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Getting Started With The Rich Contractor

Welcome to the Rich Contractor, the ultimate business resource for contractors, service professionals, and those who dream of some day dumping their dead-end job in exchange for the wild world of small business ownership.  Consider yourself lucky, because you’ve just found the playbook that I wish had been available to me when I was getting started.

MY ROUGH START

Around the time of my 30th birthday I decided that it was time to rock the boat, so to speak.  My day job was sucking the life out of me, and the idea of breaking free and starting my own business was the only thing that got me through each workday.  Finally, after years of dreaming about it, I got off my butt and did it.  I started my own home services business.  But it wasn’t a walk in the park.  I was tackling an industry in which I had little experience, and I was clueless about how to get started and how to run the operation.  Searching the internet for answers, I realized that there wasn’t much in the way of helpful information on the web for people like me.  I also noticed that many of the other contractors in my city were just as “lost” as I was when it came to running and marketing a business.

I PERSEVERED

Well, I forged ahead with my new business anyway.  I learned a lot during those first few years and devoted myself to consistent improvement whether it came to marketing, customer service skills, or simply running a more streamlined operation.  As time went on my tenacity and willingness to learn began to pay dividends, and I eventually became one of the most highly-regarded professionals in my chosen niche worldwide.

But it still nagged at me that so many of my new-found friends and peers in the contracting industry were having a difficult time with their business.  I realized that many of them were still as lost as they had been years earlier, and would always struggle financially unless they learned a new way.  I knew that it was time for somebody to step up and develop an online resource that was truly helpful and comprehensive, and since I had some basic web publishing knowledge and the work ethic to see it through I decided that person would be me.

THE RICH CONTRACTOR IS BORN

So I started RichContractor.com towards the end of 2007, my primary goal being to educate, inspire, and empower other contractors and would-be contractors who were eager to succeed but lacked basic business know-how, just as I did years before.  The rest, as they say, is history.  It’s now one of the most authoritative sites in the world on the subject of starting and running a successful contracting or home improvement business.  So how can it help you?

Well, let me point you toward a few different entry doors:

Door #1:  If you want to become a professional contractor but haven’t started yet, first read my epic post about how to become a contractor.

Door #2:  If you’ve already started your business and need help with marketing or getting new business, I would suggest you begin by reading my posts about starting a blog, getting free construction leads, and choosing construction business cards.

Door #3:  Other popular points of entry include my rant about how to make a lot of money and my comprehensive introduction to nailing contractor leads.

Then just keep working your way through the site.  There’s a mountain of information available to you here, so you’d be wise to bookmark the site for later reference.  Well, that’s all for now, folks.  Now go grab a cup of coffee and start reading…it’s time to turn that dream of entrepreneurship into a reality!

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So you’ve made the decision to become a contractor – congratulations! That first decision to make the leap and become your own boss can be one of the hardest choices you’ll make, but as a new business owner, it certainly won’t be your last. In fact, the next decision you’ll be faced with is another doozy: choosing a business model.
At first glance, a sole proprietorship may sound appealing because it’s easy to setup with little to no paperwork or fees (you typically just start working and pick up any income/losses on your personal taxes). But that doesn’t mean it’s the best business model for a general contractor. With a sole proprietorship, liability can come back to haunt you. Say someone gets hurt on a worksite or you default on a business loan. If someone comes after you, they can go after not only your business assets, but your personal assets as well, and that’s a situation no business owner would even want to think about.

That’s why so many contractors and home service providers choose a business model that protects them and their personal assets, acting as a shield between their business and their personal lives. In most cases, this divider comes in the form of a Limited Liability Company (LLC) or an S Corporation. Here are the differences to consider between the two, and how to tell which is best for you:

Limited Liability Company (LLC)

As the name implies, the biggest benefit of an LLC is that it shelters you personally from any liability for your business. So in the example above, if your business was sued, only your business assets would be vulnerable, not your personal assets. LLCs also offer the option of having an unlimited number of owners, referred to as “members,” if you don’t want to be the sole decision-maker. Because LLCs are pass-through entities when it comes to taxation, all gains and losses from the business flow through to each members’ individual tax return. This means you’re only paying taxes on the portion of profits you receive as opposed to all of the business’s earnings, as you would with a sole proprietorship.

LLCs do require more extensive paperwork in the setup phase because of the legal protection they offer. You’ll be required to choose and file a unique business name, as well as file Articles of Incorporation with your Secretary of State. Some states also require you to publish your Articles of Incorporation in a newspaper or legal journal at an additional expense. Of course, you can choose to work with a filing company who will take care of this paperwork for you, but that often costs more than doing the work yourself.

S Corporation

Corporations offer the same benefits as LLCs in that they protect owners from personally being held liable for their businesses. There are two main type of corporations: C Corporations and S Corporations. C Corporations tend to be reserved for much larger companies with unlimited shareholders, and their profits are subject to double taxation: once when earned at the business level, and once when passed along to shareholders. However, S Corps are much more attractive to businesses who have several years of experience under their belt and a larger number of shareholders than a startup but don’t want to deal with double taxation. Similar to LLCs, profits and losses from an S Corp pass-through to its stakeholders as dividends, thereby only being taxed once on individual tax returns. Another advantage of this is these dividends are taxed at a lower rate than normal income. However, it is important to note that shareholders must be paid “reasonable compensation” for their work. Unfairly limiting the amount of money given to a shareholder in hopes of reducing taxes won’t hold up legally.

