OT: marketing your business

[Ron Beaufort]

thank you, allscott ... you just made my day ...

 

[russrmartin]

My weigh in

GIT,

I also have been in the same boat as you, thought about it, but never have done it yet. I'll probably hold off until I'm finished with my BSEE, if ever. One HUGE point that was mentioned once and got very little debate was the insurance issue. Trust me when I say that YOU NEED THIS BADLY!!! Even if it's a part time thing, as a contractor, one slip up on your part could easily cost you everything you own, and this insurance isn't cheap. We had a contractor whom we hired when we got too busy. He quit, because he didn't do enough work to justify his insurance premiums. Prior to doing anything on your own, do yourself a favor and look into this. You may get a better rate negotiating a contract with another contractor and offering your services though them. Believe me though, your keeping a production line down for 3 days past what they scheduled easily could surpass what you will make in a lifetime of working, and certain companies may try to recoup that. If they do, you'll be glad you had insurance.

Russ

 

[geniusintraining]

Thanks again,

T&M:
Ron, I get your point and agree, but...I thought I should not care about the other guy, if he makes 6,000 and I make 4,000 who cares, right?? I should be only concerned with my doings and the things I can control, after <---big after, I develop a relationship with a customer then try the T&M?, I just thought that it would be better for both...If any companies are similar to the one I work for ....then half way through the job, the scope changes and the job changes, so T&M would save the change orders and paper work, just a thought, thanks again

Insurance:
Bruce, Russ and everyone, I have the forms and I was going to the state house and turn them in, I was applying for a LLC (limited Liability Company) I thought that this was one of the advantages to this vs a corporation? I guess I need to read more, but yes on the way I will stop at my insurance agencies office.

Thanks

 

[Norml]

"then half way through the job, the scope changes and the job changes, so T&M would save the change orders and paper work, just a thought, thanks again"

I've been involved in quoting something like 40 control systems in the last year and T&M was never an option. Sounds great but a T&M arrangement is extremely hard to come by in my book. Usually you have to quote a fixed price based on specs and hold to the specs if the project changes. Many small companies rely on extras to make a profit because you have to cut everything to the bone to even get the job. If you provide services for a larger company or a municipality, the accountants will not agree to a T&M contract unless a thunderbolt strikes from above.

 

[rsdoran]

May be a little more involved.

1. If establishing any form of business, develop a plan. Bookstores, like Books-A-Million, have Starting your Own Biz guides with state and fed forms etc.
2. Even if never "think" going to hire someone get an EIN (employer identification number) anyway.
3. If providing materials then get a tax number. There is profit with taxes.
4. Insurance is a factor, need workmens comp and liability, especially when working for larger companies.
5. Bonded, most larger companies require this. (It depends on these 2 but expect the number to be in millions for coverage, not cost.
6. Have a good bookkeeping system (or bookkepper) and NEVER EVER lose or throw away receipts for anything.
7. If operating from home then allocate a specific part of the house for "your office" and have a separate line for the business.
8. Use a specific vehicle for travel and keep record of the mileage, maintenance, etc.
9. Record all medical expenses.

BTDT, its hard to be the salesman, bookkeeper, and worker all at same time but it can be done.

One of my sidelines is doing taxes. I have one guy that does 6 figures a year easy. He brings me about 7 or 8 folders with "some" receipts, does not keep up with mileage or fuel expenses, med expenses, etc etc, al the list goes on. All I can say is expect bad things and/or to pay someone big.

Have no idea what you make now but lets say $20 an hour, do not think you can go 29.95 and make money. I have always heard it called Labor and Materials instead of T&M but same thing, for the most part this is the only way to go when doing small jobs, no way to bid on the unknown and the small jobs always have unknowna.

All I can think of right now.

 

[Steve Bailey]

Regarding insurance:

There are three types of policy you need to look into.

The first is Worker's Compensation. This covers the employees of your company (including you) if they should get injured on the job. This type of coverage is mandatory. Premiums are based on the type of work you do and your payroll.

The second type may be called a "Business Owners" policy or an E&O (Errors and omissions)policy. This pays your customers if they have a claim against you for subpar workmanship or failure to produce what you promised. This, along with Worker's Comp coverage is what most customers are looking for when they ask you for a "Certificate of Insurance". Many firms won't write you a purchase order until you produce a Certificate of Insurance.

