Starting a new company.

[grumpy]

Those of you who know me know that I have a good foot hold in the industry in my area, but I am starting my own company right now as I type this. I am going to use this thread as a diary of sorts or my triumphs and pitfalls.

It is my hope that members starting their own businesses can read my diary and avoid many of the mistakes I am destined to make in the coming months and years.

If anyone has any questions regarding this thread I encourage you to open a new thread quoting my post.

[grumpy]

I will start this series by commenting on planning. I believe that only you can hold yourself back from success just as only I can hold myself back. Don't procrastinate on anything!

As we all know there are exceptions to every rule. There is an old saying "If you fail to plan, you are only planning to fail." If your going to procrastinate on anything, let this be it. Your business should start with a good plan. This does not need to be an elaborate business plan. Sit down and answer these following questions. What area will I service? What services will I offer? How will I find customers? How much will this all cost me to setup?

I sat down and spent many many hours forecasting my overhead, because if you don't know your overhead you can never submit an accurate bid. Your overhead are items such as office rent, truck payments, general liability insurance, telephones, advertising... all the bills that can't be directly tied to any spcific job AND re-occur regardless if you do any work or not. Know your overhead!

[grumpy]

Dealing with cashflow.

No matter how well you plan your startup, there are going to be snags in that plan. My first mistake is that when determining how much money I needed to operate for the first month I made a big error. That error was in calculating the life cycle of an estimate.

I was used to working for one company for 4+ years when I called it quits and went on my own. I was used to a constant flow of sales. I did not realize that the average person takes a few weeks to make a decision, and then it takes a few more weeks to get the materials and schedule the subs. This means it's about 6 weeks before a single penny rolls in!

Woops!

I was really stressed last week. I had to dip into my personal savings MUCH more than I anticipated. I won't got into details but let's just say I was ready to take some equity out on my condo ;)

Now that the money is rolling in, I am able to begin re-imbursing myself for my expenses. I anticipate break even before the end of the year. Hold me to that!

[grumpy]

Will accepting credit cards help your business? I determined that the ability to accept credit cards will help my business since I am dealing with mainly residential home owners. Keep in mind that accepting credit cards might be a wasted expense for some companies, while others it is a valued investment.

To determine if you should accept credit cards ask yourself: Have I ever lost a sale because I don't accept credit cards? Have any of my customers wanted to put their bills on my credit cards? What are my competitors doing? Who are my customers (business/consumer)? and do I expect to win more work for this expense? Can I afford to pay out the percentage that the merchant banks ask, or will that eat into my profits too much?

Chances are, if you do mostly new construction, you will not need to accept credit cards. Chances are if you are a service contractor, like me, who works for several customers each week; you're probably going to want to accept credit cards.

Once you decide that you want to accept cards, there is a variety of options available to you. You can accept credit cards via phone by placing a phone call and verbally processing the information. You can accept credit cards using the traditional swipe terminal. You can accept credit cards via internet allowing your customers to input their information in your website, or by using a program that allows you to manually process the cards.

Choosing which method ot use really depends on your situation and what company you plan to work with. I choose to use the swipe terminal because I pay a much much lower percentage to the merchant bank. I nisit with the customer in their house, swipe the card and process the order with them right there. There are phone terminals which I wasn't aware of when I deiced to use the traditional swipe terminal, which accomplish the same thing and are much smaller and organized.

When you do accept credit cards what you need to ask the merchant bank is this: What will my transaction fees be? What will my capitalization rate be? What will my monthly statement fee be? I pay $0.25 per transaction with a 1.5% capitalization rate, that varies from month to month, and a $10 monthly statement fee.

[grumpy]

In my area power outages are somewhat common because of an old grid and a huge recent growth in both commercial and residential properties. Usually these outages last between 10 and 30 minutes. Because of these frequent outages I have my server on a uninteruptable power supply (UPS).

Today we had a power outage at 9:15 am. This was due to some blown fuse blocking all power from entering my building. This was not repaired until about 5 Pm. I found out today the UPS is more important for the phone system than the server.

