50% puts me out of the field. Long term that isn't bad, but starting out that can be quite expensive.


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## JimmyJawn (Jan 22, 2020)

HackWork said:


> Be aware that many locals also require you to pay in a full year's benefit package for yourself as the owner. In my local it is over $30/hr for 2,000 hours. Sure, you get great healthcare, annuity, and a pension credit for that, but does a brand new company have $60K extra per year to pay for those things?
> 
> Starting a union company from scratch is very hard. Most start non-union and then are brought it to the union. My local helps us do that.


It's $48/hr here. I think you missed the part where I said I've been in for 25 years :wink:

I appreciate the concern, but I've been running someone else's business for 3 years now. I'd rather run my own and not have to work with the tools in 5 years.


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## HackWork (Oct 2, 2009)

JimmyJawn said:


> It's $48/hr here. I think you missed the part where I said I've been in for 25 years :wink:


 I didn't miss that part, and I am not sure what you mean.

The $30/hr I was speaking about is the benefit money that the contractor sends to the hall, and you have to send to the hall as an owner of the company. The the wage.



> I appreciate the concern, but I've been running someone else's business for 3 years now. I'd rather run my own and not have to work with the tools in 5 years.


 You clearly already know everything, except for how to fill out your profile...


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## JimmyJawn (Jan 22, 2020)

Switched said:


> I would make sure to have something like that in writing, you have a lot to lose if that isn't really the case. A lot goes on that they allow, but one disgruntled moron can screw everything up for you.
> 
> A lot of businesses where the owner is also working, the owner is a minority share holder of a corporation. I can own 49% in all the locals around me, but 50% puts me out of the field. Long term that isn't bad, but starting out that can be quite expensive.


I really don't think that's the case here, but when I get that far I'll double check. My wife can always own the majority, I'm not too concerned.

Do you have any advice on how to handle start-up costs? Small business loan vs line of credit, or both?


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## JimmyJawn (Jan 22, 2020)

HackWork said:


> I didn't miss that part, and I am not sure what you mean.
> 
> The $30/hr I was speaking about is the benefit money that the contractor sends to the hall, and you have to send to the hall as an owner of the company. The the wage.
> 
> You clearly already know everything, except for how to fill out your profile...


Our benefit package is $48/hr. Contractor pays monthly. Hours needed for benefits are 350/Q. It's almost like I know this because, um, I'm a union member? :smartass: Do many people come here and not know what their package is?

I don't really care about a profile, but I'd love to hear your thoughts on funding start up costs. What did you do when you first started out?


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## dronai (Apr 11, 2011)

Home equity line of credit


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## just the cowboy (Sep 4, 2013)

I'll start off easy.
If you are asking about startup cost and that sentence said maybe a buffer, than you are not ready to start a business. Search this site for prior posts about this. Flyboy has many posts on this. 

From experience:

Do not use your house as collateral. ( lucky to have mine left )
Plan on working non billable hours ( I was putting in 60-70 hours a week total)
Do not tap into retirement money. ( mines gone )
Do have 1-2 years of backup money. ( emptied account )
Do pay all house bills first. (had to rebuild my house with no money due to paying business insurance instead of homeowners)
Have 200% buy in from your spouse, not just an OK lets try it. (rough but we made it)

Good luck, there is not always a pot of at the end.

Cowboy


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## MechanicalDVR (Dec 29, 2007)

JimmyJawn said:


> Our benefit package is $48/hr. Contractor pays monthly. Hours needed for benefits are 350/Q. It's almost like I know this because, um, I'm a union member? :smartass: Do many people come here and not know what their package is?
> 
> I don't really care about a profile, but I'd love to hear your thoughts on funding start up costs. What did you do when you first started out?


With your attitude I wish you luck!


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## Switched (Dec 23, 2012)

JimmyJawn said:


> I really don't think that's the case here, but when I get that far I'll double check. My wife can always own the majority, I'm not too concerned.
> 
> *Do you have any advice on how to handle start-up costs? Small business loan vs line of credit, or both?*


Neither.

