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Thread: Challenges running an electrical bussiness

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    Challenges running an electrical bussiness

    So you decide it is time to start an electrical company... I am gonna share my experience.

    You have what is required to start and run the bussiness.

    A ladder a tool box and a couple thousand rand in the bank from your last pay cheque and dont forget a vehicle ... I had to sell my motorcycle to buy a golf and some roof racks (all I could afford at the time)

    Tell all your family and friends and you are in bussines ... well that is what I thought.

    Absolutely no bussiness experience ... no bussines plan ... no captial.

    Just good ol hard work ... good ethics should make you rich being self employed within the first 5 years.

    What happens is people take advantage ... because you are mates they expect a dirt cheap job ... being the person you are ... they get a rolls royce for the price of a mini ... they are over the moon happy and you just make enough money to buy food for the week ...because your lack of understanding of profits and margins etc you think its gonna get better.

    They tell their friends about you and so the calls from friends of friends start rolling in ... you go and quote for a job ... due to your lack of epxerience ... you make a right mess of it and under quote ... as I did R2000 to rewire a house on my own ... I quickly learnt that it is not that easy when you working alone and realise you have way under quoted ... daily travelling costs ... material costs etc ... you approach the customer because you have made a proper mess of the quote and inform them of the problem ... they are not interested in your problems .. you quoted R2k they want the job done for R2k ... thats what they budgeted.

    Eventually you have to get someone in to help pull the wiring into the conduits ... have you ever tried feeding and pulling the wire from the DB to the bedroom plug ... trust me its not easy.

    The job ends up costing you R6k ... so now you are not only broke but in debt to the wholesaler who has agreed to give you a small advance ... the person assisting wants his money and so your challenges begin.

    You manage to find a lot of work because word spreads quick when people score a good deal ... so the R4k loss doesnt seem so bad anymore.

    You get smarter and so things start to grow ... you decide to become a legit contractor so you register as an electrical contractor ... join all the ECA ... which means you have to join the bargaining coucil and so your overheads grow faster than your income.

    You move to a house so that you can run the bussines from home rather than out the garage of your duplex rental ... and so the expenses grow.

    The dreaded quiet month arrives and so you get into more debt.

    You have been working day and night ... weekends and giving it everything ... thinking it will come right ... hard work has paid the bills in the past ... those long hours you worked for the companies in the past made the owner rich ... did it ... or was it the wise choices he made with the money he made from your hard work.

    to be contuned ...
    Comments are based on opinion...not always facts....that's why people use an alias.

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    The work is slow but becomes more consistant ... but the bills still grow faster.

    You stop off at a customer in a mini factory complex ... his neighbour has breakdown in his factory (drill press not working) and heard you are a sparkie ... because you have a no repair no fee policy ... he takes advantage ... you have very limited machine repair experience at this point ... but hey you need the money ... 3 minutes later the drill press is running ... you dont charge the customer because it was such a silly repair ... the customer becomes your biggest customer over the next 10 years as his bussiness expands so does yours ... this break saves your a$$ and so you grow.

    You run into an old friend who works for his father ... you chat over a few beers and the following week you are quoting for a a project in a field that you have very limited knowledge (deisgn and panel building) that chat turns in a multi million rand custome rover a 10 year period ... working all over SA and neighbouring countries.

    5 year in and things are starting to look up ... you are working 18 hours a day ... 7 days a week.

    The challenge of funding moves to a challenge of being too small to find time to keep up with the projects.

    You see go see a man about a small job to dig a hole or 2 in the ground 12 months later it turns into a 1.2 million rand yearly contract.

    So the teams grow ... and as the teams grow so the load can be spread out ... you have the manpower to move onto site and smash out a factory reloaction over a weekend ... for the first time i wasnt the hands on sparkie ...but rahter the person preparing everything ... ordered all the material ... lay it out in the factory and asigned each person tasks and spent 3 days making sure everything went acording to plan ... with employing more staf fcomes the labour challenges ... you have people literally begging you for work ... 2 weeks later they are demanding more money ...threaten all sorts of crap ... I had a solid team ... I left it up to the rest of the team to make the problem go away.

    Word spreads fast that you know your shyte and are extremely efficient ... you start choosing your cusotmers.

