# Steps to Starting a Business



## jcgd (Oct 30, 2011)

I acquaintance and I are exploring the idea of starting a company together. We worked together in the past and we have startlingly similar goals and ideas. We seem to agree on many things, quality workmanships, ethics, etc. For my purposes we can assume this company will be a construction contracting company.

We are not really sure where to start. So far we have independently researched our niche and upon talking about a partnership we realized we are on the same page, we just got there independently. We hoping to start up around next summer, 6-8 months from now. At this point we will have received any additional training we will need and we hope to arrange all the specifics in the mean time. For now we are planning to meet one night every second week to hash out the details. While we are not entirely sure our niche idea will work out, we may supplement our niche work with our traditional line of side jobs if required.

We are thinking we should find an accountant first, and find out how to structure things. We are not really sure how to proceed in a logical manner. I'm thinking we find the following:

Accountant
Lawyer
Bank Financial Advisor

Are we supposed to create our business plan before or after we involve these people. I'm weary of spending money before we have work, but we essentially need to be up and running to find the work.

How should we proceed?


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## Taraz (Nov 24, 2013)

So you're planning to do this full-time? Or just as a side gig? Do you have a big pile of cash to pay your bills if things are slow to start out? Are you planning to get a loan to start it (which I personally wouldn't recommend).

Don't forget that you'll need corporate general liability insurance & worker's comp to start out, at a minimum. You have to pick if you want to run it as a partnership or corporation (sole proprietorship isn't an option if you want to own it together). I'd probably skip the lawyer and just talk to an accountant about setting it up, as long as you're not planning something overly complicated. 

P.S. If you're into concrete work, have you thought about becoming professional backyard forno oven builders? It seems like an unmet niche (at least where I am).


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## Just a Guy (Mar 27, 2012)

First thing you need to do is decide what you want to do. In construction I often thought it would be a good business to set up a network of people who cover all the different issues (plumber, electrician, carpenter, painter, finishing carpenter, etc.) have someone go into a job, quote the price, get the work done at that price (if a job takes longer you eat it, if it's done faster you benefit), each guy gets paid their portion the same way.

Once the plan is made, and it's important to have the plan first as it outlines costs and where you plan to get your money from, run the idea past a few business people for input (the banker may do this for you, but if you need money from them I'd wait until it was more polished). 

Once you get the input and have revised your plan, then you talk to your accountant (usually free), about how to structure the company. Rarely do you need a lawyer, but if you incorporate, you may want one to write up your minute book (though incorporating and doing a minute book is very easy and you don't need a lawyer.


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## Just a Guy (Mar 27, 2012)

Also beware partnerships...even if you start off on the same page.


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## jcgd (Oct 30, 2011)

We are in electrical. We want to focus on green technologies and backup systems. Solar power, solar hot water, wind, backup generators and similar. We can also do our bread and butter of typical electrical services until things get moving. We believe this to be a huge potential market that is still in it's infancy with very few competitors. If you do a simple search for solar installation Calgary there are only two big hits. One company is large and operates over a large area, the other is in Edmonton and seems to be relatively small still. We have an idea of a niche within this larger niche we hope to carve out.

So should we conduct all our research, determine our startup and ongoing costs and then approach the accountant and bankers?

We are both young and don't have access to a lot of money. We could likely have $20k cash when we start up and I also have access to a large LOC (~$45k). I have decent savings but it's all in my RRSP and I haven't determined my partners savings as of yet. Being a service company in general, it isn't cash intensive, but our initial purchase of tools and equipment would be hefty. Vehicles, the most expensive expense, are already covered. 

We would have trouble covering the gap between purchasing equipment from wholesalers and getting paid by the customer, but I'm hoping with a solid business plan and contracts in hand, the bank would lend us enough to bridge the gap.


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## leoc2 (Dec 28, 2010)

How about starting a business similar to this one?

http://buildingknowledge.ca/


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## Just a Guy (Mar 27, 2012)

Well, in business, you should always get some money up front, usually 25% at least. I've always tried to have my hard costs covered near the beginning, so that I'm not on the hook to others. Also, you need to consider marking up the parts you buy...negotiating a volume discount, charging retail for example. All this helps to cover the costs when you get the bad client.