The worst thing you can do is start a business under the pressure of debt, the absolute worst.

90% of small businesses fail within the first 2 years due to cash flow and other money issues. With the remaining 10%, another 80% die off in the remaining 5 years. Most of the rest just remain on life support for the duration of their existence. 

Only a very very few can sustain a profit and succeed. 

A better question is: "How much of my savings, my retirement, my net worth, my house, etc. am I willing to give up just to "Own" a business?". 

That is the question you need to ask. The answer will tell you a lot about whether you really want to take that risk, because it is a huge risk. Being that your married, these are questions your SO should be asked as well, cause if you are not on the same page and this goes south, you will lose everything, and then she'll take half of the nothing that is left when she walks away. (Obviously you may have one of those solid relationships that can handle something like this, but the road of entrepreneurship is paved with failed strong marriages).

Your entering a field that is likely 110% price driven. Your reputation is likely to mean absolutely nothing, it will all be about lowest price. After a few years, if you last that long, you may have built a few relationships with some quality vendors. Maybe some industrial places where you just hop in and out setting up new equipment, moving things around, etc. But even then, they will likely be pretty price driven. 

My point is, you need cash, not equity or a loan. You need cash. 

My personal view, and I know it isn't shared by most, is that I don't take on a project that I can't walk away from and lose every penny of that project. I may not win as big as some of the guys on here, but I also don't worry about mounting debt, the supply house chasing me down, creditors, etc, etc, etc....

Cash is King is a saying for a reason.


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## Switched (Dec 23, 2012)

JimmyJawn said:


> It's $48/hr here. I think you missed the part where I said I've been in for 25 years :wink:
> 
> I appreciate the concern, but *I've been running someone else's business for 3 years now*. I'd rather run my own and not have to work with the tools in 5 years.


A better option than risking the money and time on a venture of your own would maybe buying into another successful venture. Maybe discuss this with who you are working for?


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## HackWork (Oct 2, 2009)

JimmyJawn said:


> Our benefit package is $48/hr. Contractor pays monthly. Hours needed for benefits are 350/Q. It's almost like I know this because, um, I'm a union member? :smartass: Do many people come here and not know what their package is?


 The point I was making, and you have been too much of a smartass to understand, is that the 350hrs per quarter number doesn't apply in this situation in many locals. An owner can't just pay in the 350hr per quarter and say that is all he worked, he has to pay in for 2,000 full hours at a minimum. That's $100,000 the first year in your local, if the package is really $48/hr (seems high). Are you going to take out a mortgage just to pay your benefits package alone? Think about that.



> I don't really care about a profile, but I'd love to hear your thoughts on funding start up costs. What did you do when you first started out?


I think taking a loan out to start a union business is crazytalk. Any loan or LOC will be personally guaranteed by YOU and your house/assets. 

You keep saying how you have been doing this for 25 years, and if your local's benefits alone are $48/hr, then the wage much be huge so you should have plenty of cash, right? If not, then it's time to ask yourself why you don't have that cash and start saving.

Then start a small business and grow it until you are able to sign with the union.


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## Helmut (May 7, 2014)

JimmyJawn said:


> I've been a union electrician for almost 25 years, and I'm thinking about starting my own business (commercial work), but I need some advice on start-up costs as far as small business loans vs lines of credit, or both?
> 
> There's the union bond, various insurances($), a van (outfitted), materials for the first few jobs, and probably some sort of cushion.
> 
> Thanks.


Start up costs vary.

How big of a shop do you need, vs running it out of a 3 car garage at your house.

Used low mileage vans vs brand new
Tools required for the commercial work you want to do.
Ect.

The term "commercial work" is vague upon itself. It can mean mom and pop pizza shops, to manufacturing plants, both requiring a different set of tools and marketing plans.

I'm with the guys who say 2 yrs of personal bills saved , with a reliable vehicle, tools and test equipment as a minimum.


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## Tonedeaf (Nov 26, 2012)

Plan on working 70-80 hours a week regularly....
There is a big difference between punching a clock and operating a business day to day. Plan on going above and beyond.

