Running an electrical business

[Tradie]

Tired of making your boss rich?

smarter than all the other electricians in the company, not getting the promotion, even though you feel you are the best person for the job?

being paid small change compared to what your boss charges for your time?

your boss is an idiot and you feel you would do a way better job....... well, then maybe it's time to go on your own right?

People who are self employed, sit around all day doing enjoying the fruits of your labour?

It can't be that difficult right, I have the qualifications, the skills and the experience to be the best sparkie, that right there people is where many self employed tradesmen mess up.

Being the best tradesman, doesn't make you the best businessman, it makes you a good tradesman.

[Tradie]

If you want to move from being good at your trade to being a good businessman, you need to go through the same process as you did to get to where you are today.

If you want to know how many small businesses fail, go speak to your local wholesaler, there are a lot.

Dont feel bad when you hear they got screwed by a contractor for xyz, they have insurance that is included in your purchase price, that is why they encourage you to open an account and sign your life away.

Where do we start, how do we know it is time to go on your own?

I am going to share my experience and hopefully help others who feel it's time.

[Derlyn]

I've been on my own for 40 years, but I'm only getting started. Nothing beats experience..

Looking forward to this chat.

[Tradie]

You work your butt off, book 9 hours per day for the company (very few employees do this), and took on as many projects as possible to gain experience.

One day you wake up and look at how much you are taxed for all that overtime, weekends away from the family and thousands of km travelled.

People see how hard you work and start questioning why you dont start your own business. At no point did I have visions of being self employed, I worked hard to gain experience, I have an inquisitive mind that doesn't sleep.

One day I woke up, with many thoughts, how I was being screwed by my employer (back then we had to do compulsory military service for 3 months every year or go to jail for 3 months), because I worked for a private company I didn't get paid for the 3 months, had a family and bills to pay.

I thought I have nothing to loose, so I spoke to to a few people and everyone was happy to support my new venture.

Quoted for my first project R2000 to rewire a house, including materials, even though back then R2000 was a lot of money, I had no no idea how much I was about to loose. I resigned sold my bike and purchased a car, roof racks
and a 6 ft ladder.

Boy was I clueless about what was about to become a journey of a lifetime.

I under quoted R5000.

[Tradie]

Having a family, rent to pay, no trust fund or rich parents, investors, mentors or anyone to bail you out when things go wrong and boy do things go wrong.

Running a small business is like being stranded in a small dingy out at sea, one day you are at the top of the swell, the sun is shining, you can see land and you are hopeful, the next thing it is dark, lightning is hitting the water all around you and you can't see your hand front of your face.

You put your head down and put one step in front of the other and just keep trying, until eventually you get a nice project, so you go to the bank and ask for finance for a vehicle and overdraft facility. To your surprise they ask for a bunch of documents, surety and a business plan. All you have is a personal account which is overdrawn to the limit and some.

You go back to collecting cash and putting money in envelopes to pay the bills.

Put your head down and keep trying, giving up is not an option, regardless of the hole you are digging, because you know one day it will pay off.

[Tradie]

The bank declining the vehicle finance, telling me I am idiot and a huge liability to anyone considering investing in my silly idea, inspired me to prove them wrong. I gave myself 5 years to prove them wrong, here I sit 34.4 years later still at it, with 8 months to go, to reach my 35 year goal. The worst decision I have made since I started the business, I have totally lost interest and have no motivation to even reach the goal anymore. I have to find something to get me motivated to get up and go again.

What are the challenges of running a small business?

How do you scale the business?

Do you take on partner/s and end up taking then to the cleaner before they can destroy you?

How do you find work?

Do you get investors to grow your business or do you battle alone?

Do you commit to the bank and pay enormous bank fees and interest on credit card debt, overdraft facilities and vehicle finance?


There is so much information on the internet to help guide you, so much bullshyte, especially on youtube, everyone a millionaire/billionaire with expensive sports cars, flying around the world in private jets, but in reality, when you put your head on the pillow, only one person is accountable for your decisions and the chance you getting into that tribe is so small that best you sprinkle water on your face and wake up to reality.

Being self employed is not all about fancy cars and private jets, for most of us, it is a struggle from the time you lay your head on the pillow till the next day you do it again, if the stress doesn't kill you, chances are you will become a one of the many failures (up to 80 % at the moment ?).

