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Forum Post: Need input for information on starting a cooperative

Posted 11 years ago on March 10, 2013, 10:14 p.m. EST by Stormcrow1now (6) from Jersey City, NJ
This content is user submitted and not an official statement

There have been numerous posts on here regarding cooperatives and how great they seem to be. So if I were to start my own cooperative - how would it be structured or how do you think it should be structured so that everyone benefits-

Lets say I want to start a company that does home improvements.

I would as a minimum need the following:

1 - Building or office to work out of

1 - Office Employee/Office Manager - to manage the finances of the office

1 - Estimator - Take calls, go out and look for jobs and price them up

1 - Employee to deliver the material to the job.

1 - Employee to oversee the jobs and to ensure the job is completed as planned and on schedule. Communicate with the customer to ensure satisfaction.

1 - Crews to do the work.

In addition to the above, other expenses associated with operating the business that would be needed would be phone services, insurance, consumables (office supplies, etc.), permits for each job, business license, along with a vehicle for each crew, and all expenses associated with their operation.

Now I am not sure about how the business would be structured but from what I understand, everyone who works for a company that is a cooperative all have equal say although I could be wrong - that's why I am asking for input.

I would also like some explanation as to your decisions - are they based on personal opinion or on a cooperative business model that you are familiar with. Short paragraph explaining your decision would be fine.

Also if you have any questions and are not sure about something, please do not hesitate to ask.

Keep in mind that the purpose of this business outline is to benefit everyone involved - so look at it from that perspective - .

So, here are few questions I have. They are broken down with regard to participation by a. individual, b. employee or c. both.

Business ownership - individual - employees - both -

Business Start up costs to get the business started - individual - employees - both

Business operation - individual - employees - both

Field operations - individual - employees - both

Job assignments - individual - employees - both

Salaries - individual - employees - both

Hiring/firing - individual - employees - both

Profit Margins - individual - employees - both

Company profit distribution % - individual - employee -both



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[-] 3 points by penguento (362) 11 years ago

Excellent set of questions, too complex to answer all at once, so I'll take a stab at part of them. I'm part of such an organization, so my responses are based on my own experiences.

Your first big question is ownership -- who owns what? You first have to decide what legal form you'll use for the organization -- sole proprietorship, S-corp., C-corp, partnership, LLC, LLP, etc. No avoiding this, the taxman won't let you. If you do nothing, it's a sole proprietorship by default, which means you personally are liable for all taxes, licensing, tort liability etc.

If you go with a corporation, partnership, LLC or LLP think real, real hard about how you'll manage actual ownership. It's tempting in the rosy glow of optimism to start handing out shares to people, but that could be a mistake. People will come and go, and if they have shares when they go, you'll have owners that don't work for the business but who own part of it and to whom you'll have an assortment of legal responsibilities, maybe including splitting profits; and the shares owned by current workers will be progressively diluted, which will leave them very unhappy. If you hand out shares, make sure there's a buyback agreement with some agreed-upon price in place for when they leave. Better still, don't hand out the shares -- put them into some sort of trust arrangement, with personnel not entitled to the shares themselves, only their pro rata share of the profits from them. Then people can come and go, and while they are at the business, they still get their fair share of any profits.

You’ll then have to figure out compensation. Very tricky. Some people will work harder, some will be more skilled. Does everybody get equal pay? Is there some sort of tiered system? We went with equal shares and equal pay, regardless of job title, credentials, etc., but if we get a whole lot bigger, that probably won’t work. Also at issue is seniority. People who were in at the start will have made huge sacrifices to get the business going – insane hours, little or no pay, big time stress. Do latecomers, who didn’t share those sacrifices and walk into a smoothly running business with steady salary and benefits and regular hours, get the same money? You’ll have to puzzle all of these things out with your collaborators. Don’t be surprised if some of them feel like they ought to maybe get a little something extra for being more skilled, or one of the founders, or whatever. Don’t be surprised if you find yourself feeling the same way.

Along with compensation goes the related question of what to do when someone doesn’t work out. It’s nice to think that won’t happen, but it probably will. You’ll probably get a malcontent or misfit or deadbeat someplace along the way, and you’ll need a mechanism for getting rid of them if they can’t be straightened out. Don’t kid yourself here, and don’t kid yourself that they won’t file a complaint with the EEOC or some other agency.

