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Going from one man show to a crew

MDFContracting's picture

Going from one man show to a crew (post #205163)

I' ve been running a one man renovation outfit for two years and am thinking its time to start growing.  I've got about a months worth of work booked ahead, and have casually taken on a helper here and there.  I just want to know If theres any good advice to be had and what you guys think the biggest potential pitfalls are.    Any suggestions / tips on bringing in some of the bigger jobs that would fuel growth are definitely welcome as well.  Thanks.

Matthew Daniel Ford & Associates

Renovations and Fine Carpentry.

Cost of doing business increases (post #205163, reply #1 of 17)

Your cost of labor will go up significantly.

Workers comp and related insurance will be the biggest hit.

Your share of employee payroll taxes will come into play.

You will need to devote more time to the office side of your business.

And realize that, depending on your employee(s), efficiency may be less then what you are able to produce.

You will need to have work lined up a lot more then a month ahead and you will need more working capital then a one man show needs

 

The positive side is, if bid properly, you will be making money off each employee.

Having a crew will focus you to get the current jobs under motion and line up future work.

You can hire talent in areas of your work that you may not be as well versed.

 

My own early years were working with other similarly situated one man operations in an informal agreement to work together on larger projects. We agreed to split profits 40/60 with the job originator getting the larger share. Not a great system, but it was a start.

I now operate with two full time employees and have a handful of laborer level help that I can bring in if schedules match.

 

Terry

What Terry said. Your (post #205163, reply #2 of 17)

What Terry said. Your employee will be expecting a check every week, regardless of whether the job is done or the customer pays. Uncle Sam and your Governor will also be expecting quarterly payments on taxes. You may also be taking on the "life" of your employee, that can be good or bad.

A quick story about one of my employees. A young guy, smart, capable, experienced, dependable, until he got a new girl friend. That led to late nights out, drugs, a couple of crashed cars, OUI. His car insurance went up to $700/month and he was still paying on the car that was totaled, paying doctors bill for the girl who got hurt in the accident. He was asking for more money and advances on his checks. His work went down hill quickly.  I'd send him into a room to fill nail holes, come back to find about 1/3 done and done poorly. I would pick him up in the morning and he would slump in the seat belt, sound asleep. One morning he met a vinyl siding contractor at the coffee shop that offered him a couple dollars more an hour. He didn't call me. On his way to the new job, he fell asleep on the turnpike and crashed. Brain injury. I could tell you several other disasterous stories.

I put an add in the paper once in less hard ecconomic times. Must have had 500 applicants, probably 10 were possibilities. Today, you might get 5000. Don't know where you are but you may want to consider using a temp service. That way you can try a few folks and let the agency deal with the pay and taxes. You can hire as needed with minior commitment. To save yourself the phone ringing off the hook, you could use the employment agency to screen applicants if you don't go with a temp service.

Taking on an employee is a big commitment but it's very difficult to do carpentry by yourself. Finding someone that  appreciates your position and business isn't easy. Many look for family members rather than take a shot at the general population. It can also be difficult to keep your business issues private when you work with one employee day after day. Think it through carefully, the odds are heavily against you. When, if, you find a good employee, life can be easier but nobody will take your business to heart like you do. You will need to train them, plan out their days, and hope they stay after you make the investment.

Beat it to fit / Paint it to match

Truer words were never spoken (post #205163, reply #3 of 17)

Taking on an employee is a big commitment but it's very difficult to do carpentry by yourself

IMO there is a large step from one-man work to operating a company with employees. Working on the job with one helper is very difficult, because you need to be the 40-hour lead on site AND the entire management staff as well... sales, project management, etc. It starts to work more smoothly when you can get yourself off the site most of the time, and concentrate on running the business. To do that you need a very good lead carpenter who makes absolute top scale, and at least one other guy with him, and you need a lot of work lined up to make those commitments.

Having a one-month backlog of work is nowhere near enough to take this step--you need several months of work available, with more customers calling all the time. If you are currently a little backed up, the options are to hire a guy for a few weeks to clear the backlog, or maybe team up with someone else or sub out some of the work. Do it in a way that involves minimal complication and commitment, so you can go back to one-man operation as soon as that month of work is over, without any sort of break-up drama. 

