All Forum Posts by: Brian Mathews

This is a fairly typical response from somebody who has never run or owned a business.  Workmen's comp runs about 8% of gross payroll.   $500 a year for GL insurance?  I could't get $100K worth of GL for that and trust me, I shop it every year.  I would love to get insurance that cheap.  Maybe in Pennsylvania.  Commercial auto runs around twice what you pay for your auto insurance and half the coverage.   1 hr to install a furnace?   Somebody is cutting some corners if they are doing it that fast.   I'm not installing I have employees that install for me.   Ask your boss how much it costs to employ you per hour and how much he bills out for your time.    You might be surprised.   If you make $30 per hour for example.   You probably cost him 2-3 times that depending on the benefits he provides to you.   And that $240 isn't per hour for me.   That is a daily amount that crew generates.   I don't have 8 crews for every hour of the day.    If I did, then I would be making $240 per hour.    I have 1 crew during the wintertime and will have 2 crews in the summer.   If there is no work for them for a few days as is common this time of year in Texas due to mild weather, then that's all there is.   

 I'm an hvac contractor.   You over simplify the furnace installation.    Let's breakdown the costs a little   $2000 for the job.   $500 for the furnace.   It costs me about $500 in labor costs to have a furnace installed by my installers, by the time I figure in 2 guys for 6 hrs work,  my portion of their taxes and other benefits I provide for them so  I only hire quality guys so they don't screw up your job and steal from you . I figure I need about $200 in miscellaneous materials for a job (flue pipe, screws, tape, mastic, etc...) Typically its double that for a full system install.   My over head runs around 24% on every job for fuel, general liability and commercial auto insurance, workmen's comp,etc....   There's another $480.   We are up to $1680 for that $2000 job.   That leaves me $320 in profit or around 16%  Out of that, I have to pay my income taxes, so another $80 or so.   I'm now down to $240 for the entire job I get to keep to feed my family, pay my mortgage, pay my utilities.    

I guess it depends on what you're doing and how far along you are in the process of a "deal".    If you're wholesaling, I wouldn't mess with it.   If you're flipping houses or owning rentals and have the funding setup and you've identified properties and it's all in the details to finish it out.   Then probably so.   I've seen it a lot where people get hyped up about the idea of owning a business and put the cart before the horse and nothing ever happens.   Usually people figure out it actually takes work to succeed in business and revert back to their comfort zone.   So no reason to put spend money on something until you are knocking at the door of your first deal.  

It is hard around Austin to buy a property that isn't ridiculously overpriced.   You might have to go to Killeen, Waco, Temple to find something.   I don't think that's too bad as far as owning property not in Austin.   It's only an hour away or so.   I think that would be about my limit.   I surely wouldn't own anything that you can't drive too and back home in the same day.  

 This is exactly the reason why you should avoid workmen's comp.   If they don't pay their taxes and their a sub with you providing workmen's comp.   You could be on the hook for taxes they owe, not sure about how your state is.   But in Texas I could be on the hook for unemployment insurance as well.   If you quit providing work, they could start collecting unemployment because you established that relationship by providing workmens comp.   I'm not even sure you can provide the comp unless they are an employee.  You can get away with it as contract labor for a little while, but if they become regular workers, you have now established them as an employee.    Take the time and hire legitimate contractors with the insurance in place to protect you.  If they don't have it, don't hire them.  

I'd be afraid somebody would get hurt, either legitimately or not and you'd be on the hook for the medical bills.   I'd hire a real company that does this that has insurance and pays taxes.  

 I don't know about your state or any state.   All are different.    First I'd see if there is a licensing board for your state and check their website and only hire people off that.   Then I'd ask friends and family.   If those don't work, check to see who is pulling permits in your town as that is typically a sign of legitimacy if they go to the trouble of doing it right.    After that, I'd drive around and look for signs of people doing a remodel.   Stop and talk to the person having the work done, not the contractor.     They'll tell you if the person is good or not.  Look at Thumbtack, I get work off of it and I've used it to hire people with pretty good results.    When you get a bid, don't necessarily hire the person who tells you everything you want to hear, hire the one who speaks the truth.    If you have experience you know realistically how long it will take.   Anybody who is 180 degrees from that is a liar.   Everybody should be pretty similar in price.   If one really jumps out low, then you know he's a liar.  Look at jobs they've done in the past or references.    Look at where they live and office.   If they live in a single wide trailer with broken down cars around it.  Most likely they aren't any good.   I'm not saying they need to live in a million dollar mansion, but something middle class and neat     Look at how they present themselves, are they somewhat clean cut and neat or are they toothless and chain smoking cigarettes?   If you wouldn't trust them alone around your wife and kids, don't hire them.   You can tell a lot about a person by how they present themselves  

The problem with what I call remodelers I've found.   And this may be regional.   Is that they are typically so desperate for a job that they underbid and say it will take less time than it actually will.   The problem is that if they bid the job at what it needs to cost and realistically estimate the time, they won't get the job because a person who underbids and underestimates will get the job.   I'm an hvac contractor and I lose a lot of jobs because somebody comes in cheaper or does a crappy job.   Several times I get called back after somebody else did the job and asked for help.   Looking for contractors at Home Depot is a ridiculous notion, you might get the workers picking up materials or beer and cigarette guy.    But the guy you need to talk to isn't picking up materials.   I very rarely go to the supply house to pick stuff up, my employees do that.   

I'm a contractor and know several good contractors.    If you're some cheap *** trying to squeeze me and becoming a hassle to deal with.   I'll dump you.   I'm not desperate for work.    If you want the good guys, you have to pay.   I run a legitimate business and employ high quality guys that want to be paid fairly for their skills.   That costs money.   If you're paying beer and cigarette money wages or hiring the guy whose the cheapest, you get what you get.   

Real estate has better returns, but is more hassle.