Your next question is money. You’ll need startup money, and it’ll be more than you think. Start out with 10 people, pay them each $500 a week, and your cash burn for payroll alone will be $5,500 a week when you include the employer’s portion of taxes and other related payroll costs. You’ll also need vehicles, E&O insurance, workers comp., a contractor’s license for every jurisdiction you do business in, and an assortment of other things – and you’ll have to pay suppliers for everything you need in the way of materials and supplies -- all before you ever have a dime in revenue. You probably can’t even legally bid on a job until it’s all in place, so it’s likely to be a couple of months or more before you even have any work, and a month or more after that before you have any revenue, so you have to plan on having enough startup capital for at least several months of operating costs. When we started ours, we went six months without a dime of revenue.

How do you pay for it? Depends. If your people need to start pulling a paycheck immediately, you have to find some money to pay them with. I did it by pulling money from my IRA and maxing out credit cards. The money was loaned to the business, and two and a half years later, I finally got paid back. The downside of this approach is that if the business goes under, you’re personally stuck with the bills and the loss from your IRA, so it’s risky. And the amount of money I had was limited, so for a good long time there were still months when nobody got a paycheck. And meanwhile, in my ten person company scenario, your total cash burn is right at $25,000 a month when you figure in insurance, taxes and everything else. That’ll eat through your savings and credit cards in a big hurry. If your people have income from spouses or other jobs they can live off of until the business gets up and running, you can get started much more cheaply. If they can do that, and everybody can chip in a few thousand in startup money, you can probably get it up and running pretty cheaply, especially if you’ve already got a pickup truck.

Bank loans for a startup will be tough to get (thanks, Dodd-Frank) unless you’ve got good credit personally and are willing to pledge personal assets. Stay away from venture capitalists unless you’re willing to give up 75% of the business (that can be a worthwhile tradeoff in some cases, but this probably ain’t one of them).

My advice is, start as small as possible, spend as little as possible at first. Don’t rent an office if you can avoid it, use free or really cheap cloud-based software for billing and accounting, run that old truck into the ground. You’re probably starting this thing without nearly enough money, so cash flow will be critical. Once the money runs out you’re dead, so you have to keep the cash burn as small as possible.

One last bit of advice: If (or rather, when) you get in a cash crunch, don’t be tempted to use tax money (e.g., income tax withheld from paychecks, or the employer’s portion of social security and Medicaid) for the business, on the theory that you’ll pay it back when cash flow is better. Put it in a separate bank account, promptly send it off to whoever is supposed to get it, and learn to live without it. Leaving aside the fact that it’s illegal to divert it, if you haven’t got $5,000 to pay the taxes this month, you’re probably not going to have $10,000 for taxes next month, and very soon you’ll find yourself hopelessly under water. You’ll then find that the tax folks don’t give a shit about your cash flow problems, and they’ll hit you with penalties and interest and if you can’t pay, they’ll shut you down. Many, many small businesses fail because of this. Don’t be one of them.


[-] 2 points by penguento (362) 11 years ago

By all means, copy and use, if it's helpful.

[-] 2 points by analystwanabe99 (153) 11 years ago

Thanks by the way. I plan to hand a copy to any youngster that is thinking of starting a business, and review it if I decide to start a coop.

[-] 2 points by analystwanabe99 (153) 11 years ago

Is your coop a service or product one?

[-] 1 points by penguento (362) 11 years ago

Services. But we're expanding into products.

[-] 2 points by penguento (362) 11 years ago

One last point -- If you're the sort that hates rich people or thinks that wealthy businesses are evil, remodeling might not be a very good business to be in. Your customers are going to be almost exclusively wealthy people and prosperous businesses -- poor folks and shoestring businesses don't have any money for remodeling contractors. So you'll wind up rubbing elbows with the rich folks, and schmoozing them and talking to them about granite countertops and Wolfe ranges and imported Turkish tile and and other extravagant things of that sort (and worse, you'll be the one trying to upsell them into the more expensive granite and the fancier tile), and maybe you'll be having a glass of wine and some cheese with them at the end of the work day. And all of that will be part of your job, so if you hate it, and you hate them, it probably won't be a good fit.