These are all things to plan out in your business plan (I.e.how you're going to cover your butt and minimize losses). The better your plan, the easier it'll be to get support...that being said, until you've been in business for at least three years, you'll have a hard time getting clients and money from a bank...

Have you contacted the home builders I Calgary? I know Avalon is big into things like your talking about...probably qualico as well.


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## jcgd (Oct 30, 2011)

I thought about that, but we already have the skills and training required for our target business. We hope to start with a core business of what we know, and branch out as new technologies become mainstream and are able to provide relative stability. If we continue to expand, I hope to move into energy audits and similar services eventually, but we don't want to start out in an area where we have no expertise.


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## Causalien (Apr 4, 2009)

jcgd said:


> I thought about that, but we already have the skills and training required for our target business. We hope to start with a core business of what we know, and branch out as new technologies become mainstream and are able to provide relative stability. If we continue to expand, I hope to move into energy audits and similar services eventually, but we don't want to start out in an area where we have no expertise.


If you are in Vancouver I can walk you through the beginning over coffee.


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## jcgd (Oct 30, 2011)

Just a Guy said:


> Well, in business, you should always get some money up front, usually 25% at least. I've always tried to have my hard costs covered near the beginning, so that I'm not on the hook to others. Also, you need to consider marking up the parts you buy...negotiating a volume discount, charging retail for example. All this helps to cover the costs when you get the bad client.
> 
> These are all things to plan out in your business plan (I.e.how you're going to cover your butt and minimize losses). The better your plan, the easier it'll be to get support...that being said, until you've been in business for at least three years, you'll have a hard time getting clients and money from a bank...
> 
> Have you contacted the home builders I Calgary? I know Avalon is big into things like your talking about...probably qualico as well.


Some good points. I've started a business plan, but I can see it's likely going to take months to work through it with the sheer amount of research and detail needed.

I haven't talked to any builders yet. We want to figure out some costs and at least have some numbers and answers for when we talk to them. We are a ways off from pitching anything yet. I'll look into Avalon and Qualico though.



Causalien said:


> If you are in Vancouver I can walk you through the beginning over coffee.


I'm in Calgary, but visit Vancouver a few times a year. I might have to take you up on that when I'm out that way next. Thanks for the offer.


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## Causalien (Apr 4, 2009)

Might want to make it sooner than later. I am planning to fly out soon and will stay only until the completion of the renovation.


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## donald (Apr 18, 2011)

Scrap the partnership and go solo!(that will kill you,hire him later)Approach a track/volume builder(under-cut the market rate by 10-15%)and just ask for a 1st bid or 2........Don't worry about the ''green'' niche for now(just start off as a res electrical sub)
Pound the pavement to find that builder,go to job-sites,offices ect(have a price list/business card/gst #,dress well)someone will bite!
Treat those 1st jobs like your working for the queen of england(your goal is to over take the electrician with the majority of the acct)work solo @ from the start,don't hire until you need to.
Your only over head is your truck and tools(part off negotiating from the bat to entice the builder is give him the authority to supply materials,he will want this,gives him multiple points above and beyond your discount,your labour will be 10% cheaper than market but his total estimate will be a extra 10%)
Eventually he will do the math and keep stepping up the contract,all you can handle(that is when you hire,low skilled help)move forward with this.If you now can secure his work load,you anchor to his work and build off that work(this time you supply,you charging market rate,you using him as a reference and the 1st in your portfolio)The goal is to eventually break free from your starter builder and enter into the game(as all of this is happening network like hell on the side for retail clients,aim for a 50/50% split between new construction and private.
Once you have a few employees and have them trained then move into your niche while keeping your base work.
This is exactly how i built a company some 9 yrs ago from scratch(i am still small but busy,5 employees)One slow step at a time(don't think about some mastermind plan,just get out there and get to work and it will come)


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## donald (Apr 18, 2011)

You seem strong with math/accounting ect,so handle that end from the start(hire out year end ect,it is not much different really than stock investing accounting)I am lucky I have a family member who does my books(both business and stock investing)
Not much in the way of the lawyer accept the basics(your starting small,so it is reasonable,low fees/paper work)
Worry about this stuff more extensively when it applies and the horse is fully out of the barn.


