What surprised you the most in your first 5 years of business ?

Very true. I own now, but have given an insane amount of money away in rent over the years. If I have bought small years ago, I would have about $500,000 dollars now!!!!!!!!!!!!! ahhhhhhhhhh
You always say next year I will buy.... Buy whatever you can, no matter how small. Be efficient, then upgrade as you have the cash. You need to start small anyway, you will be there in the long run if you do, and you will have equity'/cash. I have brought in over 1 million in gross profit a year for years, made the landlord rich, paid all the employees on time, paid the city, etc etc paid all my part suppliers, etc TONS of very happy customers, and then at the end of the year I ended up loosing money that year.
Everyone prospered but me.
You have to make sure that your business works for YOU, not just your employees and customers, etc..
Also, fixing cars right is the easy part of making it 5 years. Running a successful toilet seat company better prepares you to make it 5 years having an auto shop, then being a great wrench with no business sense.
Good luck
wil
www.sakowskimotors.com

 

".....5% of the customers CREATE 95% of the problems/issue that make up most of our "wasted" time. ..."

ABSOLUTELY TRUE

It is also surprising how little incentive it takes for trusted friends to turn on you if there are a few dollars to be had.
SO-PARTNERSHIPS ARE TO BE AVOIDED, and many "favors" are to be avoided, just like the guy said.

".. Don't spend money on expansion unless you absolutely have to."
EXACTLY. One of the biggest weights that will drown you quickly is spending or taking on debt for things that you think you need but really don't.

I was surprised at how many "friends" want to tie up your time trying to get you to work for free (free supplies too) when you really do need to work for a living.

Remember that over 90% of all businesses fail in the first two years. I forgot the percentage of those that fail at 5 years and ten years, but it is still pretty high.
Be stingy with the spending, and don't be afraid to lose that troublesome 5% of customers that bring on 90% of the problems.

There is also a 20-80 rule- 20% of your customers will bring 80% of your business. Identify that 20% and take very good care of them.

 

Amen on this one. Although I have to say with good customer eductaion they get less over time ....not everyone speaks'car' 100% and soemtimes they just need to understand why something takes as long as it does or costs what it does.

 

I lease my two units, because initially, it was less of an investment of working capitol, tha I didnt really have to invest. I simply had to pay the deposit, and the bill each week. The building was very nice, price was right, and I took advantage of the poor market, by getting a good bit of square footage at a good price. The building is mantained by the landlord, and location was good for me. Also, its one less thing that I have to worry about. At the time, I was uncertain if this business I was starting would provail, and with the short lease terms, I could simply walk away if it didnt. When you own a building, especially in this market, its very hard to unload a commercial property, at least around here, then your stuck with another payment.

Also, having a shop behind my house was not an option, I refuse to work at a home shop.... when I come home, I leave work at work. As soon as I go to the shop, instantly people stop by and what not, thats not something I wanted 24/7 at home. I know a few guys that have shops in barns behind their house, and there is no escape... and honestly, sometimes you just have to get away, and its nice to do that. Close the doors, lock em, and go home from time to time.

 

Watch the hidden costs. The ones that sneak up on you, Ins. phone bill, workmans comp, taxes,lunches for clients,dinners for the same, gas(big one in construction). Just remember when all the bills are paid be thankful there's something left for yourself. I've started and sold 3 Businesses and they all were the same,hard work lots of self gratification,and a sense of accomplishment when you finally see that it is going to work,

 

The most surprising thing about being in business after 5 years is being dumb enough to go another 5. Here it is sunday afternoon and i'm working on a customers car and he has no idea of the amount of effort i am putting forth. Most people are lazy and they think everybody else is just like them.
The biggest thing i have yet to get done is to make the doorknob turn only to the left, if they aren't smart enough to figure that out they have no reason being in my shop.