Terry, Hammer and David.......... (post #205163, reply #4 of 17)

How many employees are necessary to provide enough bang for the buck?  I assume that on one hand there's the owner and a helper scenario which most think is wrong for at least two reasons.  The owner needs to be away from the job to make it profitable by handling the day to days and also to generate more work.  That being the case, hard to then really have the 2 guys doing the job that you expanded in the first place for.

Smitty runs his now and for some time, with 2 talented carpenters and I believe semi recently added a full time 3rd guy.  He still gets in there for sure, but the company now has enough crew for additions, new construction and probably two operations going the same time on remodels.

 

So, back to my question=

There can't be that much money cushion to just have them available for when necessary, there has to be enough work ALL THE TIME to make it profitable.

I have been tempted to expand a couple times over the past 20 yrs or so.  Outside of the work getting harder for one guy the older I get, I've thus far resisted.  Now I'm old in carpenter age (similar to a dog, it's way older that the actual years I'm pretty sure) and have begun to turn down some work as I don't have the balls anymore to do it.

Prior to old age creeping up on me, I just remembered the fluctuating manpower when I worked for small contractors.  We'd have 2 and a boss...............grew to 4 and a boss......................all of a sudden, me and the boss.  I didn't want to go through that runaround.  I definitely couldn't send them over to my house to put in time, like I had been kept on the payroll to do b/4.

To me there seems to be some magic number (of course according to workload) of employees to boss that can weather the fluctuation of business.  Just curious if you guys might know that number.

thanks.

A Great Place for Information, Comraderie, and a Sucker Punch.

Remodeling Contractor just outside the Glass City.


http://www.quittintime.com/

 


Magic number (post #205163, reply #7 of 17)

Cal, I think it's 2.5 guys, at a minimum. It really depends on the type of work you do, but for general remodeling, two guys who are both fully qualified and willing to do everything from demo to punch list... plus another guy who is a smart laborer and helper... you can move jobs along nicely and there is enough manpower so that the owner is not required in the field... although, he should expect to put in some hours every week on the job, possibly even doing a steady string of small jobs / service calls on his own.

Get up to 4-5 men and you have two jobs going at all times with no owner hours in the field, or else you're going very large remodels or new custom homes.

Magic number - who knows? (post #205163, reply #10 of 17)

Calvin,

I'm small potatoes.

I have one very talented carpenter (Tim) who has been with me coming up on 9 years.

I have another carpenter (Kyle) who has been with me about two years. He is a hard worker, reasonably talented and wants to do the best work that he can with a strong desire to learn as much as he can.

I have a handfull of laborer level help that I can get on short notice if schedules can work out. And yes, these part-time employees are covered with my workers comp and payroll taxes. I am too much of a coward to risk using anybody as an "independent contractor". Not that I wasn't guilty of that in the past.

This number seems to work the best for me. I have had as many as 4 employees, but this was at a time that I was doing more new houses and large additions. At that time, I had enough large work that having 4 guys did not seem to be a problem, but they got real expensive by the end of the summer.

Luckly, one quit to go south and another found a factory job before I had to lay anyone off.

 I can forsee no reason that I will ever have more manpower then I do now.

 

Magic number?

 

Terry

Thank you, (post #205163, reply #11 of 17)

Sort of what I was picking up on your conversations  It makes perfect sense to me.  2-3 so you can make enough to make it worthwhile.  One?  Borrowed shared labor...............but then again, as a subcontractor I suppose.  You couldn't be teamed up like that for long I don't suppose, and still follow the IRS guidelines.

Along time ago, a close friend and I started out together.  That was our relationship, but we were more partners  than anything else.  Everything was split down the middle and we were not of any business mind at all.  Boy what an education you can get just by being around for so long.

Glad I came here, followed along in the business threads and learned how to make more than a living................

Thanks again.

A Great Place for Information, Comraderie, and a Sucker Punch.

Remodeling Contractor just outside the Glass City.


http://www.quittintime.com/

 


I should elaborate. (post #205163, reply #12 of 17)

Calvin,

I should have said two men is the magic number for me.

I have to be small enough to work in the field. I didn't go self employed to be a businessman - I wanted to do carpentry my way.

I absolutely hate the business aspect of being self employed with employees. Too much time pushing paper and trying to sell enough to keep everybody happy and me profitable. Too often, that means a full day on the job, going to a potential customer for a meeting after work, then home for number crunching.

I know a builder in town (now semi retired) that shined on sales and delegating (My biggest weak points). He told me a number of times that he didn't start making any money till he hung up his tools and acted as a paper contractor.

