Rich Contractor

Becoming A Contractor During A Recession

If you're like a lot of this site's visitors then you're here because you want to learn how to become a contractor, but you're also unsure if this is the best time to be starting a business.  With all of the current economic problems you might be thinking that this is a terrible time to become a full-time contractor.  You might be scared that after dumping money and time into getting your little company off the ground that it will fall flat on its face because everyone is telling you that consumer spending is down, bank lending is down, and the end of the world is near.

My response to these doubts?  Simple.  Stop making excuses and get going already!

Many people have dreams of starting their own contracting or service business but in reality few of them ever actually break free from wage slavery and become business owners.  Why?  "Because it's too hard."  "It's too complicated."  It's too time-consuming.  It's too risky.  It's too scary.  I'm not smart enough.  The economy is tanking.  I might fail.  I might not have a consistent paycheck.  Blah.  Blah.  Blah. 

If you want to do it then do it.  Timing should be the least of your concerns.  But just for the record, this could actually be a great time to start your small contracting business on the side and see what happens.  Why?  Because most people are so fearful right now to make any investments in themselves or their businesses that it has created some wide-open opportunities for the rest of us to make inroads in our local markets.  While the other would-be entrepreneurs in your community are cowering in fear and unwilling to part with their so-called "secure" 9-5 job, you'll be out there getting work, building a brand, and forming professional relationships.  The result is that a few years from now when the economy is booming again you'll already have the foundation in place for record growth while everyone else is just getting started.

Be a contrarian and reap the rewards down the road.  Those who are most successful in the long-run are often the ones who become aggressive when others are running for the hills, whether it be in real estate, stocks, or entrepreneurship.

Just get going. 

Make A Lot Of Money - Here's How

I've gone over this a little before, but the volume of questions I receive on this topic make it clear to me that I need to revisit the question of how to make a lot of money.  I guess because this site's title has the word "rich" in it, it attracts all sorts of people on the internet, and that's fine.  I don't have the hangups about money that some others do, and I don't think that having a lot of money is inherently evil.  As long as your growth as a person is accelerating at the same rate as your bank account, then you're A-OK in my book.  After all, it's what you do with your wealth that really matters.

The problem, though, with attracting all types of cash-seekers to this site is that many of them seem to be looking for that quick hit that requires a minimal amount of effort.  Lots of people want to know how to get rich quickly or easily, but as those of us who have been around the block a time or two will attest, achieving wealth is almost never quick or easy.  There's a reason why only a small percentage of people on this planet are absolutely loaded, and it's that only a small percentage of us have both the desire and the enduring drive necessary to get there.  Newsflash: If you want to make a lot of money you have to work your butt off!  There is no easy way unless your last name is Hilton or Walton, and even those families spent decades and massive amounts of energy to get to ultra-wealth status.  Anybody that tells you otherwise is selling you something, and that something is a big, heaping, steaming pile of BS.

This is not to suggest that your contracting or service business will necessarily require decades to make you rich.  I've seen situations where a young small business owner worked extremely hard and became a millionaire within 5-6 years (and it's a model I'm personally trying to follow right now), but if you're expecting to earn a six-figure income right off the bat remodeling kitchens and bathrooms then you're in for some disappointment.  It will take time.  It will take sweat.  It will take sacrifice.  If you really want to learn how to make a lot of money then you better be prepared for battle.

There's a Lance Armstrong quote that goes something like this: "Pain is temporary; losing is forever".  Apologies to Lance if I got that wrong but I think the gist is evident.  There have been days in my business when everything that could go wrong did go wrong, when the deck seemed stacked against me, when all signals seemed to be that I needed to give up and go ask my old boss for my job back.  But, so far at least, in each of these instances I've been able to pull back from that edge by reminding myself that pain is temporary and losing is forever.  It is the decisions we make in these instances of doubt and confusion that ultimately separate the winners that make money from the losers that make excuses.  When the stuff hits the fan 95% of us will wither and retreat.  The other 5% will fight on with the knowledge that no matter how bad today is it will be a better tomorrow, not only because things are never as disastrous as they seem in the moment, but also because they know that the other 95% will have thrown in the towel.  The 5% consists of some ornery and stubborn SOB's, and if you want to make a lot of money with your own business you'll have to be that way, too.