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## jcgd (Oct 30, 2011)

I don't really want to drop my partner and I would prefer not to do so. I would also not try to hire someone later that I kicked to the curb earlier.

We are not sure if we should go the electrical sub route off the bat or not. That is not what we want to do, so we are not sure it makes sense to start there. There is definitely not a lack on contractors and we would simply have to steal work from somewhere else. Our niche is pretty much wide open. There is little in the way of competing businesses. However, getting in on the ground floor of home builders may be useful.


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## Four Pillars (Apr 5, 2009)

I 2nd Donald - go alone if you can.

I think it's going to be very hard to get startup cash from anyone. Although, obviously you should give it a try anyway.

I like Donald's idea of doing subs to get started. Start off small and build up. That gives you more time to figure things out. Determine how much money you need to get started the way you want the business to be run and maybe save that much up before actually starting?


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## jcgd (Oct 30, 2011)

I'm hoping to have all the startup cash required, but have yet to total up the final costs. We will determine that as part of our business plan. We will likely try to hit up friends and family for a bit, but we hope to cover almost all the costs ourselves. There's still a heck of a lot we need to research. We are just starting to get the ball rolling with this, and need the basic guidance of where to start. We are nowhere near the point of approaching builders as we have nothing to pitch at this time.


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## jcgd (Oct 30, 2011)

Okay, so I've been thinking about these replies I'm getting from you guys and you all seem to think we should focus on stealing business from established firms who specialize in residential new construction. I have a few issues with this thinking and I want to throw my logic out there and see what you all think.

- We are not residential electricians by trade. We focus mainly on commercial installations, and while we are qualified for residential installations, a typical one would take us considerably longer than an experience residential installer. We would have to learn how to do it, and then hone the skills required.

- Asking me to do a new residential wiring would be like asking an experience residential shingle roofer to do a commercial flat roof building installation. Sure, the theory overlaps, but it is a completely different project.

- We have extensive training most things residential electricians wouldn't. We are skilled at fabrication (racks, supports, piping, mounting systems, etc.) and speciality instillations that are not common in residential. At least not yet.

- We don't understand the reasoning for cannibalizing other work from other experienced businesses when our target market is relatively undeserved.

- Our training lends itself to the target niches we are interested in.

Why do you guys think we should get into residential new construction wiring instead? I ask not to be hard-headed, but because I don't see the benefits and I don't want to screw this up.


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## Just a Guy (Mar 27, 2012)

I think you read the suggestions too literally, remember, we're working on the information you provide, and make a lot of assumptions to fill in the blanks...in the above suggestions take out "residential builder" and substitute "commercial builder". 

Also contact a lot of older managers about retrofitting...there is a lot of that going on now...micro generation is all the rage.


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## donald (Apr 18, 2011)

-ability to boot strap,low overhead,dual partnership easier to create(volume builder)easier to hire low skill workers on res(goes back to low overhead)
-easier ability to get cash-flow running.
If you want to run a business the trade needs to take a ''back'' seat.
As far as cannibalizing work from others(do not agree)this should be the least of your worries,you can not have that mindset(you are doing business with the builder-it is the two of you)Once you set up shop,there is no Christmas card being sent between you and your competitors-that is the way it is.
I think res work is a good testing ground to see if you are cut out to work for yourself(the competition,if there is lots of it is GOOD)You will learn fast.
I may look at things differently than you(I would focus on the business plan-something that is easy to wet your beak and execute)


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## Taraz (Nov 24, 2013)

So why don't you do retrofits. Just bill the client when they order the solar panels / batteries / etc. (I'm guessing that's the most expensive part) so you're not out the money, then bill them the rest when you show up to do the install. You shouldn't need too much cash to get going.


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## jcgd (Oct 30, 2011)

Just a Guy said:


> I think you read the suggestions too literally, remember, we're working on the information you provide, and make a lot of assumptions to fill in the blanks...in the above suggestions take out "residential builder" and substitute "commercial builder".
> 
> Also contact a lot of older managers about retrofitting...there is a lot of that going on now...micro generation is all the rage.


