# How much capital do you recommend to go full time?



## Roughstock (Jun 26, 2017)

I have been contracting on the side for a little over a year now. Yes, I am legal and I do have insurance. Right now I currently have a regular job as an operations manager, but I have been working in the food industry for 15 years and to be honest I am just getting burned out on it.Also, the Mrs. is tired of me being at one job or the other and never being home.

I am thinking of taking the contracting full time. I mostly concentrate on remodeling and have not done a lick of advertising other than a couple posts on Facebook. My schedule stays pretty full with subcontracting out a lot of tub installs for a guy that can't get all of his done as well as calls for local work.

My problem is I have been putting all of the profits back into the business at this point and paying off other bills and have little to show for it. I am scared to death of being undercapitalized and having to go back and ask for my job back.

What would be a reasonable amount of capital to go full time with?

Things that I have covered already:
State Registration
Local license
Insurance
Truck/Trailer
Tools (always need more)


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## Big Johnson (Jun 2, 2017)

.....


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## 480sparky (Feb 1, 2009)

You're asking about how much money you need to have? There's absolutely no way we can give you a dollar amount. Only you can answer that.

If you're wondering about what expenses you'll need to cover:

*Business Cost List*

*Building*
Building 
Warehouse Space
Trash Removal
Lawn Care
Snow removal
Upkeep & Repairs

*Office Expenses*
Computers
Stationary
Copy machine
Fax machine
Forms
Printing
Software
Office Equipment
Computer maintenance
Files
Postage
Office Supplies

*IT*
Internet service
Email accounts
Web site
-Initial creation
-Updating
-Maintenance
GPS services

*Benefits*
Vacation Pay
Holiday Pay
Uniforms
Uniform Maintenance
Unemployment
Bonuses
Incentives
Retirement Plan
Christmas Party

*Taxes*
Property Taxes
Tangible Taxes
Pay Roll Taxes
Income Taxes
Sales Tax
*
Training*
Management Training
Office Training
In-House Training
Tech Training
Mfg. Training
Training Equipment
Safety Training
Update classes
License testing
OSHA compliance
RRP compliance

*Insurance*
Building Insurance
Liability Insurance
Employee Insurance
Life Insurance
Business Insurance
Workers Comp.

*Utilities*
Gas
Electricity
Telephone / Fax lines
Internet Service
Toll Calls
Telephones
Pagers/Cell Phones
Radio Maintenance

*Vehicles*
Vehicle Maintenance
Ladder Racks
Interior bins
Fuel
Truck Signs / lettering / vinyl
Tires

*Financial*
Accounting
Loans
Tax Preparation
Interest
30+ Day Receivables
Bank Charges

*Travel*
Hotel
Meals
Airline / vehicle

*Unique to the construction trade*
Permits
Licenses
Bonds
Inspections
Trade Association
Subscriptions
Memberships
Dues
Retainers
Safety PPE
-Lock-out/Tag-out kits
-Fall prevention harness
-Arc-flash clothing
-Hard hats
-Safety glasses
-Hearing protection

*Tools*
Company Tools
Safety Equipment
Ladders
2-way Radios
Test Equipment
Replacement Parts
Parts Storage
Damages
Tool Replacement
Job site storage

*Misc.*
Trips to Supply House
Theft
Uncollected Money
Collection fees
Unbillable Hours
Commissions
Call Backs / Warranty work
Shortages
Bad Checks
Delivery
Credit Card Sales
Drug Testing

*Legal *
Legal advice
Law Suits
Incorporation / LLC fees

*Advertising*
Marketing
Business cards
Signs
Radio / TV
Newspaper
Flyers / brochures
Material Purchases
Inventory

*Labor*
Wages
Salaries
Dispatcher
Answering Service


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## KAP (Feb 19, 2011)

Roughstock said:


> I have been contracting on the side for a little over a year now. Yes, I am legal and I do have insurance. Right now I currently have a regular job as an operations manager, but I have been working in the food industry for 15 years and to be honest I am just getting burned out on it.Also, the Mrs. is tired of me being at one job or the other and never being home.
> 
> I am thinking of taking the contracting full time. I mostly concentrate on remodeling and have not done a lick of advertising other than a couple posts on Facebook. My schedule stays pretty full with subcontracting out a lot of tub installs for a guy that can't get all of his done as well as calls for local work.
> 
> ...


There are formula's that prepare you for the switch, but it's more comprehensive than that... to get an idea of your business mindset...