Okay, so let's say you've got the work ethic and you understand that in order to make a ton of money you're going to have to put in the time.  Next step: what kind of business to devote yourself to for the next several years or more.  I've gone over this in previous posts so I won't rehash.  I suggest reading about making money with a simple service, getting rich via replication, and finding a profitable niche, just for starters.  Just know that unless you're ready to scrap and bust your butt the rest is a moot point.  A tenacious business owner can make a go of it in the worst of industries while a limp noodle will have trouble growing a business even in the hottest fields.  Oh and, by the way, if you think that you can grow exponentially without spending at least a little money on the exploding opportunities that are available right now in small business web marketing then you are sorely mistaken.  Familiarize yourself with the leverage that the internet can offer or risk losing out on the huge percentage of consumers who no longer even use their phone book.

This post has sort of rambled on and I apologize to my regular readers for the sermon, as this is intended not so much for you but for the new folks who stumble in here expecting that I'm going to show them the "secrets" to making a lot of money without doing much work.  It was time for some brutal honesty. 

So, a fair and kind heads-up to the newbies out there.  Send me an email demanding to know "how to make a lot of money fast" and expect that I will reply with a link to this post and probably nothing more.

How To Become A Contractor (Becoming Your Own Boss)

I've put together a ton of information on this website to try to help the average guy (or gal) get his (or her) own contracting or service business going and thriving, but occasionally I'm asked basic questions that demonstrate to me that I need to go over more of the basics.  One question I get over and over again: "What exact steps do I have to take to actually become a contractor?"  These questions come from folks who usually already have a skill but have never owned a business before and are afraid that starting one would be too complicated or too risky.  It doesn't have to be either.  Learning how to become a contractor is actually a rather straight-forward process.  Here's a basic list for turning that dream into a reality (note that this list could be slightly different for your state):

1. Have the guts to go for it.  Either you can make excuses all day long not to start your own business or you can grow a pair and take the leap.  As for me, I worked at a job that I hated for years, putting up with crappy bosses and average pay just because it was a predictable paycheck and because it offered the illusion of security.  I reached a point however, around my 30th birthday, when I realized that life was passing me by and I wanted something more.  I wanted to take a risk.  I wanted to be in a leadership role.  I wanted to experience the ups and downs of the American entrepreneurial experience by becoming a professional contractor.  Above all, I wanted to build something that was tangible and that I could be proud of.  So I went for it, and I've never once regretted the decision.  There have been highs and lows, good days and bad, but overall it's been a terrific experience, and my only real regret is that I didn't have the stomach to strike out on my own sooner in life.  Caveat: if you're starting a business that is a relatively new, unproven idea, keep the day job and work your biz on the side until things start rolling.
2. Decide what kind of service to offer.  I think the most important part of this decision is making sure it's something that you have at least some level of interest in.  Don't become a contractor in a trade that you hate just because you "heard" that there's good money in it, because you'll burn out before the big money even starts to roll in.  You don't have to love it, either, but it should be something you can tolerate long enough to hire on laborers.  Ideally, your business should also involve something that you're already skilled in.  Learning the ins and outs of a new trade is extremely time consuming, and time is money (you'll have your hands full with administrative tasks, anyway).  If you still don't know what to do, ask your family and friends for advice.  Often times those closest to us know our talents better than we do.  If you're more of an organizer and a leader then you might want to focus your efforts on learning how to become a general contractor.
   