The biggest mistake I have seen, are people who go out and get into huge debt to fund a project that they think will be the gold at the end of the rainbow, buy vehicles, rent offices and employ tons of people.

What you have to consider is that the chance that you are still going to be around in 5 years time is so small and almost impossible to be around longer than 10 years. Don't invest your entire life savings, policies and property.

[Tradie]

From what I have learnt, how would I do things differently?

I would buy a property and rent it to the business or rent it out, which will create a means to secure funding in the future when you need it most. I wouldn't use it to secure contracts, if the contract fails you loose it.

I would save a small amount of money for a long period of time, but this time I wouldn't allow the broker to link it to anything especially not life cover. This is how I lost all the investments (millions) that I had been saving from when I started working at 16 years old. Make sure your savings and life cover are in no way linked.

Insurance brokers have to make a living, selling you policies and long term investments, dont be fooled into thinking they have your best interest at heart. Leaving your your investments to one person is about stupid as buying a house with a COC that the buyer arranged, yet I hear the same tune playing everyday.

The best advice I offer my customer when it comes to selling a property, find the cheapest quote for a COC, because the risk is on the contractor who signs the COC, but dont sign the sale agreement for the new property until I have checked the house, R5000 for a test report is small change compared to the cost to make some properties complaint. It also helps with the price negotiation.In some cases the seller will be happy to drop the price.

[Tradie]

Employing staff is one of the critical mistakes in many small businesses, we tend to look for unskilled staff, to ease the load a little, why do I say this is a big mistake, because all that happens is you end up spending more time chasing after them than you do focusing on the important stuff. If you want to step back from the tools and focus on the business part of the business, then you need to make sure the people are skilled and as competent as you are.

So what is the solution, keep hiring until you find the right people, dont hang onto useless people, they drag your business down, give you a bad name and waste money. We tend to hang onto people far longer than they are needed, sometimes because you feel bad or hoping they will improve, or maybe that big contract. You run a business not a charity shop.

Some of the gems are hidden in plain sight, for example you need to take note of people, the way they dress, etc. I noticed the tea guy who worked for a company always dressed smart, polished his shoes and presented himself very well. I worked with him for a week, then took him under my wing and within a couple of years he was wiring up factories, doing breakdowns and soon became a team leader for one the 10 man teams. I could leave him for weeks at a time while I worked around the country and in neighboring countries. Loosing him after 10 years, left a huge void in the company which has never been filled.

You also need to understand people, their capabilities and desire to improve, some people dont want more than a sweeping job (bad example) in the company, they just want to show up and get paid on friday, they dont want to go to school and study further, work at height or do more than they have to everyday.

[Tradie]

The big question for most small business owner, how do I find new customers, certainly not in the yellow pages (more bad debt from 1 year of advertising here than any other) or in groups where you dont know people.

Advertising in open spaces is the highest risk, we talking about small electrical companies. You want to stay away from this type of advertising, unless of course you are doing hit and run jobs, but then you need to make sure the payment is COD.

The fastest way to find customers who will pay your worth, and actually pay, is word of mouth, and even that is risky. You have to make people aware that they become liable for the debt if the person doesn't pay. We have had a few challenges with payment via word of mouth, but at the end of the day We have always been paid, not like open space recommendations, like in open groups, the only thing they are good for is harvesting contact details to spam.

The best way to grow a small business is to become member of a tribe, join a club be it cycling, running, fishing etc. Churches are also a great way to grow a small business.

Price is not alway the deciding factor, in fact it shouldn't be, if you show up when you say you will, finish on time and charge a rate that aligns with your quality of work and service, you will grow at a faster rate than expected.

This is where you need to be very careful, because growing too fast creates a whole new set of challenges and unless you have the teams, equipment and funding, you going to become another failed statistic.

In 2020 I was growing too fast, had just completed a R200k project, got highly recommended by a customer. The new project would mean I had to employ 4 more teams for a minimum of 2 years. I spent a little time pondering about it and eventually I decided that I wasn't ready, 2 month later we went into lock down. We all know what that did to most companies.

Something you need to be very careful of, people looking to use you for payments. What am I talking about, people who get awarded contracts and need someone to take the fall. They get a large contract and then get you to quote to do the work, you get all excited, rush out and buy equipment to do the work, setup on site and get stuck in, things look great, it looks like the job is going well, they just in it for the cash draw, then they are gone and you left with huge debt and no payment.

