Managing costs and money problems were at the top of the list of why contractors fail. Poor business management skills for failing contractors included: capital, cash flow, and payment schedule issues – all of which will be discussed in the in a future posts since we need to work progressively. We do a deep-dive discussion on the topic of money in the Contractor Cash Course, but for now I would like to interduce you to our first building block on the topic of cost, that is thinking through all the potential costs that are involved in starting a contracting company.
To be clear, we don’t want any one of you to go into debt to start your company if at all possible. If you’re a startup, we recommend you save up. Work though the last exercise in the workbook in Section 6 to get a good idea of how much startup capital will be required for you to get up and running and then set up a dedicated savings account to be able to pay for everything in cash. At this point we would recommend that you don’t finance anything if you can help it. Your insurance provider may offer to finance your general liability insurance policy or your bond, but it may be best if you hold off for some time and just save up and pay these costs in full. This way you’ll be good for the year, and you’ll have 12 months to save for year two. This method seems to work out great for startups and it keeps your monthly income down, so you won’t have to worry about covering a number of added bills each month.
So that’s our recommendation for staying out of debt to start your company. Just start saving while you continue to work for your current employer or come up with some creative ways to earn extra money on the side. Otherwise, you’ll be starting up at a negative revenue which will create some added stress and put undue pressure on you.
If you’re only starting to think through starting your own business and you haven’t pulled the trigger yet, this will be your biggest homework assignment to date. Your homework is to start assembling your personal startup costs. Use your downloadable resource guide and the contractor quick start checklist, hop online, go window shopping, and make some calls to answer the pointed, cost-related questions below. They are very self-explanatory, so we’ll keep this brief as we want you to focus most your time on this lesson by working through the exercise.
It’s time to research and collect information on everything you think you need – anything you know that will be associated with a price tag for starting your company. Follow the exercise and you’ll begin to understand the financial commitment that will be required to get your 1st year off the ground.
It’s also important to note that if you’re serious about starting your business and you are just coming out of the trades, we’ll be discussing budgeting, potential company overhead, breaking even, and more in our Clarity Boost masterclass.
- Research the legally required registrations and applications that you will need to fund. Research and write down all the associated fees that will accompany such registrations and applications:
- Contact your insurance provider for an initial quote for general liability insurance and bonding (get your quote in writing):
- What is the monthly cost of the software subscriptions need (e.g., QuickBooks)?
- What equipment will you need to purchase and what will it cost?
- List all other items, inventory, gear, tools, and equipment along with its cost and add them up:
- Add it all up! What is the estimated total cost of funds you need to start?