    Then the first big bang ... we disconnect all the machine in a factory at 4.30 pm as the company closes ... we are ready ...I had stopped off and got a few bottle of stay awake mootie ... we worked solid for 3 days ... monday morning i switch on and heard home to sleep ... and hour later I get a message ... there is a problem with a machine on site ... I head back to site sort out the problem ... something silly.

    I have a good rest ... then get up and prepare the invoice ... so the challenge of getting paid began ... it was the biggest non payment at the time ... it almost bust me ... but we worked through it ... It was complicated and never received any payment ... one of the auditing companies emeployees was in on the scam who eventually left the auditing company and became a partner in the company which owed me the money ... they changed names and we all got screwed ... lesson learnt never trust anyone.

    Back in thos days hijacking had just started ... because we were doing township work and all the contractors worked together ... I put the word out that one of our vehicles had been hijacked ... 20 minutes later I got a call and the vehicle was recovered ... got a team together with the police we made a line and searched the area ... within an hour the vehicle was loaded all the equipment found in the grass and in the hole they had dug and covered with grass.

    A year or 2 later ... we had wired up a premises ... connected all the machines and grown with a company ... I was called in do look at a small project (valued at around R2000) asked the cusotmer if they wanted a quote ... they indicated no quote was required ... we started the small project which turned into a project of almost R100k ... I completed the project ... everyone was happy ... suddenly a silent partner who had never shown any interest in the project stepped forward and indicated the the invoice was too high ... so the ECA was called in to review the pricing (Chris Greagor was in charge at the time) ... the invoice was well within reason ... the rate was the same as we had been charging for the past 3 years ... I still to this day have never received a cent of that invoice ... that company has since closed and the owner now run other companies under different names ... the challenge to survive started once again ... it took arund 5 years to recover.

    Unfortunately I didnt have a daddy trust fund or anything like that ... so we had to cut back and eat bread jam for a while ... because of all my other good paying customers ... we even tually pulled through and got on top of things.

    Once again I got burnt and should have learnt from my past experience ...not to trust anyone ... no matter how long you work with people ... I had built up a good working relationship with that customer ... always paying their bill on time.

    I stepped with caution after that ... eventually things got back to normal and the same ol same ol daily challenges had to be taken care of
    Comments are based on opinion...not always facts....that's why people use an alias.

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    adrianh (27-Dec-20)

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    Greetings Ian’s

    This is a very interesting read but more importantly a must read for all contractors.

    Thank you

  5. Thanks given for this post:

    ians (28-Dec-20)

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    Almost 10 years in and you are so busy that you dont even take note of silly things like the rates you are charging (too little) it doesnt really matter because the bigger customers are covering your montlhy expenses ... however as the contracts draw to an end ... so the budget runs dry and the new contract takes a few months to get back into full swing ... you watch as some of the big contractors start to struggle to keep up with the huge overheads of running big teams and big trucks etc ... they use the tax money to survive and eventually go backrupt and end up owing the receiver huge amounts of money.

    The rest start targeting your little jobs which nobody else wanted during the year when ther ewas an abundance of work... but now realise I am the only contractor with consistant work right till the end and into the begining ... my little hole digging jobs pretty much covered my months overheads.

    During the 10 year period small businesses would come and go ... it worked out for me because in many cases the company owner would know my quality of workmanship and commitment to completing projects on time ... so his new venture would create a new customer for me.

    I also started taking note of customers who would take advantage of me ... little things ... like they would start offering to supply the materials and equipment for projects ... ... accommodation on sites ... sometimes expecting us to sleep on site in carvans etc instead of a B&B ... this happened over a period of time (2/3/4 years) subtle things ... and slowly but surely your bottom line would reduce.

    Then they would tell you that there was no profit on a project and expect you to take a knock as well ... this started happening more frequently.

    But here is something you have to take into consideration ... the Ahole thinks you are such a idiot ... he forgets that you collect the tender document ... you do all the prep work all the costing ... all the panel design and estimatations etc ... write everything up in pencil ... then hand it to his team who would add a markup and complete the mechancal side of the project ... so I would know exactly how much the project was worth ... using one project as an example ... there was a R25 000 profit margin on 1 panel ... we built 4 panels ... installed 6 000 metres of armoured cable ... my labour cost on the project was the profit margin on 1 panel and expected me to drop it ... thats when i told him to F%^& off and find another fool ... I have had numerous requests since then to go sit with him to discuss sub contracting again ... once burnt twice shy ... the company has since been taken over by new management.