To set up an S Corporation, you must first file your business as a corporation. Once you’ve ensured your corporation meets the criteria for an S Corp (be a domestic corporation, have no more than 100 shareholders, have only one type of stock, etc.), all owners must then sign an IRS Form 2553. Some states also require S Corps to establish their board of directors and issue stock certificates during the registration, so it’s wise to check with your individual Secretary of State for local rules.

Finding the right ownership structure for your general contracting business is a matter of your personal preference and how much experience you have. If this is your first time as a business owner, an LLC may be a better fit as it’s easier to setup than a corporation and still offers the separation needed to shield your personal property from business liability. However, if you’re more experienced and are ready for your business to expand to its fullest potential, an S Corp may be right for you.

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What Do You Want From Me?

I’d like to get some feedback from you all. There are hundreds of people who visit this site every day but only a small fraction of you ever leave a comment or engage in any way. Lots of lurkers, very few voices. So it’s difficult for me to know what more you’d like to learn or read about on this blog. Here’s your chance to sound off. Please leave a comment below and tell me what you’d like to learn more about! I appreciate it.

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This is a guest contribution from Randal DeHart of FastEasyAccounting.com.

I have been involved with construction beginning in the mid 1960’s as a kid working in the family construction company through the present time.

Over the decades I have gathered and documented a comprehensive list of terms that describe construction. Some of them are meant to bring a smile to your face, some are serious and the rest I hope are simply entertaining.

This Article Contains Definitions That Begin With The Letter “C”

Cash – Cash is a fact and profit is an opinion. One will put a roof over your head, clothes on your body and groceries on the table. The other one will impress your banker. Keep your priorities straight.

Competition – Drags all participants to the bottom

Cooperation – Raises all participants to the top

Construction Pioneer – Contractor with flaming arrows in the back from asking the in house construction bookkeeper for accurate financial and job costing reports

C.P.A. – Someone who is qualified to do tax returns and we refer a lot of business to the ones that only do tax returns

C.P.A. Construction Consultant – Someone who has seen a bunch of tax returns and thinks they know how to run a construction business. They are generally more dangerous to the contractor’s financial health than a drunken car salesman on a backhoe at a gas station, in the dark, digging up live fuel lines

C.P.A Doing Construction Bookkeeping – QuickBooks setup to make doing tax returns easy while greasing the rails for the contractor to go down the tube and go broke by focusing only on making the C.P.A’s job easier and not on increasing cash flow and profitable jobs

Change – The only people who want change are wet babies! Everyone else hates change!

Cheap – Not enough time or money to do it right first time; but plenty of time and money to do it over

Chaos – Always on the dollars coming in; never on the money going out

Client – Someone who buys construction services and is more concerned about quality than price

Comfort Zone – Success you have now since that is what you feel you deserve no more / no less

Company Bookkeeper – Expensive luxury for construction companies that do not know about outsourcing

Completion Date – The point at which liquidated damages begin

Contractor Not A Banker – Student of Business Consulting And Accounting who has mastered the art of managing cash flow properly

Contractors – The people who makes civilization possible by building and maintaining structures

Contractor Gambling – One project away from making it big or going broke

Contractor Chaos – Contractor netting <$100K doing everything his way; especially the bookkeeping

Contractor Cheap – Amateur with customers from Hell and host of the game show “Low Price Leader”

Contractor Income – The average income of the six people they spend the most time with

Contractor Rich – BCA client earning $100K-$200K by building a client base to sell and service

Contractor Student – BCA client net <$100K learning how to get Rich then Wealthy

Contractor Successful – Contractor using timely accurate financial reports to base their decisions upon

Contractor Volume – Loses money on every sale and tries to make it up with a volume of new work

Contractor Wealthy – BCA Client earning $200K + Investing 50K with 100 clients to service

Construction Accountant – Someone who turns piles of numbers into meaningful trends

Construction Bookkeeping – System for setup and maintaining construction bookkeeping

Construction Bookkeeping And Accounting – System for setup and maintaining construction accounting

Construction Accounting – System that combines construction bookkeeping with Quarterly Tax preparation and payroll processing and presents the annual tax preparer with the information for them to prepare the annual income tax return. Construction accounting does not prepare annual tax returns as that is a profession and specialty of its own

Construction Bookkeeping And Accounting – System for setup and maintaining construction bookkeeping and accounting together in order to develop and maintain the Key Performance Indicators (KPI) that when viewed daily and understood leads contractors to accumulate wealth

Construction Worker Thinking Patterns – Insights into the mind of a typical construction worker

Construction Worker Fully Burdened Labor Cost – Cost of having construction workers on your payroll

Critical Path Method – A management technique for losing your shirt under perfect control

Customer – Someone who buys construction services and is more concerned about price than quality

About The Author:

Randal DeHartRandal DeHart, PMP, QPA The Construction Accountant. Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington and Fast Easy Accounting. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Accounting Specialist and Bill.Com Certified Guru. Visit http://www.fasteasyaccounting.com/ to learn more. Follow Randal on Google+

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This is a guest contribution from Randal DeHart of FastEasyAccounting.com.

