Need advice from business guru's

To borrow or not to Borrow

Guys I am getting so busy I don't know what to do. I am overbooked for the next 8 months. My dilemma is that we just started our business 6 months ago and up until this point we have had to live from job to job cash wise.

We have ver profitable projects over the next 8 months and we expect to build up our cash flow significantly. Our problem is that we can't accept any more work unless I hire another crew. In order to hire another crew I need to take out a line of credit to purchase another vehicle and tools.

Have any of you been in this position? What should I do? I have never borrowed money in my life. What do I need to consider? If I get to big too fast what could happen?

I second the motion-

Josh, you are finding yourself in an enviable position and managing growth is the toughest part- staffing up then the responsibility of sustaining the salaries and overhead. So much is local to your market/economy.

Still, nice position to be in! Your caution sounds like you will keep quality ahead of production and you are to be commended for that alone.

Good Luck!

Be Careful

Be careful about reckless growth Josh. It is better to grow slow and steady than to be getting work that is not geared to your present operations.

Do you know your cost of doing business? Is there a chance your prices are getting you lots of business, but not covering overhead, much less profit.

Maybe you should start raising your prices...anyone can be low bidder.

Are you working with your tools? If so, you may be to step back and start managing your business more while looking at the bigger picture.

Are you paying yourself a salary? Is it a fair salary that is covered in your cost of doing business? If not, why not?

When you go through growth spurts too fast, you must be careful that you continue to pay your bills on time. Some people see that "cash flow" and think they really are doing great...can buy anything they need.

Do you have an accountant or CPA? If not, you need to get some professional assistance.

It takes money (cash) to make money, but you have to use those reserves to grow slow. In addition, there are some things you will always need to continue growing, so be careful of your expense priorities before you let loose with a dime.

Pay your bills on time, don't overstaff, make your payroll on time, pay your payroll taxes on time, watch your estimated taxes, read, think ahead, work hard, etc.

It sounds like you are in a bubble market of some sort and you need to realize that those markets can be tricky. One day they are here and the next day they are gone. However, in our business the lead and lag of this type of market is not easy to see changing and it doesn't happen over night.

Bill

Josh,

Try this. http://www.barebonesbiz.com/.

Best of luck brother, sounds like you're on your way. Chris

Interesting Bill. I have almost tripled my hourly rate since starting. I think it has been the quality that sells my work. I almost never bid less than my competition. Typically I have been atleast $2 a square foot more.

Growing pains

Josh, if your jobs are profitable, you should be able to buy a new truck and tools in the next 6 months. Given that scenario, 2 new crews and vehicles every year, that is too much although. Don't be in too much of a hurry. Turn down work as needed and it will still come. Good luck, Tim.

Josh

I would proceed with caution regarding the second crew. Right now, you're booking a whopping 8 months in advance. But if the demand should slow or, supply increase, you may find yourself in the very ugly position of having to lay-off staff. No fun. Then, if the demand should pick up again youll have to rehire and that can be a job in itself with plenty of tirals and tribulations. You could find yourself in a never ending cycle like this. To me, it seems there is some danger in expanding a 6 month old company into a second and third crew. It may require twice as much management on your part as well. As several others said in this thread, slow and steady growth. Or as my father always used to say, slow and steady wins the race ).

growing business

Josh,

A good accountant will do a world of good for you. They can point you in the right direction for all the legalities and guvment forms that are necessary. Keep your business in a good cash position and be carefull of debt. Debt will kill you if there is a major downturn. I have seen too many small companies expand quickly and get mired down with all the additional management needed. Good luck,

Gary from Granville

Josh

I know a lot of good folks who gave me a lot of good advice over the years as a journalist. I wrote a book recently just for people like you, called "The Next Contractor" (www.the-next-contractor.com). Let me know if you'd like to tap into some of these minds.

Hey Rich, I think I can answer some of this for you. The first thing I would do is spend $200 and go over to a recommended CPA and talk about all business structures. For us we chose an S corporation because of the asset protection and tax savings. That made sense to me because I have an accounting degree but mabe not for someone else. Either way the money you spend on a consultation is money well spent. Second talk to a lawyer to form your business. All of these services are less than $1000 and you can be assured that if ucle sam knocks on your door you are covered.

Thanks guys for all of your advice. I am really going to keep it close. I love that I can get it straight from all of you.

I really like the idea of saving half and financing half. That seems to make the most sense. That I can do.

After reading everyones threads and considering ALL of them I can see how expanding fast can kill my company. It is really interesting the position we are in. I didn't expect to have so much work and actually have money in the bank. It's great but like I said I can't take on even 1 more job for the next 8 months.

Again thanks for the SOLID advice from all of you.