    If you are really good at what you do ... trust me they will always come back.

    Then you get the employees of big companies who believe it is their right to get a little something on the side just because ... I have been fortunate enough to sit here today and say in almost 30 years I have not paid a bribe ... I have had people fired for expecting a bribe and lost a lot of work because I dont pay bribes ... I have taken customers out for lunch without sliding a brown envelope across the table ... this is one of the reasons I will be closing the bussiness down when I reach my goal ... it seems it has become standard bussiness practise.

    This challenge is real and has become a serious problem in industry ... be very careful of who you deal with once you start that shyte ... you need to learn to play the game and if you go down this route be prepared to play rough.
    Comments are based on opinion...not always facts....that's why people use an alias.

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    Platinum Member Derlyn's Avatar
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    Why not sell the business rather than closing it down ?

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    Quote Originally Posted by Derlyn View Post
    Why not sell the business rather than closing it down ?
    It was never my intention to build to sell ... honesty ... integrity and doing it right the first time everytime are key factors ... I dont beleive I could trust anyone.
    Comments are based on opinion...not always facts....that's why people use an alias.

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    You quote for a job and win it hands down ... because your price is very "reasonable" compared to other industrial electrical companies ... Then you realise why ... safety files ... medical checks and all the usual stuff ... if you didnt take this into consideration ... you are better off just walking away.

    But that is not what I wanted to share ... public liability insurance and other types of insuranaces required to protect yourself ... this becomes a challenge ... I started doing work for a company which was installing equipment worth millions ... and the same ol same ol ... the customer expects the work to be done at the cheapest rate possible ... then you receive an email with a 5 page document with all the requires to work on the site ... one being insurances ... now here is the catch the standard Public liablity genrally covers 1 or 2 million.

    When you are a big company with all the overheads ... staff in the office ... teams out on the road etc ... another couple thousand rand for insurances is just a few hundred ran less in tax revenue you have to hand over ... but as a small bussiness all these little extras ...add up and kill the bottom line.

    Add on the end of year leave and bonuses ... your financial worth is seriously challenged by the middle of January/ Febuary.

    As a smart businessman this isnt a problem ...because you have taken a percentage every month of your turnover and put it into a savings account to cover for VAT etc what is lef tover of the vat payable can be used to ease the burben of these extras ... but as a small bussiness especially when you are start out ... man you grovelling for every cent ... unless daddy left you a trust fund to blow.

    I have walked away from a few projects where I noted the risks involved if something went wrong are too high to take a chance.
    Comments are based on opinion...not always facts....that's why people use an alias.

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    Which brings me to sub contracting to main contractors ... when you are a small bussiness ... this keeps you alive until you get those breaks we all wait for ... but also has it challenges.

    When I first started out ... I had a few companies which used my services to work with their teams ... the owners being like me ... a man of his word ... if I shake your hand ... know that that hand shake is more valuable than any piece of paper I have and will ever sign ... people take it lightly ... for example when time get tough and you need help ... people get to know your reputation ... a shyte reputation gets you nothing ... I have been through some tough times in my life ... but when I reach out and ask for help ... people help.

    Lets this be a valuable tip for anyone not only in bussiness but in life in general ... you cant help people who cant help themself ... but when someone needs help ... the wheel will turn and it comes back ... it always does ... it may not be in a money value ... it might be a silly thing like helping a family member on the side of the road.

    I can tell you of times where I have been so screwed that I didnt think I would ever recover ... next thing my phone rings ... that call changes my life ... anyway we not here to preach life lessons.

    Sub contracting is a tricky bussiness ... I have seen how some main contracotrs treat subbies ... in fact the last big project ... the prick who got the contract treated everyone including his own staff like shyte ... fortunatley for me I was the only contractor on site who wasnt sub contracting to him ... he tried to speak to me like I was one of his subbies ... I put in his place very quickly ... at the end of the project he arrived with a pile of documents for multiple projects around the country ... I turned them down ... and told him one day when he learns some manners I might consider working with his team ... dont let these pricks bully ou on site ... the reis nothing special about them ... in most cases they are just playing the game differnetly ... the way I have chosen not to play until next year.
    Comments are based on opinion...not always facts....that's why people use an alias.

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