[-] 2 points by penguento (362) 11 years ago

Let's talk about the realities of cash flow and income. A lot of the ideological purists around here like to suggest that profit is a dirty word, and if you're focused on profits you’re a bad person. I don't know whether that is true or not, but what I do know is that if you own a business, communal or otherwise, and you have to make payroll every week or every month, you will be forced to be obsessive about profitability, because if you are not profitable your organization will go out of business and your people will be out of a job. Let's look at some numbers:

Earlier, I spoke of a hypothetical 10-person company. Let's suppose that you want to pay each of those 10 people $1,000 a week. That's a reasonable middle-class income, but hardly extravagant, and certainly something you should reasonably aspire to for you and your collaborators. That's about $520,000 a year in direct payroll costs. I can tell you from personal experience that you'll have an additional 11% or so in additional payroll costs that constitute the employer portion of payroll taxes and some other things, that will bring your payroll to north of $550,000 a year (this is actually low – that 11% is my figure. Your business will have much higher workers comp rates than mine does, and you may be in a jurisdiction with much higher business taxes). But suppose that in addition to the salary you want to provide health insurance to employees and their families; another perfectly reasonable thing to do. That will run you about $700 a month per employee. But suppose further that you also want to provide a small retirement fund for each employee, say $300 a month, another entirely reasonable thing. All of this will bring your yearly payroll costs to right around $693,000. In addition to these costs you'll have overhead, a wide assortment of government taxes and fees, the cost of supplies and materials and other costs. Your sales will have to pay for all of this. So in order to do that, how much will you have to sell every year? Let's assume that labor is 50% of your total costs, materials for your jobs are 30% of your total costs, taxes and government fees are 10% of your total costs and overhead is 10% of your total costs. How much will you have to sell and bill every year to make this nut? Very nearly $1.4 million, assuming you manage to collect it all, which you won’t. That’s over $5,500 in sales every working day of the year, $27,000 a week. For a funky little startup, that’s a ton of sales, my friend. And of course, you won’t get that much in sales every day – nobody will be buying much remodeling the day after Christmas, for example. So your salesman will be humping very hard the rest of the year.

Of course, you won’t want to be living hand-to-mouth forever. You’ll want some cash in the bank to tide you over the slow times of year, so everybody can get a steady paycheck, even when things are slow – laying people off sucks. So does telling them there’s no paycheck, or half a paycheck, this month. Say you want a 6 month cushion --$700,000 -- in the bank for payroll, unexpected expenses like the truck blowing an engine, and so on. That may sound like a lot, but if you run into a very slow quarter, you could easily be burning $50,000 or more per month on payroll alone. If you get sued, you could easily drop $100,000 on legal fees alone. (I got into a little legal squabble over a business matter myself a while back, and when I asked my lawyer what it would cost to litigate it, he told me about $175,000. I settled, fast.)

How much more will you need to make? A lot more than $700,000. The reason for this is that they don’t let you just take this additional money and park it in the business for free. You’ll have to pay taxes on that cushion – lots of taxes. There’ll be federal income tax, state income tax, local income or gross receipts tax, unemployment compensation workers compensation, various excise taxes, etc., etc. And the result will be that they will take 40% or more; so if you want to park $700k in the bank, you’ll have to earn $1.2 million more to do so. That’s a ton of additional sales. If you wanted to accumulate it in a single year, you’d have to sell and collect on $2.6 million worth of business in a year.

We haven’t even gotten to the point of making enough to pay a distribution to your employees. We’re just talking here about enough money to pay 10 people a reasonable middle-class wage and a few benefits and give them a little job security. But you get the picture. It’s a lot of money, and you will have to hump mighty hard to come up with it. And you’ll discover that doing so is going to be tough. Competition is brutal – particularly in a business like the one you’re contemplating – and customers will demand top-drawer work at rock-bottom prices. And then, many of them will stall on final payment as long as possible, or try to stiff you, making it that much tougher to make the nut every month. I can assure you from long personal experience that even under the best of circumstances, you're going to be having a lot of months where making payroll and expenses is a white-knuckle, high-stress exercise.