 

I am on year 5 of my shop,reputation is everything,treat peaple the same way you want to be treated,be as honest as you can with time lines and cost,explain to them the price and amount of work might and will change along with time lines,i break everything down into stages,i work on a escrow style payment,charge by the hour not the job is the best for both you and the customer,first stage dissasemble sand blast or media blast to bare steel so you can see what you have and what needs to be ordered or fabricated,,stage 2 metal work,3 bodywork,4 paint,5 assebly and details,keep all your time real time,you cant work a 8 hour day 40 hour work week ,so dont charge it,it will bleed the job in the end,,dont get the customer that has a budget to buy all the eye candy items first (billet wheels,chrome this and that,etc.)they will blow there budget on trinkets and cool shiny parts but in the end not have the $$ for your labor,and will try and beat ya down and question your hours,most customers that pay for cars to be built or worked on never had a wrench in there hans just a pen for there checkbook,they hurt themselves or screw up what they are trying to do,hence the reason you have the car,they cant do it themselves,i like to have them work next to me for a day or two,give them a taste of the time it takes to do things,how dirty of a job it can be,keep them involved in everything ,,,,the most important is paperwork and sighned very detailed work orders,reciepts and allot of digital photos,i been burned in the begining when working under the table and legit,you cant and wont make everyone happy,,and its very important to do the work on others cars like it is your own,take 100% pride in what you do,dont take any shortcuts or settle for cheap materials ,parts etc. and you will want to wake up and hurry to get to your shop to start the day,not dread it,,it will be tuff ,but you will get to a point will you can pick and choose your jobs,and you must be able to read peaple,see if they will be a headache or a pleasure to work for,,,,,,,hope that helps a little,,,,

 

MY biggest mistake was the first time around I didnt charge enuf. I mistakenly thought that I could work for less or charge less than the competition. In truth you will be hard pressed to put in 6 hours per day of production with phones, customers and ordering parts using up a lot of time. You need to fingure out your cost per hour. You need to pay you first. You need to hire a book keeper who does your books once a month. They charge less per hour than you do and usually 1 hours work in your shop willl cover their expense. You on the other hand will take many hours to do your books and in all likley hood will always be behind and stressed. By hiring a good book keeper you eliminate one big headache and keep yourself on the right side of the taxman as well. My last book keeper charged $35 per month. About 45 minutes of shop production covered it. BARGIN!(I am talking boook keeper here not accountant)
I know, I have heard it all before, your wife or your girlfriend or your mommy will do them. NO, Wrong answer. Keep business seperate from home.
On large jobs get enuf gold up front to cover the major parts. Also get a commercial Credit card account so people can pay you by credit card. IT usuall costs about $40 to $75 bucks one time for set up and machine. Then when someone wants to charge it you say Visa or mastercharge. You're a shop not a bank. Dont forget that. I ran the one business for 5 years before selling it and had got burnt for only $450 at the end of 5 years. Having the credit card pay set up saved my butt big time. I have friends carrying so much on the books they cant buy parts except with cash. Only reason is they dont have credit card set up in their shop so they carry all the credit rather than Visa and Mastercharge. I hear how "that costs 2%" etc etc but I figured 2% is nothing to pay when I always get payed. Pay attention here fellows This is good advice. Remember despite what you may think in your heart people come to you because you are good at what you do. You dont need to give that away. If you're good then you should get the going rate at least. Also keep a slush fund (2 to 5 % of total sales) to cover when your compressor pukes or your welder dies. If you are making a profit and faced with taxes find a deductable you will enjoy to use that will benifit the shop and you as well. A new truck or nicer welder or something. It is foolish to be paying income tax if you could use something that would make your life easier to deduct the excess income to lower less taxable level.
My experiences.
Don

 

sure wish I knew the formula for that one. investing in someone isn't cheap only to find out they don't really give a shit and are only working for the check.

 

I didn't read the whole thread, but what surprised me the most is the excuses some customers come up with why they can't pay their bill on time. Also I find that I spend more time dealing with paperwork and other things than I thought I would, some of which happens after hours. Often I find my self dealing with shop related things 12 hours a day, but I would never trade my shop and go back to working for somebody else.

 

One excuse I have gotten is 'the wife doesnt know about this' YOU would think that someone would actually TELL their wife $20K of their hard earned cash would be going to build a cool ride... like some of them think the wife won't notice or something...


I think another thing I would not have realizes is that how employees would react to stuff- some more positive than expected and some MUCH more negative. Its an eye opener every time for me.