The third is Professional Liability coverage. This is what a doctor would call "Malpractice Insurance". If someone should get injured while working on a machine for which you designed the controls and it can be shown that a failure of the control system contributed to the injury, this is what covers you when the injured party sues you. This coverage is substantially more expensive than E&O coverage.

You should also be aware of this significant aspect of the Worker's Compensation law. When an injured party accepts a Worker's Comp settlement, they give up the right to sue their employer. Even if the employer's unsafe working conditions contributed to the accident, they're off the hook. The employer might get fined by OSHA and their Worker's Comp premium may go up, but they're not going to have to defend themselves in a liability suit.

Also, implicit in the insurance policy is the obligation of the insurance company to defend the policyholder. This is important because it's a pretty sure bet that your lawyer's hourly rate is higher than yours.

 

[TimWilborne]

Ron could you please right a book. Just pick a subject, I'd buy it.

Put me on the list also Ron.

The only thing that I don't think has been taken into account the that variable of time. Not the time it takes to do the job, but the time you have to quote/accept a job. If a customer comes running at you and says he has this job for you to do but you only have 15 minutes to make a decision (yes I'm exaggerating) do you say...
1. Hold on, give me 14:59 to quote it? I think not.

2. Sorry, but without proper time to quote the job I just can't help you out. Many of these jobs you will because they have been through together and you will just get pulled into the middle of a mess

3. There is not enough time to properly quote this job, but I will work with you and do whatever it takes to get the job done. Perhaps the customer got the job in a rush, an employee quit, or they just figured out they were over their head and need your help. Do you turn them down? I hope not. They have an obvious void that you can fill. Chances are these are the ones you can build a relationship with.

 

[S7Guy]

I've been on my own for close to nine years now, and I can tell you that if you do quality work, are in the top 1% of whatever you specialize in, are well-spoken, and are willing to put in serious hours, you will have more work than you can handle.

I have what I consider very fair rates, which I can do because my overhead is low (no employees). What you need to do is calculate your burden rate right to the penny to make sure you can make a living at this. For instance, I live in a very liberal state, so my taxes are outrageous, and things like health insurance are double what they are in other states. Things like that need to be accounted for. What I did when I started out was determine what I wanted for a net income, and then reverse engineered it from that. It worked out pretty well.

I get calls all the time asking if I can work for something like $30 an hour (some companies just don't get it). Most of my work is T&M, but then again I have the reputation of getting an awful lot done in a short amount of time (word spreads fast, whether you're good or bad). I've also done fixed bid work, but usually because the bean counters required it. In those cases, I doubled the time I thought it would take me to do the work. All I can say is that I wished there was more fixed bid work out there.

 

[elevmike]

One place I disagree with TW is in using cost as a sales tool. In my opinion it doesn't work well. In the first place, someone can always underbid you no matter what. In the second, some customers see low price as equivalent to low quality, or even worse, a guy that is so hungry they can get away with abusing him.

Charge the going rate, and remind cuctomers that you plan to do top quality work and expect to be paid accordingly. If they want it cheap, they should go elsewhere and come back to you when they want it right.

Amen to that!

 

[CaseyK]

Don't price too low.

If you are to low, some customers will question your worth.

You probably will have trouble with some clients raising your rates. Once you give an introductory rate, you will most likely be stuck with it.

Don't let them set your rate for you.

Many years ago, I was getting $25 per hour for engineering. This was pretty low, but considering the amount of people on the street, was good for the downstate Illinois area. I also was getting paid weekly. (Weakly and weekly).

I had on client say "We'll give you $20 per hour", before I told them my rate. Then I found they only paid every two weeks. Then I found they didn't issue checks at all in August.

I now have a contract. I will try to attach a copy of it.

You are likely to have trouble getting big bucks as an independant. I have seen friends of plant managers get 4 or 5 times as much as someone who comes in off the streets, and actually does the work.

There is no fair and equitable.

 

[Peter Nachtwey]

Equipment manufacturers are always looking for people that can install their equipmen

Look at Rockwell. They have integrators that they bring business to because Rockwell wants to sell the product and they need competent people to install it. I have seen that the Rockwell distributors or sales force was very good at connecting integrators that know Rockwell PLCs to Rockwell end customers. For a manufacturer it is important to make the sale. It is also important the product gets installed properly and makes everyone look like a hero.