I have some modern phones which require electricity to operate. Also my answering machine is electrical. I lost a whole 8 hours of phone calls. A whole day down the drain.

I highly suggest to anyone who has an answering machine, go buy a UPS for your answering machine so you don't lose any incoming calls.

[grumpy]

Holy Cripes! It's been a long time since I made an entry in this log. The point being don't overload yourself. This is a mistake I made.

About a week ago I had to step back because I was killing myself. There is more to life than just work work work. 16 hours a day for 6 days a week for 3 months? I don't even want to do the math on that one but I can tell you everything was suffering because of it.

I encourage you not to fall into the same trap I fell into and to find a release for stress. Mine came in the form of a video game my brother bought... I guess it could have been anything, it was just the right place and time.

Also limit yourself and the time you work. I think 50 hours a week is totally acceptable and I'd even say 60 hours is acceptable during the busy season but set clear defined limits! Now let your friends and family and employees know your hours. I have found this helps alot.

[grumpy]

I don't think hiring a salesman to run your leads is for everyone. I am more than capable of making my own sales, but if I wanted to be the only salesman at my company I'd still be working for someone else. To acheive my goals of growing a large exterior remodeling company running multiple crews daily, I will need the assistance of sales people.

I have tried out quite a few sales people. I have one currently working for me and he's doing a wonderful job. I had 2 before him and one after him. Those 3 haven't worked out. I have leared alot from them... what not to do when hiring a sales person.

The first thing is don't allow yourself to be sold. I figured if I allow myself to be sold then so would my customers... wrong! Also don't hire someone out of desperation. This will certainly not work... even if you rationalize it and tell yourself it's only until you find someone better. I lost alot of money on the 3 salesmen I hired. Correct me if I am wrong but aren't they supposed to make me money?

I have found that the inexperienced is the best salesman because they will be more open to learning your sales system. What you don't have a sales system? YOu better develope one! You have to teach them how you want them to sell.

I have also found when hiring salesmen the first thing they ask for is a price list... Duh! Why make them re-invent the wheel? You've figured out the prices before, you might as well write them all down in one organized neat spot.

Design a commission system which promotes your salesman to sell more. I have designed a tiered system which pays a higher commission based on their monthly sales volume. This promotes them to sell more jobs at my price rather than selling less jobs at higher profit margins. But the point is design a system that works for you.

Samples samples samples. How can a salesman sell without samples to show the customers?

You should have all the above mentioned ready BEFORE you decide to interview your salesman.

The last but probably most important part is training. What I have noticed is I was able to give my one successful salesman more training than my three unsuccessful salesmen. I first passed out all the above mentioned materials. I then went through and explained everything to him. I then took him with me two days, 6 sales calls, so he could see me in action. I then followed him around for a day to see him in action. Lastly, before I sent him loose on my customers I did some role playing with him in the office forcing him to SELL ME our services. LOL this is probably the hardest sale he ever had to make :) I also think it is what has determined his success.

A perk which I think has really made a difference is the office space I have allowed him. I think part of the reason the first two salesmen failed is the fact that they were not disciplined enough to be 90% on their own. When working from home it seemed they didn't treat their job like a job. I now require my salesman to come into the office once a day, at what ever time is convenient for them but once a day at least. I give him a loooong leash, but he is still on a leash. Heck, afterall if someone were self sufficent enough to operate totally on their own with no assistance from me, why wouldn't they already be running their own business?!

The last piece of advice I can give is not biting off more than you can chew. If you have read this post faithfully, you will see that is a bad habit I have and I repeat it all too often. Don't hire another salesmen unless you can dedicate the time. Make sure your first no longer requires the focus of your attention, os the second will suffer. I think this is part of the reason my third salesman failed... that and katrina. He is an ex-storm chaser and I suppose I just didn't give him reason enough to stick around so he went to rip off, errr I mean sell to the katrina victims... as if they haven't been victimized enough already. I'm actually glad he didn't work out. I could tell after a few days he wasn't a good fit for my company or my sales system.