That said....I know plenty of small union shops that get fed work from 1 or two General Contractors. But If you think you are going to go out and win all this work competitively in your market you are mistaken.....you need to have relationships and work lined up or your just gonna fail quick....so make sure you have all your ducks in a row before you take the plunge.


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## HackWork (Oct 2, 2009)

Tonedeaf said:


> Plan on working 70-80 hours a week regularly....
> There is a big difference between punching a clock and operating a business day to day. Plan on going above and beyond.
> 
> That said....I know plenty of small union shops that get fed work from 1 or two General Contractors. But If you think you are going to go out and win all this work competitively in your market you are mistaken.....you need to have relationships and work lined up or your just gonna fail quick....so make sure you have all your ducks in a row before you take the plunge.


If he works it right, he can be fed all the little jobs that his current employer doesn't want to have to deal with.


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## NJ Contractor (Nov 12, 2016)

How much experience do you all think it takes the average electrician to be ready (technically speaking) to be able to start their own shop? 

Residential - 5 years?
Commercial - 10 years?
Industrial - 15 years?


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## just the cowboy (Sep 4, 2013)

NJ Contractor said:


> How much experience do you all think it takes the average electrician to be ready (technically speaking) to be able to start their own shop?
> 
> Residential - 5 years?
> Commercial - 10 years?
> Industrial - 15 years?


I love it when forth year apprentices ask " How do i start my own business". 
I think after about 5 years in the field as a journeyman you should have the electrical skills needed, BUT. It will take another 5 years to learn the business ins and outs.

Cowboy


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## just the cowboy (Sep 4, 2013)

Another OP gone because he did not want to hear the truth.


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## JimmyJawn (Jan 22, 2020)

just the cowboy said:


> I'll start off easy.
> If you are asking about startup cost and that sentence said maybe a buffer, than you are not ready to start a business. Search this site for prior posts about this. Flyboy has many posts on this.


Thanks for the tip on searching that member. A google search brought me here, on a post from a few years ago, but I couldn't find much more.




just the cowboy said:


> From experience:
> 
> Do not use your house as collateral. (lucky to have mine left)
> Plan on working non billable hours (I was putting in 60-70 hours a week total)
> ...


That's all great advice, I agree with all of it. Thanks for the response. 
We're still in the discussion stage, but she's all in. That's part of the problem with where I am now. Spouse didn't care about the business but wanted a weekly paycheck.

Do you still have your business?


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## JimmyJawn (Jan 22, 2020)

Switched said:


> Neither.
> 
> The worst thing you can do is start a business under the pressure of debt, the absolute worst.
> 
> ...



I agree with your personal view as well. I'd rather stay small than blow everything up on a big job. I've seen it happen to others.
I'd like to start up with as little debt as possible, and grow from there. Seems like the main cost will be the van and insurance, but we haven't finished crunching numbers. I wanted to see what others have done. 
This is all sound advice. I appreciate you taking the time to reply.


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## Switched (Dec 23, 2012)

Used... Used... Used...

There are a lot of shops out there that lease vehicles from large leasing fleets. After X amount of years/miles they return them and go on to the next. I have bought several of these vans.

I get them with just around 100k miles on them. They have ladder racks and all the bins in them. (Some I have even found with electrical supplies!) I get them for about $8k to $10k and run them for another 150k to 200k before I get another. No serious mechanical issues to date doing this, and I bet it saves me about $40k.

When and if you start bankrolling some money, then you can look at getting new if you want. Starting off, leave that cash for materials, labor, overhead, etc...


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## JimmyJawn (Jan 22, 2020)

Switched said:


> A better option than risking the money and time on a venture of your own would maybe buying into another successful venture. Maybe discuss this with who you are working for?



I can't get into too many details, but that won't happen in this situation. Let's just say he's got some personal demons he needs to take care of. I've tried to help as much as I could over the years, but at some point he needs to help himself. It's not a good situation.


