Building a construction business

[MMatt]

Wow, I know in the U.S. commercial builders are working at 1-5% profit margins. Not the best time to get into the construction biz here but it is slowly improving.

 

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[CryptO]

Wow, I know in the U.S. commercial builders are working at 1-5% profit margins. Not the best time to get into the construction biz here but it is slowly improving.

I should point out it is a pretty bad situation here too, when compared to 2008, especially for the large commercial builders who are struggling to see single digit profit margins.

These people are dropping prices on large scale developments everywhere just to keep people employed.

In small sized businesses, where there is far less waste, there are still some people who are turning 10% with some even making a 20% margin.

 

[The Autobahn]

Very interesting progress.. keep us updated.

 

[MMatt]

I should point out it is a pretty bad situation here too, when compared to 2008, especially for the large commercial builders who are struggling to see single digit profit margins.

These people are dropping prices on large scale developments everywhere just to keep people employed.

In small sized businesses, where there is far less waste, there are still some people who are turning 10% with some even making a 20% margin.

Ah, that seems quite similar to the situation here then. Commercial builders are just trying to stay in the game until things turn around while residential are still doing alright besides the limited amount of jobs to bid.

 

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[InMotion]

Just in the middle of making a bid for a 5 unit development, the deadline for quotes is 23/07/2013.

This is going to be fun, I'm trying to work in 5K profit for each unit.

If I get the job I'll have to put a crane on site plus hire about 4 people.

It's certainly risky, but could pay off very nicely.

Be careful on larger jobs, you will get what I call "scope creep" where the owners and or developers etc. will try to add on more work and that will deteriorate your bottom line if you don't whip out a change order and bill them for it. Bid should stand per original drawings etc. add-ons are extra IMO.

They do this frequently here in the states...trying to squeeze more out of you effectively bringing their cost down along with your profit.

 

[CryptO]

General Update

On site

Left the concrete slab to cure for two weeks whilst working elsewhere and now the walls are mostly finished.

Ideally I wanted to have the gable walls built before breaking for holiday but to do that I really needed the carpenter to give me the dimensions of the roof timbers but he's on summer vacation so I got no choice but to wait until September to finish.



Off Site

In fact even if I had the dimensions I'm unable to continue working because when I woke up yesterday I could hardly move. Apparently it's a torticollis from sleeping awkwardly and any physical activity is just not possible for a few days! Sometimes just the slightest movement is painful so I'm basically stuck in the house unable to do normal things like walking over to the fridge hassle free or even putting a t-shirt on without wincing!

Any time I'm unwell it reminds me how important it is to be healthy and that it shouldn't be taken for granted.

During this time I have been able to get a couple of quotes out, which is very time consuming but crucial for my survival in this game.

Building a construction company is definitely a good experience but in no way do I want to stay doing this forever, it is extremely time consuming!

My mind is set on my fastlane plan and I've been making some moves to validate the demand for a service and I'm in the process of collecting real feedback..... more on this coming up in another thread!

 

[timmy]

Hi . I commend you for your bravery thus far. However this route will never become fastlane. You can have a profitable business if that is what you want. To Fastlane this you would need to go after the corporate market, renovations and new builds. Project manage it out and let them run it as if it was their own business. This is done by paying them above average wages and top this up with a super bonus scheme that kicks in after job is done( and paid for). Build the company adding managers as the company expands, and only as needed. Do the calculations and allow a fair budget for the project manager to execute the job in a safe and timely manner. Scale the company by offering a complete turn key operation. In the corporate world they only want to deal with one person! .........Your project manager............ Show up in solidarity for annual christmas party......Best of luck......PM me if you seek more information & best of luck to you .

 

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[Jeffreyy]

Well if you do go down, the specialist road i would prevent personal customers like the affect. Set up connections, with professional contractors and bigger house contractors and perform for them. Would also suggest you are dedicated, to one place and become the best at it.
franchises for sale

 

[CryptO]

Update

Met an amazing person today.

A man with a passion, motivation, excitement and energy to keep building his wealth in a way that I've rarely seen before, first hand.

This man owns big land in prime locations, 50+ houses and several large apartment blocks..... so what?

The thing is that when I went to the rendezvous at an apartment complex to meet with this potential client, I'd conjured up some stereotypical images of the person I was about to meet. Then whilst waiting for the meeting I saw this old man walk down the stairs out into the car park and he called me over.