 

If you do get sued or have to sue....have a polite sit down with the other person. Try to work it out. Dont tell your lawyer.

Probably the worst piece of advice in this thread.
If you "don't tell your lawyer"... you don't have a lawyer any more, and he's not responsible for what happens to you.

By definition, you're being sued by someone with a lawyer, who controls everything he says, does, agrees to, and proposes.

Ever hear of "bringing a knife to a gun fight"?
By making an agreement drawn up by his layer, you even paid for his gun, and let him shoot you with it. An attorney's job is not only to make the best possible deal for his client (and the worst deal for you), but to disguise it so that you don't realize the damage.
IQ and "street smarts" have no effect here: doctors are cheated as frequently as anyone else.

Trying to get of a contract on the basis that "I had a lawyer, but I signed it anyway" is shooting yourself in the head - again.

 

The biggest surprise was me and the crew showing up for work one morning and finding the building all locked up(differnt lock&key) my partner hadn't paid the rent in three months, this was about three weeks before Christmas. I knew from the beginning that everybody should focus on what they were good at, If you were the best wrench you shouldn't have to answer the phone or spend too much time BSing with customers..by the same token if it was slow grab a broom and sweep up! my "partner" was in charge of the front desk,telephones,checkbook, I really should have paid more attention to that. The whole thing,three years, was a learning experience of what not to do really..I just have to look back and be proud of the cars and trucks that we did finish, on my watch, remember the smiling faces of the folks as they drove off, with a lighter wallet, but happy with the finished car!

 

how fast the 5-year plan turns into a 10.

Double everything you think you need.

 

The surprise was that your competitors advertise well for you if you do you job very well.
Word of mouth is great advertising. Happy customers will send you very many more happy customers! Just make sure you make them all happy! It's not easy, but well worth it.

 

I have had concurrent business with partners since 2001, and also one of the businesses started in 1997.

What I have learned:
-Get a line of credit, and then act like it doesn't exist.
-Take the time to understand how your cash flow works, and take steps to ensure that you are not taking too much money out at any given point.
-Try not to fall in love with a certain type of product or customer. Times change, and you might need to cover another segment.
-Don't pay your employees better than you pay yourself.
-When times are bad make everyone take a paycut, not just you. When times are good, share the extra cash too.
-Avoid piling on fixed costs. One day you might not be able to weather a bad economy, like right now.
-Use an accountant.
-Do you know at what $ you are profitable?
-Be flexible when you are slow, because low margin, non-core activities are better than no cashflow.
-A one month backlog is good. Two months is gooder. Three months means you need to raise prices or higher more people, pick ONE.
-Keep a few months of operating capital around.
-Always take some time to market or to check for business. Not prudent to be 100% focused on just working on whatever you do, who will be finding business for you?
-Try to be as organized as possible. If you constantly can't find numbers, tools, etc., that's your fault.
-I'm not a shop owner, but if I had one, and did big builds, I would have the customer send a check every month, not let it build up 6-7 months. It's better for them too.

 

I was pretty shocked at how easily a "nice" wife becomes a greedy, overspending, false-sense-of-entitlement-having HALF OWNER of your business without ever lifting a finger to help grow it or work it. The state is not your friend and is happy to tax you to death and give your hard work away. I guess that is business and divorce combined

Of course, you can always close... settle up and start again later. They can't really keep you down if you get creative.

 

HALF OWNER of your business

In most states, "marital estate" is exactly that: 50/50 split in everything acquired by either party during the marriage, even if she did nothing at all (there are exceptions, pretty technical).

The really bad news is that if you owned the business before you were married she's entitled to 50% of it's increase in value since the marriage.

Don't like those terms? "She said she's never ask for that"?

You need a lawyer.