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## flyboy (Jun 13, 2011)

Personal emergency backup money and seed capital for a business are two separate and distinct things. Whether you are in business or working for someone else you should have savings that equal 6 to 12 months of personal expenses and no debt beyond a house payment.

The rest of your savings should be in a well thought out investment portfolio (tax deferred and taxable accounts) with a securities and bond mix that fits your risk comfort level. After 25 years in the union you should not only have the emergency money, but at least 300k to 500k in your investment portfolio. 

Borrowing money to go into business is very risky and I simply wouldn't do it. If you do, you better know what your doing. You must know all the risks of the space you decide to enter in this trade. Whether it's residential, commercial, industrial, new construction, renovation, service, whatever. 

You also need to understand your completion in that space and whether or not you can compete with them and make money. The only way you're going to know this is if you have a clear understanding of that space and financial side of that business. Do you really know what your costs of doing business will be? Can you read a Income Statement, Balance Sheet and Cash Flow Statement?

Do you know the difference between gross margins and net margins? Do you know what gross margins are acceptable for the space your looking to get into? 

Do you know what your overhead expenses are going to be at startup and 1, 2, 3, 4 years in? Do you know how much business you're going to need to get to meet your financial goals and scale the business? How many jobs will you have to bid to win the number of jobs you'll need to hit your profit goals? Are you ready to put together a 3 to 5 year business plan? Can you put a yearly budget together and then track it monthly, quarterly and yearly?

That's the "not so easy stuff" you need to learn about first. Or you can skip all that stuff and just wing it and see what's left over at the end of a job. Good luck with that. There's a better then 95% chance you'll fail if you do. 

Here's the really easy and fun stuff. Branding your company, website development, SEM, finding an accountant, setting up the business entity, setting up your accounting system, buying trucks, tools, etc. It's easy to spend money and there's plenty of advise on here about that. 

I strongly advise against having family in the business, especially a significant other, but if you must, pay her for the work she does. She's not your slave, it's your dream, not hers. She has her own life to live.

Oh by the way, just because you've been running jobs for your boss for 25 years doesn't qualify you to run a business. Trust me on that one. 

I can send you a spread sheet for pricing inside a flat rate system that will show you how to figure out your breakeven and profit numbers. You must include your email if you want it. It's designed more for a service and replacement business, but it'll be a good exercise in understanding costs. 

Good luck


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## JimmyJawn (Jan 22, 2020)

just the cowboy said:


> Another OP gone because he did not want to hear the truth.


nah, just workin'.


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## JimmyJawn (Jan 22, 2020)

flyboy said:


> I can send you a spread sheet for pricing inside a flat rate system that will show you how to figure out your break even and profit numbers. You must include your email if you want it. It's designed more for a service and replacement business, but it'll be a good exercise in understanding costs.


That would be great, thanks!





flyboy said:


> You also need to understand your completion in that space and whether or not you can compete with them and make money. The only way you're going to know this is if you have a clear understanding of that space and financial side of that business. Do you really know what your costs of doing business will be? Can you read a Income Statement, Balance Sheet and Cash Flow Statement?
> 
> Do you know the difference between gross margins and net margins? Do you know what gross margins are acceptable for the space your looking to get into?
> 
> Do you know what your overhead expenses are going to be at startup and 1, 2, 3, 4 years in? Do you know how much business you're going to need to get to meet your financial goals and scale the business? How many jobs will you have to bid to win the number of jobs you'll need to hit your profit goals? Are you ready to put together a 3 to 5 year business plan? Can you put a yearly budget together and then track it monthly, quarterly and yearly?


This is everything that we need to work on before we decide if we're going to do this. We just started crunching some basic numbers this week. We know we have a lot more to do, and a lot more people to talk to, before filing for an LLC, etc. 
I really appreciate your thoughtful response. Thanks again.


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## John Valdes (May 17, 2007)

JimmyJawn said:


> I don't really care about a profile, but I'd love to hear your thoughts on funding start up costs. What did you do when you first started out?


A profile is required even though you have introduced yourself.
A week, a month goes by and your intro goes away.
A profile stays with you.


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