If you care about your employees (or colleagues, or communards, or whatever you style them to be), you’ll be obsessed with making money and being profitable, and you will sweat long hours over it. Because if you don’t, you’ll be screwing them all.

[-] 2 points by penguento (362) 11 years ago

I want to talk a bit more about money. A lot of the folks around here would have you believe that if you run your business with good intentions and treat people well that the money will all just work itself out. As I discussed in one of my other posts, that's unfortunately not true. From the day you start your business until the day you close it down, money will be on your mind continuously. You won't be able to avoid it.

So, let's talk about what people will get paid. One of the common themes you'll see in connection with cooperatives, and in particular with cooperatives being touted by anarchists is the notion that, since all workers have equal dignity, and all workers contribute to the success of the organization, all workers should be paid equally. However noble that may seem, there are some practical considerations you will have to bear in mind should you think about going that route.

Let's take an example germane to your proposed remodeling business: you might have a work crew that contains, among others, an unskilled laborer and someone who is very skilled and credentialed such as a journeyman or master electrician or a master cabinetmaker. One thing you'll quickly discover is that if your customers are paying by the hour, they will be unwilling to pay an unskilled laborer at the same rate that they would pay a master electrician or a master cabinetmaker. They might be willing to pay $20 an hour or so for a laborer, while the electrician or cabinetmaker might command $100 an hour to $150 an hour or more. If you insist on true equality, you could only charge for the laborer’s rate, since no one will pay the laborer the higher rate. Doing that would be a considerable economic disadvantage to your firm, since you wouldn't be making anywhere near the money you could otherwise make; and that's bad for everybody, including the laborer. The simple fact of the matter is that an hour of the electrician or cabinet maker’s time is worth much more to your organization than is an hour of the laborer’s time. Although it's not quite so obvious, this is equally true if you are working jobs on a flat fee basis. The electrician or cabinetmaker contributes much more to the economic value of the job than does the unskilled laborer. So, no matter how much you might wish it to be otherwise, the simple fact of the matter is that the electrician and cabinetmaker are much more valuable to your organization that is the laborer. If one of them quits and you have to try to replace them, you’ll find this out very quickly.

When it comes to actually paying them, human nature will play a part in the outcome as well. It may well be that if you've got communally oriented participants in your organization, the very skilled amongst them will be willing to take less money than they otherwise would, to subsidize and increase the pay of the less skilled. However, whether or not the very highly skilled will be willing to take a pay cut of 75% or 80% over what they could otherwise make is debatable. You may find considerable resistance to a fully horizontal pay scheme when it involves people taking that kind of a discount. By its nature, any such scheme inherently favors the less skilled over the more skilled, and therefore, human nature being what it is, it will be more favored by the less skilled as well.

You'll also find that even if your participants initially go along with a horizontal or nearly horizontal regime, as they get older and have families and responsibilities, and as they acquire more skills and are themselves worth more, they will be less inclined to such a thing. When you're young and relatively unskilled and have no family or other responsibilities you have to pay for, it's easy to be in favor of a horizontal pay scheme of which you are the beneficiary. As people get older older, and are the ones subsidizing the scheme, and they have bills, and a spouse and children, and maybe an elderly parent to care for, they often discover that their allegiances lie first with family, and only secondarily with the workplace; and their personal income to support that family becomes very much more important to them. If your organization fails to take this into account, you're likely to find yourself losing your more skilled workers as they get older and conclude that they can make quite a little bit more money working for themselves or in some more traditional employment arrangement.

Another place you'll have to think this sort of thing through very carefully is in the sales area. In another post, I discuss the realities of generating enough income to pay everybody, so suffice it for the moment to say that you will constantly be struggling to generate enough sales to keep your organization afloat and to pay everybody. That means you have to have a skilled and energetic sales staff. Finding such people is always a challenge: most people hate sales, and most people are really lousy at it. When you find somebody that's good and really likes it, you have to keep them, and you have to keep them motivated. Most salespeople are paid commission, and there's a reason for that: it keeps them motivated. And they need it. Sales work involves constant rejection, a million phone calls, cold calling people and businesses and a lot of other dreary and unpleasant work. What keeps a salesman motivated through all of that is the thought of that commission check. So, you may find you'll have to pay your sales people commission. And you, like many other people, may discover that, in order to motivate them to generate the sales volume necessary to keep everybody else employed, you have to pay them commissions which make them much more well-paid than everybody else. The communists amongst you will not be pleased by this fact, but a cold, hard analysis of the arithmetic may well lead you to the conclusion that paying your salesman extravagant commissions is in the best interests of everybody, including the communists; just like paying the master electrician more is in the best interests of the laborer who gets paid less. In most organizations with commission sales staffs, the top salesmen are by a wide margin the best paid people in the company, often making more than the executives – for good reason.