[Blurock]

This thread is recommended for everyone intending to start a business or those who already have a business but are battling with the same issues entrepreneurs or single operators experience all over.
Well done Tradie. You have obviously learnt a few lessons along the way!

[Derlyn]

4 golden rules.

A good deal is one where you don't lose any money.

A bad deal is one where you lose money.

No deal is better than a bad deal.

Know when to cut the line.

And just a final one for good measure. If you know that someone is unfaithfull towards his wife, don't do a deal with him.
If he cannot be faithfull to his wife, he won't feel anything to do you in.

[Tradie]

Long term loyal customers, yes they are good for business, provided to you know how to maintain the balance between work and overtime, and at what point, it changes from a chat to billable time.

You tend to "look after" these customer and so you should, they pay the bills. What you find is that some tend to abuse it, you become friends with the long term customers, which results in evening and weekend calls to discuss challenges or solutions to minor issues, which either should be done during working hours or billed for the time.

The most important advice I can offer to any small business ... No matter how long the customer has supported the the business, payments must be made within 3 working days of invoice, let this slide, its like lending people money, you do it once, twice and by the 3 rd time they expect it to be a norm and payments take longer and longer to settle.

There is also this thing where people believe that if you do work for big business or corporations, you should expect to get paid 30 days from invoice or longer and you must be VAT registered. I have been doing this for a long time, step up and lay down the terms of payment. Even the metros can pay within a week, you just need to make sure they understand it before you step foot on the site.It use to burn some of the contractors, who found out and they would wait months for payments.

When it comes to long term customer (95 % of my customer base 10 years +) you have to keep the relationship professional, why I say this is because sometimes people take advantage, you start getting calls in the evenings and on weekends, which could be sorted out during normal working hours, In some cases the payments start to stretch, in fact I just recently dumped a long term customer for this very reason, I didn't chase them for the little bills (up to R2000), I would let them slide for 2 or 3 months , sometimes as long as 6 months, you think its ok because they had been loyal customers for longer than 20 years, I spoke to the customer about it, they stretched it out and still never settled, so I dumped them, I had calls from shareholders who were not aware of the payment issue, unfortunately it was too late and they had to find another sparkie, because there are so few people like myself who understand the machine controls, it is difficult to replace us.

[Tradie]

Cash cows, this is a topic that must be discussed, because some small companies use and abuse them.

"In business, a "cash cow" is a product, service, or business unit that consistently generates a strong, reliable cash flow over a long period, often with minimal additional investment needed to maintain its profitability. It's like an asset that provides a steady stream of income"

Dont, just dont abuse it, stick to your rates and bill for what should be billed, adding to labour hours or buying stuff and adding to the bill, could result in an inquiry, if you get caught, not only will you loose a customer, you will also get a bad a name.

I seen it happen with small businesses, they always loose in the long run.

If you are in it for the hit and run, then it doesn't matter, the more cash cows, the faster you can make money.

A customer taught me a lesson a long time ago, every job required a quote, no matter how small, then one day I got a call to move his factory, I tried to setup a meeting to discuss the quote, he said that no quote was required and that I can go ahead, but did warn me that if I mess up (tried to milk him) I would loose all his work, at that point he was my biggest customer 60% of my monthly turnover. He went from a small mini factory to a massive factory, and expanded his equipment to handle the motor industry work load. He employed a factory manager and left him to manage things, while he expanded into a new venture, 2 years later the factory went belly up.

[Tradie]

Something I realised the other day, I have outlasted ever single business (customer) I have ever worked with.

Not one of my customer have been operating for more than 30 years, most last around 10 -15 years, and the few gems 20+, either sell and close within a year or 2 or have just just closed down.

[Tradie]

We can go on about the purpose of a business, why you want to take the risk, how to find investors and new customers and all the other narrative that is pushed on social media.

The reality people, until you understand that it is how you manage the small, medium or large amount of money that the business generates, is one of the keys to longevity.

Even if you get that right, your mental health. which will be pushed to the absolute limit, will determine not only how long the business will survive but also how it ends.

One of the mistakes that many of us make, instead of cutting back on expenses, we try hold onto staff or vehicles by increases the debt, by increasing overdraft limits, get anew credit card and put it in your personal name then run that card to the limit, to a point that the bank knows that not only will they be able to collect on the debt from the business, they will shut you down and call in all the debt, which could result in you loosing that property or even your home.

You need to learn how to manage all of this and understand the consequences of the debt.