 

I understand above where you don't work with someone with their lawyer present. But I would highly suggest to stay as far away from lawyers as possible, unless you really really have to have one. You usually don't need one, some lawyers will make a mountain out of a mole hill really fast. It is business, lawyers have their best business interest in mind first, realize this reality. 95% of the time where there is a lawsuit in a shop, it could have been avoided by calmly sitting down the the customer and listening, talking, and finding a settlement you both can live with. ( I said listen first, shut up, have an open mind, and listen, then think about it ) Remember, it is your job to screen customers and pick the one's to do work for, and the one's to run for the hills from. This is the only way to survive. If you mess up with your job as screener and proactive protector / mind reader of the shop, then make it go away, and do a better job next time.
If the job gets out of hand and runs out of control, it is the shop owner's fault, so handle it, don't let that happen.
It is also your job to make sure the customer really understands and you guys have a meeting of the minds in the type, quality, prices etc of job BEFORE you enter into the marriage of working on their car. Don't wait till you are heads deep in the job to figure out if you and the customer are really on the same page.

Picking the right people to work for you is everything.

The business decisions you make will make or brake your business. Fixing cars is the easy part, and really secondary to not even in the same realm of importance to having a successful business.

Define, what really constitutes a "successful" business to you.

Now, if you don't understand the legal system and the law, and have successful business experience with this, DO NOT sign anything without having a lawyer review it that you don't mind getting screwed on. There are plenty of lawyers that will happily review a quick document and give legal advice etc for a minimal fee. All lawyers and doctors are not self important tools.
Good luck
Wil
www.sakowskimotors.com

 

Sorry to hear that pal- Sometimes I think my wife Dana works harder than me as she is the one who gets me the press coverage and people interested enough to actually get in the door. She handles all the marketing and website and newsletter- in addition to her FT middle management job and taking care of our son.


I think when you start a business EVERYONE in the family becomes a part of it.

 

One other thing most people in business need, a mentor /advisor. If I would've had someone who had the balls to tell me how the rules work and how to handle the emotional ups and downs that goes with owning abusiness, I probably woul have been much better off and less depressed. Business owners, although they won't admit it, need a someone on the backside looking after their best and worst interests. If nothing else it is a good idea work with a neutral party you can just talk to openly.

I deal with successful (and some on the verge of failure) business owners who cannot see the forest for the trees when it comes to their own well-being. Mentally and physically. I've discovered they are very much alone as well. Most of them don't need me to tell them how to succeed, they simply need a mentor, confidant, or coach if you will, to keep them on the right track, or offer support when they think suicide is the best answer to their problems. Although they have friends and fam to discuss issues with, sometimes it is better to talk with someone on the outside who can offer objective perspectives. When starting out fresh or running a well established business, you don't need 'yes' people. You need straightforward advice that will help you survive.

Mikey

 

I know some folks who are members of Vistage/Tec, it's a national organzation of business leaders who form small groups and meet once a month. Might be a little too big for most folks posting in here, but it has that mentoring aspect that some folks might want.

 

"One guy told me, "save 20% of your time for promoting and developing new business, so that you're not out of work when the current project ends."

The other guy said, "keep your overhead down." That was easy advice for me to heed, because I'm a cheapskate."

Great advice. I'm a partner in a small consulting firm that's been up and running for 8 years now. Owning your own business is fun, but busy. You get to do everything from hiring, marketing, working, billing, collecting, etc. It's not for everyone. I'd love to just be able to come in and worry about getting the job at hand done, then go home and not worry.

Low overhead lets you compete in times like these. I'm quite busy because I can bid on contracts for 1/2 of what the big names would charge and still make out OK. In good times, people want a name. In tough times, people want the job done for a reasonable cost.

My advice is to keep focused and do a few things really well. We didn't really get too much traction until we made a name for ourselves in a couple of areas in an already niche market. It takes a while to build client relationships. Do a better job than they expected for less. I always get good laugh when I open a small firm's website and they have 15 different areas of services they offer. It tells me they're either much more talented than I am or they've taken on way to much in terms of scope.

My 0.02

 

bumping this up again- seems like every time I do , we find new pearls of wisdom.