You'll want to think about all of this very long and very hard, because the balancing act between maintaining the ideals of a communal workplace, dealing with the reality that people have a personal interest in making as much money as possible, and keeping your business afloat is a very tough one. You'll have to make some tough choices and tough compromises that are likely to put you in a position that is not as ideologically pure as the diehards amongst you would like it to be.

[-] 0 points by vaprosvyeh (-400) 11 years ago

Thank you so much for taking the time to write this all out and give us a very realistic picture of what goes into developing and maintaining a successful business of any kind. It's a lot harder than most people can even imagine, even when all participants are engaged and working together.

[-] 2 points by penguento (362) 11 years ago

My pleasure. I hope it serves as the basis for a grounded discussion.

[-] 2 points by penguento (362) 11 years ago

Let's talk for a few minutes about personalities and people. If you're the sort of person who's interested in starting a cooperative business, you probably place a high degree of value on common values, group cohesiveness and shared sacrifice. And you're probably willing to forgo some money – maybe a lot of money – personally in order to achieve some greater good for the group. I applaud you for this – I feel the same way. Ideally, everyone in your cooperative venture will also feel the same way. And in an ideal world, they would. Unfortunately, that's not always the case. If you're going to be climbing in bed with other people, you need to be realistic about how they may behave and plan accordingly.

I've had some experience with cooperatives in the past, in addition to my current arrangement; both economic cooperatives and social cooperatives. A depressingly large number of them have been sabotaged by incorporating members who do not share the values I set forth above. You need to be aware that a communal situation offers sociopathic people the opportunity to manipulate others, and that such people will be attracted to you. So, you may find your cooperative drawing in some undesirable people. They will, in one way or another, attempt to use the more naïve and idealistic members of the cooperative for their own purposes, anything from control to mere crass economic gain. So let's think about some of the more common specimens you're likely run into:

First is the simple deadbeat or slacker. If you’ve got a cooperative where everybody gets paid the same because all worker are valued equally, you'll get the occasional person who figures out that they'll get paid the same whether they work hard or not. In extreme cases – and I have personal experience of them – you'll get people who are more than happy to draw their salary every month and not do much of anything. Not everybody's this bad, but lots of other folks will do the minimum necessary, or otherwise let other people shoulder a disproportionate share of the burden.

This will have a number of bad effects on your organization: the first is that it is exceedingly bad for the morale of everybody else. People who are working hard toward the communal goals will not be pleased by having to work harder on account of a slacker, nor will they, or you, be happy to give a deadbeat a paycheck at the end of the month that they haven't really earned. More generally, the economic well-being of your cooperative will be adversely impacted by such people because your overall economic output will be lower as a result of them, and as a result of this everyone's standard of living will be that much lower. If your slackers are outward facing and have contact with your clients and customers, the adverse affect on your economics may be even more dramatic as you lose customers.

You may think that you are immune to this. If so, I strongly advise you to disabuse yourself of any such notion. A surprisingly large percentage of the population is more than willing, given the chance, to sponge off of other people and not carry their fair share of the weight. In your little cooperative, where cash is going to be tight and you're going to be living on a shoestring for a very long time, you can't afford this. I speak here from long experience dealing with these matters. You need to vet people very carefully before you let them in, and when necessary, you must have a door to let them right back out.