At his peak, he had three office / drafting / estimating people. One guy doing nothing but punch list and customer hand holding. A clean up and material delivery guy. Enough man power to operate two framing crews. Trim crew. Some of his men would float between framing crew to siding. Sub contractors that he could count on.

His operation ran smooth enough that he sold more then one job that the only time he was physically at the job site was at the first meeting with the customer and never set foot on the lot again.

That was his magic number. For me, the thought of operating that way makes me nauseous. I have to swing a hammer and hit my thumb enough to feel like I am doing something.

 Terry

Terry (post #205163, reply #13 of 17)

Today I was in my glory.  Framing and sheeting some porch openings with the homowner and his rental house carpenter.  The homowner is fine with direction (and watching)-his guy-very good.  So, I did layout and cut, they assembled.  All went smoothly and hopefully so will the installation of the glass and door tomorrow.  Then I leave, maybe to return after the brickie to do the siding (trim detail).  This job is two blocks away if you cut through my ravine (next to where the horseshoe pits are).  Since I can't drive my van that way-it's probably 4 blocks away. 

So pc. of cake-no employees, no payroll, no liability and 2 guys helping.

A Great Place for Information, Comraderie, and a Sucker Punch.

Remodeling Contractor just outside the Glass City.


http://www.quittintime.com/

 


started in '75  with  one (post #205163, reply #14 of 17)

started in '75  with  one employee... got up to  5 carps  in the '80's

went to work for  someone else  when they closed  the credit  unions  in Rhode Island...1991

 

http://www.projo.com/specials/century/month11/collapse.htm

 

took about a year  to   get thru  that ... then  never  looked back...

settled  on  3  carps  as  my  ideal...  a  part time  bookeeper...... an accountant.....  a  payroll service....

an insurance  agent, specializing  in Construction,   who  handles  all our  insurance.

i do all the purchasing , selling, hands on / hands off supervision....

i do the billing

 

and  , since  we are  Design / Build... I  do all the design... half  the jobs  involve  design

i could  leave  the guys  alone  for a week... or a day....  not  much difference..

we  do  repairs, remodeling, additions,  kitchens, baths... new  homes

siding, trim, roofing

we also  have  subs   if the scope  is  large enough

i'm 66....  my  lead   guy  is  27...  he'll probably  take over the business... someday

 

times  get tight.. but  it only takes one phone call to line  up  a year's  work

or   it  takes 20 phone calls

since  we are  a corp.. we  are all employees...  if  we  have  no work, we  lay off all the employees.. including  me

in the past ten years.. that  has  happened  twice.. once  for about  6  weeks.. once  for about  4  weeks

everbody  came  back when we  lined  up work...

i can still swing a hammer, lay out a wall..... grab a shovel

but  it  sure  is nice  having  young  dudes to  take  the load

Mike Smith Rhode Island : Design / Build / Repair / Restore

              www.mfsmithbuilder.com

Mike (post #205163, reply #15 of 17)

Thanks.  It was good of you to lay out the history and the answers to my questions.  I know your situation pretty well and have admired you for making it work.  As we all realize, it just don't happen.

 

And at 62 I admire even more you being able to continue.  The part I like the best is the young dudes thing.  Where you help them dig the hole- I get stuck digging the whole damn thing. 

Yessir, really got to hand it to you!

A Great Place for Information, Comraderie, and a Sucker Punch.

Remodeling Contractor just outside the Glass City.


http://www.quittintime.com/

 


Been there (post #205163, reply #5 of 17)

Some guys will make you money, some will cost you.

Tattoos on the neck, no hire.

Joe H

Thanks for the words and the time fellas..... (post #205163, reply #6 of 17)

 Any advice for building work log??? I find that when I start telling people its goin to be 1 month + before we can start, they start looking for someone else to do the job.  The other thing is that I find I don't get many inquiries about larger renos.  It's usually a deck or fence, or I also subcontract trim and doors from a few larger companies.  What do you find is the most effective promotional dollar??? I currently just go by word of mouth.  This is great for weeding out tire kickers, but if what you say is true, and I need way more work pending at any given time, Then I'll need to advertise.  I'm having some lawn signs and flyers made up, but was wondering if theres any other preferred method I haven't thought of ???