We have a few integrators that we trust but sometimes they are busy or not local to our customers. We are always looking for more qualified people that can install our products. In one case the a person got 3 years of business upgrading injection molding machines.

In our business we have found that hydraulic distributors know where the hydraulic applications are at but these hydraulic distributors often don't have a PLC programmer that will allow the distributor to sell a complete package.

Find a good account, lawyer and insurance salesman. They are important. The trick is to avoid problems, not get out of it.

Create a web page where you can post your success stories and capabilities.

 

[SAK-CO TECH]

Lots of good advice!

First order of business is to form a corporation whether it is a “C” or “S” corporation, LLC, etc. This is your first line of defense to protect your personal assets except, of course; in the case of the IRS (no one is immune here). Make sure you pay your taxes and, as had been said before, save those receipts and keep good records. Corporations also provide for more tax write-offs if done properly. This should/could be another thread.

As many here who own their own business can attest, it will take some gumption (read balls) on your part and a true commitment. We started our business on literally -$3000 dollars and my wife, four children and I were one step away from losing everything… and I mean everything we owned.

The owner of the company that I worked for as a G.M. prior to finally starting our own business became a very dear friend but mismanaged the money I personally made him (a LOT of money). At the end of this company’s life, when he (and his family) could no longer pay the bills due to mismanagement, I still worked for him for 3 months for free to help him out. This hurt us to no end but hey, you do the right thing in life whether it is for friends or customers, it will always come back in the end.

Needless to say, when we made the decision to start our business, I turned down three very exceptional offers (over 100K) to work for others. This was a very difficult decision when you have four children, a wife and no money in the bank. The biggest support came from my wife who said “Your not going to make any more money for anyone else anymore except for us” after which I replied “Were probably going to lose everything” at which she said “So what!”. This as you can imagine was huge. We made the leap and started on a borrowed $3,000 from one of my best customers to this day (the start of our first project) and never looked back.

There has already been a lot of good advice to which I’ll add my own 2 cents:

• Cash flow, Cash flow, Cash flow – keep that money in the bank (when you do get it) to cover for any eventualities.
• Walk away from any known bad customers. One of the hardest things to do in business is to walk away from any kind of work. A non-paying customer will take you down quickly.
• Take care of any and all of your customers like they were your own children. Give them the best of you, word will spread!
• It’s been said but I’ll say it again, good bookkeeping, keep expenses down to the bare minimum (read enough to live) until your on your feet and even then, don’t’ be foolish with money.
• Do not sell yourself short, as had been said before.
• Most important, do good work… better yet, do the best work for your customers and once again, word will spread.

Good luck and if you do decide to do it, enjoy it, it’s the hard times that we look back on fondly when reminiscing.


Chris

 

[TimWilborne]

• Walk away from any known bad customers. One of the hardest things to do in business is to walk away from any kind of work. A non-paying customer

Kind of on the same note, know when to tell a good customer that what they want is not possible or you can't build it to be reliable. Offer them an alternative. If they insist on doing it in a way you don't feel will work, decline the job. That is probably a tougher decision to make than walk away from a bad customer. On one hand you my loose the customer, then again they will probably respect you in the end more for not being willing to do shabby work

 

[SAK-CO TECH]

An excellent point TW!

Had to do this only twice but was called back in to "fix" both of those projects others had done in my place and at a very nice rate by the way. Both of these customers now dont even solicite quotes from anyone else but our company.

Chris

 

[controlled]

I have been working for myself for about 8 years now. When I started, I went to the company I was with at the time (Small OEM) and talked about them hiring me as a sub, which they graciously did. This helped me understand the business side of things, without getting into the marketing part of it. I then talked with existing customers of my past employer and started doing some small design work, and assisted them with commissioning. This was not taking any work away from my past employer as they were only building machines for larger OEM's and did not do any commissioning for them. I then started doing small service calls for customers. This way I wasn't putting out alot of money, just enough to purchase components to repair machines. This got me into alot of doors, which then led to larger projects (Design Build type things.) As long as you do good quality work, word of mouth travels fast.