3. Name your business.  Keep it short and memorable, but not hokey.  People shouldn't laugh when you tell them the name of your business, nor should it be so convoluted that you have to repeat it five times before they get it.  Remember, your business is a brand, and you'll be identified with it for the foreseeable future.  Make it a name to be proud of, and include the type of service you offer in the name if possible.  Check the website of your state's Secretary of State to make sure the name is still available, then register it as a sole proprietorship, LLC, or corporation (among others).  My business is set up as an LLC but check with a lawyer to decide what's best for your situation. 
4. Apply for an EIN (Employer Identification Number).  You need to do this even if you have no employees, and you can apply online here.  You'll need this for things like opening a bank account, applying for a license, and filing a tax return.
5. Apply for a service vendor's license from your state.  This one came as a surprise to me back in the day when I was in the process of learning how to become a contractor, but it's one of those red-tape steps that shouldn't be overlooked.  Depending on your business and state this may or may not be necessary but it was for me.  Again, a simple google search should point you in the right direction on this one.  Most states now have a business gateway website that will walk you through a lot of this kind of stuff.
6. Open a business bank account.  This is easy.  I walked into my local bank, met with someone for about 15 minutes and it was done.  I walked out with a booklet of checks and received a debit card in the mail a week or two later.
7. Get insured.  Nothing says "amateur" like an uninsured contractor.  This will be a significant expense for you but well worth the cost when you consider how many potential customers will turn you away if you don't have it.  Talk with a local agent to go over your particular situation and to make sure you're fully covered for your services, vehicles, and equipment.  If you plan on hiring employees right off the bat, you'll also need workers compensation coverage and probably an unemployment compensation tax account with your state's department of job & family services(check with your state for more information).
8. Register with your state's department of taxation if you'll be collecting sales tax.  This is usually a pretty straight-forward process, and I pay collected sales taxes to my state on the internet once a month.
9. Make sure you take the necessary steps to become a licensed contractor, if the law requires it. My business did not require any sort of trade license, but obviously for people like electricians and plumbers this is a must-have.  In some states you'll need a license even if you're trying to learn how to become a general contractor.  Starting a legitimate contracting business means playing by the rules, and avoiding them will burn you eventually so take this one seriously.  It's hard for me to be more specific about getting a license because every state handles it differently, but just Google it and you should have your answer.
10. Find a location.  Obviously it would be wise to start your business from home and then if growth justifies it look for an industrial space to rent or buy.  Many states also offer a department of development website with an online database of available commercial space.
11. Set up a business phone number.  Setting up a dedicated line for your business not only comes across as more professional but also usually gets you a complimentary listing in the phone book.  Try also to get a number which translates into an easy-to-remember "vanity" number.  For example, if you're starting a roofing business see if they'll find a number for you that ends in 7663 (which coordinates with the letters R-O-O-F).  It's easier for a potential customer to remember 999-ROOF than 999-1928.  When I set ours up the rep at the phone company was very helpful with this and it was done in a matter of minutes.
12. Prepare for the accounting.  You can either hire this out or use software like Quickbooks.  I use Quickbooks and it's a huge timesaver once you get the hang of it.  I know, I know, you want to become a contractor, not an accountant, but sometimes in the early stages you have to wear several hats.  It comes with the territory.
13. Get the word out.  Time to tell every person you know and meet about your cool new contracting business.  Have professionally designed construction business cards on you at all times.  Order postcards and have them direct mailed to wealthy suburbs in your city.  Most importantly, get a website and hire someone to market it for you online.  Our web efforts have been, by far, the single biggest factor in providing us with free construction leads and growing our business.  Web marketing is far more cost-effective than TV, radio, or print ads.  It's still shocking to me just how few contractors bother to utilize the internet, but that's a good thing for you because if you go that route you'll have very little competition.

Now sit back and watch the money roll in.  Yeah, right!  Now the real work begins, but if you've made it this far you're already ahead of the 99% of people out there who talk a good game but will never do what it really takes to get a business off the ground and running.  Please keep in mind that this is a generic list and that there could be additional steps and procedures in becoming a contractor that you'll need to take depending on what state you live in, what your legal structure is, and how many other owners are involved.  Though I set up my business without the help of a lawyer, you'd be wise to consult one just to make sure all your bases are covered.

So now you know how to become a truly self-employed contractor.  It's not hard.  You just need to do it.  Do you have it in you?  How much longer will you tolerate a job you hate and a boss you despise before you take the plunge?

Choose A Simple Service To Maximize Profit

My last post was about how you've got to expand your business in order to achieve wealth, but I also need to make the important point that replication in your business is made much, much easier when the service you provide can be easily performed by unskilled laborers.

Many services require special training, education, and certifications.  For example, I have a good friend who is a personal trainer in Cleveland, and he is highly skilled at what he does.  He earns a good living, but if he ever desired to expand his business by moving into a managerial role and bringing in other trainers to work for him he could find it more difficult than it would be for, say, a lawn-mowing business owner. 

Why?  Personal trainers are certified and have devoted long hours to get where they're at, which means that they are somewhat of a scarcity and expect to earn a good living.  In other words, they expect to be paid well and are difficult to replace.  One or two trainers quit and it could really effect the business in an immediate and negative way.  Lawn mowing techs, on the other hand, are pretty much a dime a dozen.  They don't need any previous training or skills and so they are in greater supply.  Therefore they can be hired for relatively low pay and if one quits they are easily and quickly replaced.  This scenario sets you, the business owner, up for higher profit margins, less chance of a breakdown in the system, and therefore a quicker rate of company expansion.

As evidence of this phenomenon just take a look at McDonald's or Subway, which have thousands upon thousands of franchises.  Do you think they achieved that kind of growth by hiring highly skilled hamburger flippers and sandwich makers who expect to make a lot of money?  Of course not.  They'll hire just about anybody with a pulse because the work is easy to learn and perform, and the pay is therefore pretty low.  That means more money in the franchise owner's pocket, and more money in the corporation's pocket.

Find A Niche And Focus On Speed

Now many of you no doubt have big plans to build a full-service remodeling company, and perhaps you're already knee-deep in the process of learning how to become a general contractor, but I'd ask you to put on the brakes for one second and hear me out on this one.  I would contend that for many people, a simpler, more streamlined service business might be the better way to go.  Let me explain.