Do you consider Profit your pay (i.e. - what you get paid after everyone else is paid)?


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## sparehair (Nov 21, 2008)

You soulnd like youre pretty disciplined. If you have tools bought by you work you have an ASSET. If you have paid down debts you are improving cash flow by reducing interest costs. 

Dont work for show, work for flow. The incremental steps you take to make better money on your time will snowball.

Now, its easy to stay busy when youre working for under the table type rates as a sub of a sub. Can you stay busy makeing retail rates? Can you make better than retail rates?

You should have six months expenses saved plus operating capital (something like 1 or 2 time monthly sales). You need to be ready to live with 30 to 90 day pay cycles depending on who youre working for. 

The most important thing is what is your marketing plan? Facebook is not enough. Craigslist is not enough. You need to spend money and time on marketing. Before you quit you should have built a website and started running adwords campaigns.

You might think nah dont want to that. Well I started on craigslist and worked without marketing off of craigslist. I went from 30k a year to 20! And I kept trying to make it like that for 4 years before I started advertising. Up to my ass in debt. Once I got serious about marketing I went from 30k in cc debt and student loans to zero in about 3 years.

There are so many expenses and people can smell desperation and will lean on you if you need the work. Plan on actually receiving 30 cents on every dollar of revenue!



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## Jaws (Dec 20, 2010)

Sounds like you have your stuff together. Good for you

10-15% of estimated gross sales is pretty good. We had less when we Started, and probably only a months wages in personal. I took about 1/3 my current salary for 5 years with only 2 small bonuses throught that 5 years to build the shop, trucks,trailers equipment yada yada yada and operating capital. 9 years later we still leave a lot of the profit in every year to compensate for growth. 

Just be disciplined in your salary is my advice. Earn that good living you'll hopefully make later now. 

Good luck


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## TxElectrician (May 21, 2008)

I started with $1,000.00 and plenty of tools. Still have most of the tools.


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## SectorSecurity (Nov 26, 2013)

You will be amazed how hard you will Hussle to find work once you make the switch.



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## 480sparky (Feb 1, 2009)

TxElectrician said:


> I started with $1,000.00 and plenty of tools. Still have most of the tools.


I started on a shoestring and within a year I tripled my net worth.






































Yet even to this day, I'm still trying to figure out what to do with three old shoestrings.


:laughing:

.


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## Bull Trout (Dec 6, 2016)

Ideally, I would say about 3 months of your overhead costs, including your own salary
plus what you will have to pay out of pocket for the first job. 

I started with less, and don't know if I would have taken the same advice when I started


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## Windycity (Oct 3, 2015)

Everybody's situation is different, the one thing I have to ask you that you need to look into first is does your current job provide you with health insurance? A lot of contractors I know, health insurance is provided through their spouses employer. 

Health insurance can be extremely expensive if you are the sole breadwinner in your family and need to provide insurance. don't forget to look into that as well at how much it is going to cost you to purchase it on you own

If you and your wife both work and provide for the family then if you go out on your own her income will help sustain you through the hard times. 

Being your own boss and running your own company is great however it takes a lot of climbing to get on top of the hill. 

Obviously if you have a family to support you will need more capital reserve to sustain you through the hard times. If you are married and have no kids and both of you work you need less capital because you can rely on her through the lean times.


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## Jaws (Dec 20, 2010)

Windycity said:


> Everybody's situation is different, the one thing I have to ask you that you need to look into first is does your current job provide you with health insurance? A lot of contractors I know, health insurance is provided through their spouses employer.
> 
> Health insurance can be extremely expensive if you are the sole breadwinner in your family and need to provide insurance. don't forget to look into that as well at how much it is going to cost you to purchase it on you own
> 
> ...


Very good advice :thumbsup:

I was 26, first born on the way. I had to make sure I had the Jack to pay the Dr before I quit my job.... :laughing: I did have a big trailer full of tools though :laughing:

Btw I suspect most wife's insurance sucks now. My wife works for the dept. Of the atty gen of Texas and it costs me 1100 or so for my two kids and myself for HI, DI and EI. Thats through a state agency...

Biggest fight of my almost 14 year marriage was trying to get her to quit her job when #2 came along. Take out private school (wouldn't need it if she was a stay at home) and her commute/work clothes/CE the only reason she works is for insurance and I'd gladly pay that to have her with my daughter's. She left work for a year twice and we made it no problem 

She's 12 years in though so in 8 she can quit and get half her check and her insurance (she getd free insurance from now on if she leaves her money in her pension) when she turns 57.... so that should cover my meds by then. :laughing:

Several of my buddies wives have insurance through work and they buy their own.... 