Surely this isn't the guy that contacted me??? (my fist thought) he looks so down to earth, simple and far from what I'd imagined.

We got talking and I quickly discovered this was the person, and then he mentioned his age.

86 years old!

He seemed so coherent and excited when showing me round two of his apartment blocks where at the back of the land was the house he was born and tons of garages that he'd like to demolish and turn into flats.

He was discussing the work he'd like to do etc and his future projects, including another multi residential by the coast and a couple more houses. It was just amazing to see such energy from somebody born in the 1920's!

He'd started off 40 years ago with a real estate license and he made smart moves and grew and grew his portfolio to where it's at now and there's no sign of stopping.

I asked him if he get's many tenants that don't pay to which he said yes. We put their furniture out onto the street and they soon leave! (not sure if he was joking or exaggerating) but he said it takes 6 months via the courts otherwise.

This guy was recommended to me by my old boss as a person he could trust, so I look forward to living up to that by providing a good service.

Anyway, just thought I'd share that experience for what it's worth. Wouldn't it be good if we could all be energetic and motivated when we're older?


On site

House one is finished today! Been given 2 more for October.

The carpenters were putting the roof on this morning and everything corresponded (which is a relief).

I'll probably have some finishing / snagging to do one way of another.

Unfortunately I can't post a photo because the screen on my galaxy note 2 is bust and is being repaired by the insurers.

Off site

Getting organised for a couple of small jobs for next week which includes changing the tiles on an old roof.

Got some quotes to put together.... and just generally keeping busy!

 

[CryptO]

Administration

Got to change my company structure next month as my revenue has outgrown the existing model.

I'd started with a something called autoentrepreneur which is designed to help people get off the ground.

However it is limited to 82000 euros per year, soon I'll be doing that every two months (if only this was net profit!).

By November I've been told that I've no choice but to change to a structure that has no revenue limit.

The pros are - No revenue limit, Recuperate TVA (VAT), possibility to change company name.

Cons are - 33% tax from all profit made, startup admin costs

It is obligatory to hire an accountant, so this will be an additional monthly charge on top of existing charges.

My overheads will be in the region of 1000 euros per month so keeping a monthly income it paramount to this company's success.

This is far from Fastlane, but it beats working for somebody else!

 

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[CryptO]

3500+ Euros profit in one day!

That's what is going to happen tomorrow.

My new contract pays me 288 euros per 1 m3 of concrete.

The cost price is 110 euros per 1 m3 and tomorrow there is at least 20 m3 of concrete on it's way.

This will be my most profitable day ever and the invoice will be in the post as soon as I get back home in the evening!

Here's some photos of the latest build, it will be twice the size of the last one.

We've had to drill down and set the house on concrete posts because the ground at surface level is unstable.

 

[CryptO]

Done it.

6hrs work and over 3000 euros earned.

Whilst I feel really happy, I also feel slightly weird.

I think it's because only a few months ago I had to work weeks to earn that amount of money.

Next stop is the shuttering of the concrete beams that will support the platform and the house.

That's going to be well paid, but will take a few more days to complete.

 

[Dionysus]

Done it.

6hrs work and over 3000 euros earned.

Whilst I feel really happy, I also feel slightly weird.

I think it's because only a few months ago I had to work weeks to earn that amount of money.

Next stop is the shuttering of the concrete beams that will support the platform and the house.

That's going to be well paid, but will take a few more days to complete.

View attachment 5911

Keep the updates coming, I have a special interest in this since I have a cousin who's a construction manager.

 

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[Alex Rend]

Making amount of money for a day when you're earning it for weeks or even month before - it's a great mindset shift in your head, congratulations! Keep it updated, it's very interesting thread.

 

[Dionysus]

Hey, it's been a while care to give us an update how things are going?

 

[CryptO]

Thanks for the interest.

Just finished building the house (the one that you can see the digging of the foundations in photos above).

Also, we revamped the façade of an apartment block.

Here's some pics:

I'm closing my company down to go full time Crypto in January.

This was a great experience and I have come away with these three lasting impressions.

1. Being your own boss is worth its weight in psychological GOLD.
2. Being your own boss in construction = working many many hours.
3. Running a construction company is like running a circus. IT IS NOT FASTLANE and you quickly become enslaved to clients and the monster you created!

Conclusion: Good bread winner but always be on the look out for something more profitable.

