Being your own boss is something a lot of workers dream about. But while there are a lot of benefits to being the boss, there are also plenty of challenges that you have to face. If you are thinking of running a small business of your own, or want to be a freelancer, here are some of the things that you should take into consideration before you make the leap.
Understand market pricing for your services and where you are going to price your service. Don’t try and be the lowest price to buy the work and ultimately take the risk of losing money. Try to compete with businesses priced in the middle of the road with a quality service.
Decide whether you’re going to be a subcontractor or general contractor/lead. There is a big difference in the model for your business if you must do extensive sales and marketing to get new work or if you are going to be a subcontractor and work for a larger contractor. There are pluses and minuses to both. Know which model you are going to start your business with and make sure you understand how to get work. Your margins might be lower with a larger contractor, but you won’t have the headaches of all the sales and marketing.
If you are going to be the lead contractor or specialty contractor and be responsible for getting all your own work, then you need to have a plan for acquiring work. If you are a new contractor, then you won’t have a referral base or repeat customers to rely on. Getting the work is a critical part of survival. Check out lead sources like HomeAdvisor, Porch, etc. Google also offers some free website tools to create a very simple website. Have a plan for marketing your business because it will be expected that you have some online presence.
You cannot start your own contractor business without insurance, licenses, etc. Larger contractors will require that you have these basics in place and most homeowners will also expect you have met basic legal requirements. If you can’t afford these basics you should probably not start your own contracting business.
Get quotes and estimates out within 24 to 48 hours. This is the best way to impress your potential new customers and get a lead on the competition.
Get terms with your material vendors. Many vendors will give you at least 30 days on materials or use a credit card with suppliers such as Menards, Home Depot, etc. but make sure you pay them off right away when you get paid for the job.
Cash is king. Require deposits of up to 50% on all jobs whenever possible. This will help pay for your materials and keep you going until you finish the job.
Invoice Immediately. Contractors go bankrupt because they run out of cash. Paperwork is an evil necessity, but you can do it all electronically today with some simple invoicing apps like JobFLEX (try it for free).
Balance. Don’t get so busy doing the work that you don’t spend time on sales and marketing. Try to schedule at least one day a week to make sure you keep the machine going or one month you will be buried with business and the next month you will be starving for work.
Clearly, starting a business is something that requires a lot of careful consideration and planning, but if you’ve got a handle on the items listed above, you’re off to a strong start. Running your own business comes with a unique set of challenges but asking yourself some tough questions beforehand and developing the right business practices and processes can go a long way into improving your chances of success.