When I was a kid it wasn't like that:no::sad:


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## Windycity (Oct 3, 2015)

Thanks jaws! It's been quite a few years since I have had to worry about insurance but talking to other contractors I understand that it's quite the fiasco 

Something I would like to add besides the issues that I mentioned above is you have to take into consideration of how lean of a business you are operating. If you decide you want to be a contractor full time and run out and finance a brand new truck, then you you decide you need a trailer which is financed, then you rent a shop to keep all your stuff in which requires a monthly payment. Then a job comes up requiring a bobcat that you lease and all of this on top of the fact that you have to shell out $1200 a month for health insurance makes your business extremely top heavy and vulnerable to failure. 

On the other hand if you are smart about it and you keep your overhead low by purchasing an older pick up truck/van that is paid for in cash and have absolutely zero debt and operate out of your garage instead of renting a shop. Then your business becomes more sustainable especially when you are first starting out. 

You say that you are not happy at your current job however when you are a business owner and business is slow and you have to make a decision to either pay for your cell phone bill for the month or pay the cable bill for the month because you don't have enough money for both that's pretty miserable as well. 

If you are currently living living paycheck to paycheck imo you are definitely not in a position to go full-time with your business financially. One of the best reasons to work for somebody else is the fact that you should reliably receive a paycheck every week as opposed to running your own business


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## sparehair (Nov 21, 2008)

Windycity said:


> Thanks jaws! It's been quite a few years since I have had to worry about insurance but talking to other contractors I understand that it's quite the fiasco
> 
> Something I would like to add besides the issues that I mentioned above is you have to take into consideration of how lean of a business you are operating. If you decide you want to be a contractor full time and run out and finance a brand new truck, then you you decide you need a trailer which is financed, then you rent a shop to keep all your stuff in which requires a monthly payment. Then a job comes up requiring a bobcat that you lease and all of this on top of the fact that you have to shell out $1200 a month for health insurance makes your business extremely top heavy and vulnerable to failure.
> 
> ...


On the other hand, if youre dont like the money you're making now it will never get better until you make a change.

We are all on sled teams. The scenery doesnt change unless your the lead dog.

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## Roughstock (Jun 26, 2017)

Thanks everyone,
So If I figure it right I should need somewhere between 3 and 6 months of overhead including my salary and insurances. 
A lot of things that were mentioned are not where I am headed at this point. things like warehouses.
I am running a pretty lean outfit, mostly just me and some day labor occasionally. I run my office out of the house and truck and trailer are already covered. 
We don't have any business loans and keep our accounts that the local yards caught up. Currently my salary keeps the lights on and internet running so I can either consider them business expense or cost of living that comes from the salary. 
I have about 3/4 of my website completed, but it is not ready for publication at this point as far as other marketing is concerned I just haven't gone there yet because I am busy enough that I have had to turn away work as it is. If I had more help I wouldn't need to turn away work, but then that also increases overhead costs that I need to save for.
Well I have some saving to do


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## Calidecks (Nov 19, 2011)

There comes a time when you have enough assets where you can just drop it all in the same pocket. As a sole proprietor there's no difference between me or my company. Legally and financially. 


Mike.
_______________


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## Irishslave (Jun 20, 2010)

Californiadecks said:


> There comes a time when you have enough assets where you can just drop it all in the same pocket. As a sole proprietor there's no difference between me or my company. Legally and financially.
> 
> 
> Mike.
> _______________


Then why am I keeping 3 separate bank accounts? Plus and my wife gives me the jazz about it I'll have different caches of cash in different places...I keep everything separate..Drives her crazy she puts hers all in the same place....I say that's why wallets have different compartments...Hell I go out of my way to buy pants with extra pockets. 

I wonder if I'm the only one who does this just to keep track of everything?


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## pathbuilder (Jul 22, 2017)

Roughstock said:


> If I had more help I wouldn't need to turn away work, but then that also increases overhead costs that I need to save for.


Careful with this.. If you don't hire them you'll turn down more work. Hire them and have that overhead sure, but higher sales too and more profit.


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## Calidecks (Nov 19, 2011)

Irishslave said:


> Then why am I keeping 3 separate bank accounts? Plus and my wife gives me the jazz about it I'll have different caches of cash in different places...I keep everything separate..Drives her crazy she puts hers all in the same place....I say that's why wallets have different compartments...Hell I go out of my way to buy pants with extra pockets.
> 
> 
> 
> I wonder if I'm the only one who does this just to keep track of everything?