 

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[Dionysus]

Was really hoping you would be successful with this business. Had a family member who peaked my interest in becoming a construction manager. Good luck on your future ventures.

 

[Lagron]

I'm closing my company down to go full time Crypto in January.

Not entirely sure what just happened, why the sudden close on the company?
What is full time Crypto?

Conclusion: Good bread winner but always be on the look out for something more profitable.

... just when it was getting interesting reading your post.

--- I still go off and price commercial or residential roofs in NJ for my fathers company once in a blue moon. We are near to finish a convent for a private college in Northern NJ, profit with a nice margin of 100-150k...

I'm not entirely sure as to why people say Construction isn't very fastlane. Yes of course there are better options out there, but there is a lot of money to be made within this industry. My father's company is suffering though, as you may find from other posts of mine & the entire reason it suffers... take a quick guess...YEAP, lack of projects to complete.

He has a pretty good system in place and here is how it works, (aside from the fact that he is awarded projects)...

1. Find project.
2. Bid on project, with % profit margin.
3. If awarded... this is the good part.
3a.... subcontract it to others...
3b.... make sure project is progressing on schedule.
4. While waiting/checking on the project once or twice a week, bid on other projects.

The 100-150k profit margin came from masonry work (installing blocks and rocks on walls..not sure on terms here, I'm a commercial roofing guy since middle school). Total project was 653k at 15$ a sq. foot of installation including labor and material.... that is a 22% profit margin. What did my father have to do, to withhold these earnings? ....weekly job meeting, directing subcontractor on progress of masonry installation a few times a month.

----
Issues I see with the construction industry...and how I think if you took my advice you can make it fastlane


1. Contractors can't manage WHATSOEVER.
2. THEY DO NOT KNOW how to market/they have no knowledge in these BUSINESS aspects.
3. No offense to those that know what they are doing as a business manager, but from experience of being in construction for 5 years, they aren't really good at this.

What needs to be done for a fastlane construction business, if you do ever go back to it.
1. Get a project.
2. Finish project.
3. As working on project, look for more work.
4. Be awarded a project, HIRE MORE PEOPLE, and finish these 2 projects simultaneously.
5. ...Guess what? ... you really need to pump out at least 1 bid to a project every week!
5a. If you can't price 1 bid a week, you NEEEEEED a refresher at reading plans and pricing according to them.
5b. Create an excel sheet, with every single item on a unit or per sq. foot basis, and figure out what the prices are...
5c.. When pricing projects, just look at the total sq. footage of the plans and what is needed X the number you have come up you are willing to do the work at.
5d...NO REASON to look back at the price. Installing drywall? What does it run per sq. foot of installation and material?... read the plan, 50k sq. feet of dry wall?...well do the math.

You should only be pricing projects, and subcontracting it out, as you start you may even hire some people...

6. Stick to just subcontracting it and building a relationship with your vendors.
7. ONLY DO THIS, DO NOT TOUCH physical work... THIS IS "FASTLANE" in the construction industry... why? All you do is look at plans for a day, possibly price 2 a week with experience, and you are set.

THEN, and this is what I dont like, you are thinking "oh but the subcontractor will be taking a cut..." you know what? Go ahead and hire more people to do the work on your behalf, go ahead and deal with employees, and workers comp and insurances and so on... IMHO DO THE MATH, you are better off just pricing jobs, being awarded the jobs, and subcontracting it all.

No need for actual manual labors, no need for buying tools, or anything like that.

"Sounds easy" ...its a lot of work, to price a project? OR is it MORE WORK to actually dig the holes, and mix concrete and place the blocks? ...

To sum this up...

Fastlane general contruction = a lot more headaches and overhead.
Fastlane "construction management" = BEST...

1. Bid on projects.
2. Subcontract it to others. ----(This is key)
3. Take a nice clean profit.
4. Hire someone to help price/bid on projects. ---(This is key) ....hire these guys, the more you get, the more you can price, the more you'll be awarded the more $$$ you'll make.
5. More profit.
6. Rinse/repeat.

You want to be on the top of the totem pole when running the construction company. That is the 2nd highest position possible when starting out... the only position above that is, being a business owner that shows up 2 times a week, to make sure the bidders/your bidding manager is on top of his game, after a meeting and then calling it a day as you collect a check.