The second class of problem people you run into are the alpha dog sorts. Some people seem to think that it is the natural order of the universe for them to be in charge and giving orders. And in your cooperative, they will, if given the chance, make that very assumption. In my experience, such folks don't make very good leaders or managers. Leading or managing isn't really what they’re after, stroking their own ego is the point. So if they start becoming de facto managers of your organization you will have problems. It's almost certain that they will piss other people off quite a lot as well, so not only will you have bad management, you also likely to face a revolt amongst your workers. If someone shows signs of being an alpha dog, don't let them in your cooperative. If they get in, get rid of them quickly. If you don't you'll be sorry.

The third class of people you may run into are out-and-out predators. They are looking for naïve people to take advantage of and rip off. And, they seem to have a radar for spotting susceptible people. Idealistic young people make perfect targets for guys like this, so they will be attracted to you. And usually, they talk a pretty good game and come off as very charming. So, watch it. They are there, and if they figure out you are there, you will become a target.

In all of these cases, I speak from experience. I don’t want to suggest you shouldn't try a cooperative. To the contrary, I think it's an excellent thing to do, and something I'm doing myself right now. But, I've seen a lot of cooperatives and communes fail because of people issues, and I've seen a lot of idealistic and naïve people burned by the deadbeats and predators of the world. It doesn't have to happen to you, but you need to go in with your eyes open. Not everybody's as nice or as committed or as selfless as you are.

[-] 2 points by penguento (362) 11 years ago

So, let’s talk for a minute about consensus and governance. Once again, in the rosy glow of your initial optimism, it’s tempting to think you’ll have a workplace with direct democratic decision-making about every decision large and small. Once again, however, that may not be a good idea, or workable.

First, every day consists of an endless series of decisions, many of which must be made quickly. Even supposing that consensus is always possible, there are an assortment of practical obstacles:

People will be working long days at whatever it is they do to earn money for the company and won’t have much time for meetings during the workday (and in your case, won’t usually be in the same place). That means that your meetings will mostly occur evenings and weekends. People who have just put in a 10 hour day doing outdoor construction work in cold weather may not be much interested in having a two or three hour meeting on top of it, even if they are part owners. Likewise, a weekend meeting after a 55 hour work week may not be very appealing to folks. That means that lots of important decisions will tend to languish because you never get around to discussing them fully. That’s a problem for us, and we’re a relatively small group, equipped with video conferencing and all the other gadgets to make meetings as easy as possible.

As a practical matter, a great many decisions are delegated to one or another of us, and everybody else just goes along with what they decide. An example of this occurred just today: A customer wanted a bid on something, with an estimate of hours and other things. Someone else drafted it and sent it out for review. I was too busy to bother with it and so was everybody else, so after waiting a while the originator just sent it along without input or consensus from the rest of the group. The alternative would have been to blow off the customer, not a good idea.

In like manner, I keep the books for the business. Everybody else could inspect the books (they all have access to the accounting records) or question my decision-making about lots of financial matters, but as a practical matter, they’re too busy, so they take my word for it most of the time. I raise major issues about financial matters with them, but most of the time, I just do it. Likewise, they don’t need to gain consensus from the group to buy a new laptop or software or whatever – we haven’t got the time to be debating whether somebody really needs a new iPhone. They just buy it and submit an expense report and they’re reimbursed. (Note that in this group, there is an exceptional degree of trust between us that you may not have). You’ll find that lots of this sort of de facto authority is a practical necessity if you want to get anything done. Maybe not to the extent of letting someone run the books without supervision, but the day-to-day stuff, it’s unavoidable, otherwise you’ll never get anything done.

Next is the question of expertise. The accountant probably doesn’t know much about the remodeling business. Unless the question involves financial and accounting matters, his or her input on some classes of business decisions about remodeling may not be terribly useful. In the worst case, it might be detrimental. Likewise, a great carpenter doesn’t necessarily know anything about accounting and may not be in a position to make a useful contribution to decisions about financial matters. The upshot of all of this is that everyone getting a say about everything may not be a particularly good idea, regardless of the anarchist ideal. In my business, we routinely defer to our internal experts on all sorts of things from legal matters (I’m a lawyer) to tech matters (we have a tech expert on staff) to business decisions involving particular clients with whom one of us may have the greatest experience; and don’t pretend to seek consensus. Everybody has their say, and then the expert renders their judgment, and we do what they say. Or, if the decision needs to happen quickly, the person on the spot just does what’s needed and doesn’t bother seeking input. We’re all smart enough to realize when someone else is smarter about something or closer to the action and let them make the call. The problems arise when people aren’t that smart, and insist on meddling in matters where they are not competent or not sufficiently knowledgeable.