I have a bookkeeper that goes through all my finances and separates business from personal. However where the money is stored isn't really that relevant. It's how it's made and where it's spent.


Mike.
_______________


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## Calidecks (Nov 19, 2011)

In other words, if I have 100k in the bank after all the bills are paid. Is it mine or my company's? There's no difference. 


Mike.
_______________


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## Windycity (Oct 3, 2015)

pathbuilder said:


> Careful with this.. If you don't hire them you'll turn down more work. Hire them and have that overhead sure, but higher sales too and more profit.




It's kind of a double edge sword. 

Yes you will have more responsibility to keep guys working however you will be able to take on more and bigger projects that you will not be able to do by yourself.. 

I am fortunate because I have a couple of part-time guys that I can work full-time if I need them. 

One guy is married to a nurse practitioner who makes really good money so he has no problems taking time off, and the other one lives with the mother in law and his wife also makes decent money so he is happy sitting at home playing video games all day. Great guys but whatever...friggin 40 year old slackers but it's great for me


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## Irishslave (Jun 20, 2010)

Californiadecks said:


> I have a bookkeeper that goes through all my finances and separates business from personal. However where the money is stored isn't really that relevant. It's how it's made and where it's spent.
> 
> 
> Mike.
> _______________


That reminds me I have a ton of receipts from the last month or so in the truck I need to bring in and sort through. I bought a new ledger today with it's own pen and it stays in the truck...everything will get noted everyday including mileage


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## Windycity (Oct 3, 2015)

Irishslave said:


> That reminds me I have a ton of receipts from the last month or so in the truck I need to bring in and sort through. I bought a new ledger today with it's own pen and it stays in the truck...everything will get noted everyday including mileage




It has its own pen? Can the pen be used for anything else haha

Do you use your truck for personal and business? I would think logging mileage every day could be a royal PITA


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## Calidecks (Nov 19, 2011)

Irishslave said:


> That reminds me I have a ton of receipts from the last month or so in the truck I need to bring in and sort through. I bought a new ledger today with it's own pen and it stays in the truck...everything will get noted everyday including mileage




I have five vehicle. It's easy to claim all the mileage for one truck as business. 


Mike.
_______________


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## Roughstock (Jun 26, 2017)

For mileage I use an app on my phone called MileIQ. It's pretty slick.


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## Irishslave (Jun 20, 2010)

Californiadecks said:


> I have five vehicle. It's easy to claim all the mileage for one truck as business.
> 
> 
> Mike.
> _______________


I have two I use for business (soon to be 3) one is for estimating...it get's the good gas mileage I just feel better knowing how much I'm putting into all these damn estimates....it's a loser and it comes off


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## Irishslave (Jun 20, 2010)

Roughstock said:


> For mileage I use an app on my phone called MileIQ. It's pretty slick.


It's all logged in my GPS.....I'll write it down before clearing


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## Calidecks (Nov 19, 2011)

Irishslave said:


> I have two I use for business (soon to be 3) one is for estimating...it get's the good gas mileage I just feel better knowing how much I'm putting into all these damn estimates....it's a loser and it comes off




I have two trucks but only one where all the mileage is business. 


Mike.
_______________


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## KAP (Feb 19, 2011)

Californiadecks said:


> In other words, if I have 100k in the bank after all the bills are paid. Is it mine or my company's? There's no difference.
> 
> 
> Mike.
> _______________


It matters if you get sued... unless you're a sole proprietor, if the money is in a business account, it's the businesses money (and treated as a separate legal entity) until disbursed to you ... 

Keeping business and personal separate is critical in this regard... if you don't, even under an LLC you are potentially piercing the corporate veil and can be opening up your personal assets to liability...


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## TxElectrician (May 21, 2008)

KAP said:


> It matters if you get sued... unless you're a sole proprietor, if the money is in a business account, it's the businesses money (and treated as a separate legal entity) until disbursed to you ...
> 
> Keeping business and personal separate is critical in this regard... if you don't, even under an LLC you are potentially piercing the corporate veil and can be opening up your personal assets to liability...





Californiadecks said:


> There comes a time when you have enough assets where you can just drop it all in the same pocket. As a sole proprietor there's no difference between me or my company. Legally and financially.
> 
> 
> Mike.
> _______________


...


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