Hope I helped. Maybe it did, maybe it didn't... but if you are doing the actual work yourself/hiring employees, try to get away from that, and try to get into the actual "bidding & just subcontracting it out" portion of business.

My father does okay, but he isn't scaling his company, and getting projects is "tough..." ...get rid of "tough" with your company, hire a bidder/estimator and give him a commission for successful bids, based on the total profit from the project, this seems to motivate them greatly. It should also be these estimators that meet clients, NOT YOU. Just until you scale up again, and you hire someone that just meets clients...and so on

Good luck!... remember luck is just action towards your desired reaction.

 

[tafy]

If your going to subcontract it then you are just a middleman, no control and no future.

 

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[Lagron]

If your going to subcontract it then you are just a middleman, no control and no future.

You have a point, you are a "middle man" ...but the way I see the margins work...

Perform a project for 100,000$ for example.
My profit would be what?... 70,000$ if I did it myself and it would take me 2 months to complete the roof?
48,000 if I had employees do it.
40,000$ if I hired someone to do it for me?

I lose $ in margins right? ... BUT think about this now... you need payrolls/you need insurance/you need workerscomp/you need tools, and managers, and to worry about inventory....you need x and y and z...and reliability and hard working employees and so on and so forth... I am certain 100%, that subcontracting it is a MUCH MORE viable solution..perhaps I put more weight to the ability that lets me specialize in something concrete (performing bids and subcontracting, as opposed to having to become a guy that runs everything else as well)

In the time it would take to deal with all these other issues, I could lay out another bid for another project...if I did a project on my own I would lose out on a whole new project. And I would lose out if anything wrong happens with the project.

No Control? No Future?
Hmm I can say you don't know much about the industry...

...you find a school that needs an addition...
You bid on the project...
You hire people to do the work... or you subcontract the work to others... Middle man?... How are you the middle man in the construction industry?

Can I ask you something.... do you honestly believe a normal worker can go off and bid on additions for schools or complexes????

There is only soo far down the totem pole you could be and WELL in this industry, you are the TOP guy. It is YOUR project, YOU can hire whom you choose. Whether that be employees on payroll or subcontractors.

Control... you get more projects and hire the people to do the work...
Future... you hire estimators to get more projects.

---
Maybe I am misinterpreting this, but No control and No future = Wrong.

This is scalable to an extent, but magnitude exists.

 

[tafy]

How many projects will you be able to win with enough margins to subcontract?
What happens if subcontractors want more than you bidded for?
What happens if they dont do a good job?

There is no control, you are a middleman and middlemen dont last very long.

If you said that you were bidding on more complex project where it needs management then you would be more of a project manager, then you subcontract the electrics, plumbing, plastering, painting and manage all the different aspects and timings. Then you are providing value but lots of time.

I dont need to know the industry to know you wont make it, i know thats harsh. They will look at your bid and look at your company and if they sniff that you are a middleman they will run. What will you put on your website? I subcontract your job to great builders? They want the builders directly!

Go try it, if your just subcontracting you can start bidding today. Set up company + website, put a progress thread up about it and prove me wrong!

 

[1step]

I dont need to know the industry to know you wont make it, i know thats harsh. They will look at your bid and look at your company and if they sniff that you are a middleman they will run. What will you put on your website? I subcontract your job to great builders? They want the builders directly!
Go try it, if your just subcontracting you can start bidding today. Set up company + website, put a progress thread up about it and prove me wrong!

My family has run a subcontracting business for 25+ years... I guess Im still waiting for it to fail.

 

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[tafy]

My family has run a subcontracting business for 25+ years

Why even ask about it then? Just join the family business.

 

[1step]

Why even ask about it then? Just join the family business.

I haven't posted once about it, you were addressing someone else. You're providing information that you know absolutely nothing about, why would you continue to post when you admittedly have no knowledge about this?

There is no control, you are a middleman and middlemen dont last very long.

I dont need to know the industry to know you wont make it, i know thats harsh.

Set up company + website, put a progress thread up about it and prove me wrong!

Please post about something you have knowledge about

 

[tafy]

I haven't posted once about it, you were addressing someone else

You are right, I didnt notice that. Sorry

It's advice, take it or leave it. Tell him how it can be done since you have the knowledge. I will leave this for you to explain.

 

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[alexsanders456]

CryptO I am really curious where you are now in 2019 with your venture?

 

[mcpretelin]

updates?