Chicken/egg (post #205163, reply #8 of 17)

You get steady large jobs when people perceive that you are the right guy for the job... enough crew, a track record, etc. It is easier to get there when times are good and there are extra jobs laying around, which is not right now as far as I can tell. At this point, if you can simply maintain a small business that supports you alone, you are doing reasonably well. 

No good advice on marketing here. Yard signs, maybe, but not the cheap foamcore deals with the wire legs. Truck lettering, yes, but not a decal, you want permanent-looking vinyl on a clean, newer vehicle. Yellow pages, no. Web site, yes, but it needs to look professional, so you probably need to pay someone. Facebook page, yes, but it needs regular new content posted. Google Places listing, yes. Direct calls to designers, architects, suppliers, salespeople, etc., definitely. Working your network directly is probably the best thing.

Make sure you understand and (post #205163, reply #9 of 17)

Make sure you understand and follow the law regarding employees.  Many people in your position think they can just get another guy and treat them as an independent contractor (thats tax language not construction).  If you think you can just pay them and not withhold taxes, cover them with work comp, you are looking for trouble times 3.  A truly independent contractor will provide his own tools, set his own schedule, perform tasks as he sees fit and in any order he wants and he has skin in the game...he can lose money as well as make it and is typically paid by the job not the hour. 

If you are telling someone when to show up, when to leave, when to eat.  If you are training them, providing tools, telling them how to do the job, paying them by the hour...then they are employees.  if you pay an employee and don't withhold taxes and simply give them a 1099 pretending they are a contractor, you will be on the hook for both the employers side of the FICA tax and the Employees side along with fines and penalties. 

I liked the suggestion of teaming up with another one man show on a 60/40 split.  You can still maintain your independence on most jobs but be able to tackle the occasional larger job like an addition and if needed get temp agency help to avoid the whole employee mess.

To me the biggest  pitfalls (post #205163, reply #16 of 17)

To me the biggest  pitfalls are in supervision - the larger the project the more time you spend watching rather than doing.  Then there is the balance between hiring guys who are good at what they do (essentially contractors working as carps) and guys who need a lot of guidance and take your time away from other things.  I had one carp throw me under the bus with a client when they developed a relationship outside of work that totally changed my mind on hiring guys who know too much, or at least think they do.  My attorney confirmed that if it's done "right", an employee can steal business in a way that's very hard to do anything about.  There is definitely a "type" that makes a great employee, another that makes a good indepenant contractor...things go wrong when one is put in place of the other.

You cannot protect against everything that will go wrong with clients or employees, but the best protection seems to be a very close attention to details and being hands on constantly - knowing exactly what's going on at all times keeps things from sneaking up on you.

 

Cheers!

Don

 

Beer was created so carpenters wouldn't rule the world.

So much truth here. I found (post #205163, reply #17 of 17)

So much truth here. I found myself nodding along with almost every post. My extra couple of thoughts:

  • part time employees can be great. My longest time employee is a retired cop who grew up working for his contractor dad. He was looking for something to keep him busy but not too worried about the money, and wanted time off to look after his horses and 10 head of cattle. He's there about 25-30 hours a week and is stronger and fitter than I am despite being 5 years my senior. Took the pressure off me in those early days knowing if I couldn't find enough work that he wouldn't miss a mortgage payment. I have another employee that takes a few weeks off every summer and winter to stage manage shows at a local live theatre. These guys don't miss a beat if work slows up or a deal falls through.
  • do it legally. As other posters have mentioned, you are sooo screwed if you skimp or cut corners. All it takes is one disgruntled former (or current) employee to pick up the phone and you could be on the hook for many thousands in back pay, taxes and penalties.
  • anything you do yourself needs to be done to professional standard. You'll be better off in the long run to pay for services like bookkeeping, payroll, marketing and so on - unless you have the skills to do it in a way that doesn't make your business look cheap and sloppy.
  • co-operation between small contractors can work powerfully for you. In my early years I made a pact with several former co-workers who were now one- or two-man shows like me. We agreed to never turn down a job without calling the other guys first. On numerous occasions we teamed up to take on projects larger than what we were willing to tackle individually. Skills, experience and tools have all been shared over the years. We all learnt from each other and our experiences in the new world of contracting. To this day we consider each other allies even though technically we're competitors. We've all specialised a bit these days and still refer each other for work, use each other's employees or hire each other as subs. There has never been any kind of formal arrangement and it has worked beautifully.

Buccaneer Contracting

Penticton, BC