I'm always impressed by the speed and efficiency that characterize the most successful local carpet cleaning companies.  They'll arrive in a basic, lettered van, zip through a few rooms of carpet like it's nobody's business, and less than 30 minutes later be out the door with $100 in hand.  Those that repeat the process an average of eight times a day have quite a cash machine working for them.  Furthermore, those that can accumulate 5-10 vans and workers, each visiting eight homes per day, can start counting the days to early retirement and seven-figure wealth.  They've figured out how to perfect a system that fulfills a very specific consumer need, and then expanded the business without straying from their specialty.

There are several factors that contribute to the success of this kind of service business:

• By specializing in one service, systems and procedures become easier to replicate and perform.  You can hire less-skilled laborers (who therefore don't expect to make a lot of money) because they don't have to juggle varied tasks or responsibilities.  Simply spend a few days training them on their main task (in this case carpet cleaning), and then with every carpet they clean thereafter they'll become faster and more skilled, to the point that they hopefully need little or no oversight.  By contrast, a more complex business that requires the laborer to have or accumulate a multitude of different skills will almost always struggle to find qualified personnel that will stick around for any period of time, and the ones that do are more likely to command a premium wage.
• Material and equipment costs are lower and more predictable with a niche business.  Businesses that try to do too much or provide too many services are often burdened with all sorts of equipment that may or may not be utilized on a consistent basis.  That's extra equipment that needs to be purchased, maintained, repaired, and stored.  And all that upkeep means extra manpower, less productivity, and more money out of your pocket.  Keeping your service and equipment setup as predictable and simple as possible will serve you well as you look to expand.
• A one-service company can more easily claim to be an "authority" in their local market.  Most quality-minded homeowners today want to know that they are hiring an "expert" in a specific trade or field, not a jack-of-all-trades or handyman type of service. 
• Speed, and therefore profit, is more easily achieved with a single-service business because it often avoids the pitfalls of a more complicated, custom-design type of business.  Ask any full-service remodeler what his pet peeves are, and one of them is sure to be customer indecision when it comes to design and color schemes.  Enormous amounts of time are lost when a customer changes their mind on what type of cabinets should be installed, what color the walls should be, whether the tile should be in a subway or diagonal pattern, etc.  Lost time equals lost profits.  Pursuing a niche, non-custom service business like carpet cleaning or gutter-guard installation allows you to bypass these kinds of problems and focus more of your energies on perfecting your system and achieving speed and productivity.

Of course there are exceptions to every rule, and the multitudes of successful and wealthy full-service remodeling business owners in every American city would surely take offense to many of this post's precepts.  Just be aware that the more varied and complex your services, the more focused and organized you (and your employees) must be; the greater the number of moving parts, the higher the chance of a system breakdown.  Full-service remodelers and builders also must be keenly aware of margins and cost projections, lest one bad job send your whole quarter down the tubes.  The nice thing about something like carpet cleaning is that if you have one pain-in-the-butt job that you lose money on, it's over in less than an hour and you can move on to the next one.  Not so with a more complex service.

My personal preference is for a specialized company that is more able to focus on systems, speed, and productivity.   A few add-on services could be justified from time to time, but only if they won't interfere with your core business and its mechanisms.  A good example would be the carpet cleaner that adds upholstery cleaning to his list of services because it often utilizes the same equipment and materials and only adds a small amount of time to the job.  Just remember that simplicity is conducive to quickness which is conducive to profits.

How To Become A Millionaire

Ways to become a millionaire:

1. Win the lottery.  Not a likely scenario.  Save your money.


2. Invest in real estate or the stock market.  Both good ideas but unless you're the next Buffett or Trump you'll be old before you can enjoy the proceeds.


3. Become a doctor, lawyer, or high-level corporate executive.  These types quite often do attain wealth-status, but what if you don't have the time or money to attend college for 6+ years?  And what if none of those professions seems appealing to you?


4. Start your own business.  The most tried and true method for attaining staggering amounts of wealth in the United States.  You don't need a degree, a rich relative, or a secret formula.  All you need is desire and a willingness to learn from your mistakes.  Research your market and if there is a demand for your service or idea, go for it.  Dominate your competition, expect quality from yourself and your business, treat people well, never grow complacent, and you could be shopping for a vacation home in Hawaii before your whiz-kid friend from high school has even finished med school.

It's time to take your life and your finances to the next level.  No more excuses.  Are you ready?  If so, then start by going through the 13 steps of how to become a contractor.