Yes I think you are right. I haven't been very specific but maybe I should be. Micro generation is one of the areas we wish to focus on.




donald said:


> -ability to boot strap,low overhead,dual partnership easier to create(volume builder)easier to hire low skill workers on res(goes back to low overhead)
> -easier ability to get cash-flow running.
> If you want to run a business the trade needs to take a ''back'' seat.
> As far as cannibalizing work from others(do not agree)this should be the least of your worries,you can not have that mindset(you are doing business with the builder-it is the two of you)Once you set up shop,there is no Christmas card being sent between you and your competitors-that is the way it is.
> ...


Those points make sense. We won't really be able to hire low skilled workers in our area as they must be registered and at least be apprentices and licensed to do electrical work, but it would apply to the general labour side of things.

So I'm thinking it would be wise to try to partner with a builder, but try to keep it to our specialization rather than the residential wiring. We can try to get the volume and cash flow going.



Taraz said:


> So why don't you do retrofits. Just bill the client when they order the solar panels / batteries / etc. (I'm guessing that's the most expensive part) so you're not out the money, then bill them the rest when you show up to do the install. You shouldn't need too much cash to get going.


That is more or less the plan at the moment. Bill for all or most of the parts upfront and bill for labour afterwards, or during construction. We figure if we can cover equipment and overhead out of the date, the rest should be a matter of managing cash flow. 

Can anyone tell me how a builder pays out for work being done? Donald, I'm sure you would know this. If I partner with a builder, what do I have to pay for up front, and when do I get paid in full? I'm thinking of this from a new subdivision type setup where the developer pre sells and then builds out over the next year or two.


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## jcgd (Oct 30, 2011)

Just to be clear here, the areas we are looking to enter are micro generation as well as things like solar hot water, backup generators and other power saving methods when people are looking to upgrade, either for environmental/ convenience reasons or because old appliances need to to be upgraded anyway and they want to make the leap to greener alternatives.

If this takes a while to gain traction, or we are having trouble securing work we plan to do typical service side jobs to fill the gaps. Many tradespeople do these types of jobs illegally but we would fold them into the company where we would be licensed and actually pull the required permits.


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## donald (Apr 18, 2011)

Typically,30-45 days in res.
suppliers,usual either the 1st or 15th of every mth
2 pay periods in 2 weeks for employees
The benefit to having/striking a deal with a builder at a discount(with him supplying is you don't have to worry about that at the start-only collection on labour.
You won't have the float at the beginning likely to satisfy your bills,just the way it is lol
I keeping dreaming of collapsing my business for 2 mth just to catch up and start fresh again


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## jcgd (Oct 30, 2011)

Thanks Donald. If you want to approach a home builder, who is the person you want to talk to?


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## donald (Apr 18, 2011)

Networking.I knew a contractor who vouched for me(the owner,gave me a chance on one and it went from there,i no long work for him anymore but without him i don't think i would of made it,it was steady work and a predictable amt of work.
Tap the network in your school or friends in the trade,most of it is timming but once your ''in'' your in,each builder and the subs are abit of a boys club(insulates you)


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## jcgd (Oct 30, 2011)

So just a little update for those who gave their thoughts in this thread. We got the partnership going, we are fully licensed, insured, etc. We've done a few small jobs and one bigger job so far. I was able to find a contractor who throws me all of his electrical work. Due to the nature of his word of mouth client referrals we have little to no competition. We state our price and we generally get the work if the client moves forward. So far we have just been doing residential jobs but we are working on our first solar quote. Solar is a hard sell because there isn't really a financial return at this point. I'm just excited to have my own business!

At this point we treat our business as a second job and plan to continue working full time at our day jobs. We are just honest with the homeowners and for the most part they just seem happy to have someone willing to do the smaller jobs. Most contractors don't bother with the petty stuff as it's not worth their time. For us the smaller jobs are perfect. It's like having a second job that pays well and we control. Sure, it's a lot of work, but it's a challenge and I enjoy it.


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## donald (Apr 18, 2011)

Great way to go(that is how i also started,minus a partner)Won't be long now till it makes sense to leave your job and give the business a full go(money aside,way more satisfying)
Not that you need to be told likely!but make sure you keep things under your hat for now(no need to talk about your side work at your full time job,boss And co-workers)I find my old boss now(after 8 yrs respects me ect)but right when i was transitioning he was a ahole--employers generally don't like your new found way of thinking(i get that more now that i have employees but it is what it is)good luck


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