 

It surprized me how much work it was to try to earn a living, came back from Nam with an attitude
started about 1971, threw in a divorce quickly.
was painting cars for $65 ea , times were tough in the 70's too, if a person could pay the bills it was a good month.....
bank sold off some of my tools...
went to work at $5 an hour as heavy equip mech, paid off the house ,vehicle loans.. did not want to work for the "man" the rest of my life
decided to go to college took 7 years
went back into business, worked harder , got some breaks and finally made some money, had a lot more enthusiam because of the hard times starting

NOW got old and am selling off the inventory and realizing some $$ of the work of the business

and buying rods and show cars just because i always wanted too
went to car shows with $1 in my pocket in the 60's they were not such good times as everyone thinks

 

I started my exhaust shop 25 years ago...
I wouldn`t want to be doing anything else !

the most important thing I`ve learned is to go with your gut feeling...


the first of every month you sit down with yourself and work out a game plan, what needs to be paid, what needs to be done, what are my needs...

notice your needs are last !
try as I might , it`s hard to put money away for the rainy day...
you just have to work harder and longer, but in the end you have that deep down warm feeling......this is all mine !
or it might just be heartburn...

act on your dreams !

ratso

 

My Dad had this advise. "Remember the bigger you are the farther you can fall". Wish I had lisened to him. I ran a small 1 man shop for years, enjoyed it, always had work with a back log, happy customers. About 12 years ago one of my customers said I did such good work I should go "big time", talked me into it. So I rented a big shop, bought/ leased a lot of new equiptment, hired help. Went from needing $200 a day to pay the bills to $2000 a day. Stess level of having to sell, produce and COLLECT that much almost killed me. Back log of work went away, quality suffered big time because YOU WILL NOT FIND hired help to do the work as well as you will and you CAN'T do it all. Employees will and do rip you off. I went from loving my job to hating it and I the end of the day I was making less then I had in my small shop. When there isn't enough work to cover the OH and you need $2000 a day your savings start going away really, really fast, you can fall really far.
Sold the buisness to a wealthy customer that was real impressed with the operation and thought he could really make it work. I went back to a small one man operation, had my back log of work again and could pick and choose my clients. Life for me was good again. The wealthy customer that bought me out filed bankruptcy less then 2 years later.
I know this advise isn't for everyone. My case is I'm good at building cars, not good at running a big buisness. I know there are some big shop that appear to be successfull and I admire the owners for that. Just pointing out that if you go big you'll need a lot more expertise then just being good at wrenching or whatever the buisness does.

 

Iv'e been self-employed since 1976. Had one man shops, had shops w/ helpers, even had a corporation with over 30 employees. One thing I found is your always going to be chasing your tail and robbing Peter to pay Paul! That's just how buisness is. It always seems like the crooks make all the easy money while your trying to do the right thing. My first buisness I built up a very big clientel by excellent service, on time delivery, good product and good prices. I made lots of money after 5 years but my first 7 years in buisness I never really took any time off for my self. So by the time the money finally came rolling in I was burned out. Money can't buy your health or happines. You can't please all the customers all the time. You have to learn to take the punches and roll with it. Remember It's only buisness. If you develop a tough skin early on in buisness you'll be better off! Trust me your the only one who knows if you really screwed up or not. Be friendly with your customers but don't be their friend or they'll start expecting favors. You'll end up turning a cash cow into non-payer!! My main reason for going into buisness was for the fabrication and building the cars. There's nothing like taking the finished car off the jig and rolling it outside for a look. That to me is my payday, but unfortunately we have to pay the bills. One upside though is the customer picks up on this passion and realizes that maybe building cars is more of an art form than a cold buisness deal lost in the ideology of coperate America of today. Ask yourself why am I in buisness?

 

__________________________________________________________________

I can't say I ran across any suprises, even 20+ years down the road..... no that is not entirely true...... What I was not prepared for or even thought of, shortly after starting my business in the late 80's and the recession hit in '90, I had to swallow the humbling fact....I was not a necessity, I was not needed, that came out of nowhere but hit home. I did and still do custom lettering, graphics and pinstriping. All of this was not needed, and it is much worse now. That was a suprise.

The thing I did learn was the truth in the statement my bosses in the past used to tell me when I was younger......they'd say I went home this week with more money than they did.....I couldn't believe that, but after being in business, I now know that to at times to be true.

 

my biggest surprise was that people STILL think I am the Bank of Lenny -giving out loans....