I have been involved with construction beginning in the mid 1960’s as a kid working in the family construction company through the present time.

Over the decades I have gathered and documented a comprehensive list of terms that describe construction. Some of them are meant to bring a smile to your face, some are serious and the rest I hope are simply entertaining.

This Article Contains Definitions That Begin With The Letter “B”

Bad BookkeeperWealth prevention tool keeping contractors from earning more than bookkeepers

Bad Bookkeeper Thinking Patterns - Some of the reasons they do what they do to drive contractors crazy

Bad Bookkeeping – Saving money in the wrong place and making decisions on garbage reports

Bad Numbers – Lead to bad decisions / cash shrinks / business unstable / bankruptcy or failure

Banker Agreement – Pledge to yourself in front of a mirror “Bankers do not do construction and I do not loan money”. Then always get job deposits before any work begins and regular construction draws. Preferably every week.

Bankruptcy – Result of saving money on bookkeeping and making decisions on garbage reports

BCA Business Coach – Someone who helps you raise your level of thinking and income

BCA Staff MemberCheerful, well paid, thinking, responsible adult, Mastermind Team member

BCG Matrix – Graphical representation of Cash Cows / Rising Stars / Question Marks / Dogs

Belly Button Accountability – The one person who is responsible for a deliverable on a construction project

Bid – A wild guess carried out to two decimal places

Bid Collector – Customer looking for cheap contractor

Bid Opening – A poker game in which the losing hand wins

Bilingual – Words for women because they enjoy reading and can easily form pictures and movies in their minds to understand concepts. Pictures for men because they are accustomed to looking at drawings and blueprints.

Black Box – Computer with construction accounting software operated by a trainee

Bookkeeper Fully Burdened Labor Costs – The total cost of having a bookkeeper in your office including the cost to fix mistakes, pay for training, drama and overhead

Bookkeeper Training Contractor – Bookkeepers, who train the boss to let them come in late, leave early, call friends and relatives, take long breaks, get paid more and do less and less.

BPMBusiness Process Management for construction company owners to grow passive income streams

Budget Bookkeeping – Listing all deposits from the bank statement as sales income and leads to contractor paying too much in taxes.

Business Failure – No meaningful financial and project management records in the calendar quarter preceding the failure

Business Life Cycle – Start small / grow big / lose shirt / shrink back to small business

Business Plan – A plan to have accurate financial reports to base long and short term decisions on

Business Process Management – Develop a construction business that generates passive income

Business Roundtable – Little round table in tavern with pitcher of beer and four contractors strategizing

About The Author:

Randal DeHartRandal DeHart, PMP, QPA The Construction Accountant. Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington and Fast Easy Accounting. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Accounting Specialist and Bill.Com Certified Guru. Visit http://www.fasteasyaccounting.com/ to learn more. Follow Randal on Google+

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This is a guest contribution from Randal DeHart of FastEasyAccounting.com.

I have been involved with construction beginning in the mid 1960’s as a kid working in the family construction company through the present time.

Over the decades I have gathered and documented a comprehensive list of terms that describe construction. Some of them are meant to bring a smile to your face, some are serious and the rest I hope are simply entertaining.

This Article Contains Definitions That Begin With The Letter “A”

80/20 Rule 80% of a contractor’s wealth and well-being comes from 20% of their clients and their daily activities.

24 Hour Bookkeeper also known as a scanner connected to our paperless server; sits in your office quietly, no watering, no feeding, always ready to perform 24-7, never wastes company time surfing the web or chatting or texting on their cell phone.

Apprentice Communication is what happens when apprentices point at something while making deep noises from their chest sound like important messages from their brain all in a feeble attempt to hide the fact they know nothing at all, about anything.

Aggravation Box is a desktop, notebook or tablet computer with construction accounting software operated by a trainee with no clue about accounting let alone construction accounting.

Auction the sad and yet inevitable end of a promising construction company where the upper management and/or owner spent time working in the business, focusing on the wrong stuff and relying on bad financial and job costing reports due to incompetent bookkeeping.

Auditor is the person who goes in after the war is lost, the contractor is bankrupt and bayonets any hope of recovery.

Assets of Construction Company are as follows: Cash, Receivables, Trucks, Tools, Equipment and Material.

Assets of Construction Firm are cash, Business Process, Sales Process, Client List and Predictable Cash Flow. (There is a lot of information if you understand the differences between a company and a firm.)

Please feel free to share them with anyone and especially contractors who need a bit of humor and homespun wisdom and perhaps they will find value.

About The Author:

Randal DeHartRandal DeHart, PMP, QPA The Construction Accountant. Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington and Fast Easy Accounting. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Accounting Specialist and Bill.Com Certified Guru. Visit http://www.fasteasyaccounting.com/ to learn more. Follow Randal on Google+

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