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Old 01-22-2020, 05:41 PM   #1
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Default Shop Owners: Looking for Start-Up Advice

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.
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Old 01-22-2020, 06:21 PM   #2
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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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Old 01-22-2020, 06:47 PM   #3
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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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Old 01-22-2020, 06:48 PM   #4
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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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Old 01-22-2020, 07:49 PM   #5
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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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Old 01-22-2020, 09:00 PM   #6
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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

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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Old 01-22-2020, 09:04 PM   #7
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It's $48/hr here. I think you missed the part where I said I've been in for 25 years
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.

Quote:
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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Old 01-22-2020, 09:19 PM   #8
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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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Old 01-22-2020, 09:56 PM   #9
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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? 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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Old 01-22-2020, 10:01 PM   #10
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Home equity line of credit
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Old 01-23-2020, 10:38 AM   #11
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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.

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Old 01-23-2020, 10:52 AM   #12
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Originally Posted by JimmyJawn View Post
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? 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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Old 01-23-2020, 12:18 PM   #13
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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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Old 01-23-2020, 12:20 PM   #14
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It's $48/hr here. I think you missed the part where I said I've been in for 25 years

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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Old 01-23-2020, 01:15 PM   #15
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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? 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.

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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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Old 01-23-2020, 05:00 PM   #16
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Originally Posted by JimmyJawn View Post
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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Old 01-24-2020, 08:39 AM   #17
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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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Old 01-24-2020, 08:44 AM   #18
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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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Old 01-24-2020, 09:21 AM   #19
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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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Old 01-24-2020, 10:02 AM   #20
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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.

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