The bigger your group, the more these issues will be a problem – it gets harder and harder to get everyone together in the same place at the same time, there are more issues to deal with, more, and more vehement, disagreements, and a much greater likelihood of having personality issues or power struggles that can really cause problems. You should have some sort of robust mechanism for dealing with these sorts of things, because they’re very real and can cause you serious problems.

Our current group is very close and works well together, but in the past, we’ve had all of those sorts of issues, and they can be a very serious problem. They pretty much wrecked the last outfit I was with, so this time, we’ve learned to be very, very selective about who we let in. I would advise you to do the same. Once you’re in bed with people, if it’s a bad fit, getting back out in one piece can be very difficult, particularly if you’ve made a significant investment in that arrangement.

[-] 2 points by gnomunny (6819) from St Louis, MO 11 years ago

Chances are, you could probably get away with using a home office when you first start out. That might save a lot of start-up costs associated with rental of an office. And you might be able to rent space to store tools and supplies as well, like those U-Stores. It probably depends on where you live, though.

Edit: a lot of building supply companies will deliver material straight to the jobsite.

[-] -2 points by OTP (-203) from Tampa, FL 11 years ago

You dont need to start as a fully functional, departmentalized contracting company. You can start as a few guys with the desire to help people.

[-] 2 points by penguento (362) 11 years ago

If you plan to be around for a while, the people your plan to help had better include yourselves. A desire to help people doesn't pay the rent or put food on the table. You have to make money, and you have to do so quickly.

[-] 0 points by OTP (-203) from Tampa, FL 11 years ago

You could not be more further from the truth. If your core business philosophy is not to help your customers, then you wont last long.

Its why 95% of businesses fail in 5 years, because they go in thinking of profit and not of the customers. I've worked for myself for 10 years and seen many come and go. The profit tinkering clowns always fail, always fuck up. The ones who stick to incredible customer service (this doesnt mean offering the lowest price) are the ones who seem to stick around.

[-] 2 points by penguento (362) 11 years ago

Quite the contrary, I'm right. If you're not making a profit, you won't be around long, regardless of how nice you are to your customers. That said, you're also quite right. If you want to take care of yourselves, you'd better take care of your customers first, or they'll walk away.

Just as you've seen businesses die because they focused too much on profits and not enough on their customers, I've seen businesses fail because they're unwilling or unable to charge enough to make a reasonable profit. You've got to balance the two factors, but like it or not, turning a profit has to be on the agenda.

[-] 1 points by OTP (-203) from Tampa, FL 11 years ago

If you focus on great customer service, and dont try to go "low cost/Walmart" route, everything else takes care of itself. Assuming the market needs what you are pushing.

I saw a store on my street open a while back. Designer Persian Rugs. In the middle of a economic downfall. Either that dude is not made to be in business, or it was money laundering.

No matter how great his service was, no one is going to buy designer rugs when they are afraid of being laid off.

[-] 2 points by penguento (362) 11 years ago

Well, lots of things go into it. You've got to have a product or service people want -- persian rugs in a recession probably ain't it; and you've got to have good customer service unless you're the only game in town, which you're probably not. But you've also got to be able to charge enough to cover your expenses and earn a decent living at it. I've seen a lot of really nice guys go down because they couldn't or wouldn't charge enough for what they did. And in some cases, they could easily have charged more -- they just didn't out of some sense of guilt, or because they started seeing customers as friends. Which is fine, until it bankrupts you.

Like it or not, cash flow is king.

[-] -1 points by highlander3 (-62) 11 years ago

like a starting business, out to provide a people's need for a profit.

[-] 2 points by DebtNEUTRALITYpetition (647) 11 years ago

Not necessarily. There are profit motive businesses that offer crap products and services, and there are profit motive companies that enrich the customer, giving them actual value that exceeds the profit generated.

The problem with wall street is they have access to a LOT of money and stick the investments into companies that DO NOT provide more than the profit generated.

The profit generated is all that exists, and they, are the real terrorists of society.