Questions for people who run their own business!

Ethanol

Ethanol

Coast to Coast
So I think the time has finally come for me and my friends to open our own shop. We have some great people (mechanics/bodywork/paint etc) and we have a tone of project bikes we're working on. We've been doing informally for a while now and it seems like the right time to finally get it off the ground.

So, if you have started your own business I'd love to hear tips, success stories, pit-falls, and anything else that might be handy.

Any links you could provide would be greatly appreciated too!

Thanks guys, you're the best!

Ethan
 
Oh and just so you know we're not crazy kids. All in our 30s with good credit and own our own houses etc. May be a pipe dream but not completely unrealistic.
 
I have two businesses. Restoration Media Blasting and Covenant Customs here in Franklin, TN.


Rule #1. There is no such thing as separate "business ethics". You're in the business of selling relationships not just bikes. It's a service industry. Those who offer excellent customer service and quality survive. Those who are just out to make a buck don't. The real customers will recognize that and are willing to pay a little more for good work. The lesser customers will haggle you to death and suck the life out of you. I call these people "emotional vampires".

Rule #2. Stay out of debt. If you need another motorcycle lift, save up and pay cash. The market fluctuates way too much to have defined debt to pay in a bad month. If you take on debt, only do so if you already have the cash stashed away in order to hold that debt in good standing for at least 90 days. This would be valid for huge purchases like a paint booth. Always justify the investment mathmatically. Until then, sub it out.


Rule #3. Somebody has to take the "presidential" lead and the others recognize that. Can't have all chiefs and no indians. However, this means each person takes a specialty and is soley responsible for the efficiency and performance of that "department". Your paint guy quotes the time/material to his part. the electrical guy...ditto, the machinist...and so on. That way, each person feels "invested" and responsible for their little kingdom while top dog carries the veto vote. Have after hours meetings and make decisions on the majority rule. Tie breakers are then decided by Mr. Prez.


Rule #4. Establish the amount of monthly reinvestment is put back into the company. Hopefully all of it at least for a while to build up reserves. After that, have monthly or quarterly dividends paid out based on the plan. Once things get rolling..more often. Plan the work, work the plan. There needs to be a "no money this month" plan. If you can't make all the shop rent, everybody pre-agreed to chip in the same amount in order to float it with payback at dividend time.


Rule #5. You're in this for the money so leave the smokin' and jokin' for break time as much as possible while keeping the work fun. Everyone involved has to commit the hours agreed just like they do at their regular job. This is serious now. (I like to enjoy a cigar too much and have to remind myself to get busy)


Rule #6. Qualify the customer. Require deposits on large projects to at least cover parts and material. Too often, a builder takes on a project, invests hours in it only to find out the customer's eyes were bigger than his wallet in the end. Bank roll the deposits immediately and purchase parts as they are required. This shows consistent, constant positive cash flow for a good D&B rating later on down the road if you are fortunate to end up going "big time". It's a good idea to have a structured payment plan. 50% complete equals 50% of the balance due. (I learned this one the hard way too)


Rule #7. Market yourself big. Don't get your brother-in-law's nephew's friend to take a stab at a website or a company logo. Leave that stuff to professionals. There's a reason they do it for a living. (I'm learning this one right now and revamping everything)


That's just some quickies off the top of my head.
 
I haven't opened a shop (although I can dream)... but I started my own software company 9.5 years ago. My advice would include:
Get a CPA - They can save you a lot of time and money. Use a referral from someone who can vouch for them, not the yellow pages.
Use good book keeping practices - We use QuickBooks pro and it does most everything you'll need. You may need a basic accounting 101 course at a local technical college, or if you are a self-learner, grab a book and read. Some of my business owner friends recommend a book keeper to do most everything. It depends on your ability and time.


With things like the two above, always consider: What's my time worth? If I waste 4 hours trying to do a task in accounting, what could that have been billed to a client as? $75, $100, $150 an hour? It usually makes sense to pay someone to do the things you are not good at.


Cash Flow is King - Get partial payments up front, percentages throughout, and a final payment at the end if you can. (not sure about your industry). But keep that cash flowing. It's the ebbs and flow of cash that can sink a business. Your bills are still due during your builds. So you need to keep the cash coming.


Get a line of credit. It's pretty easy to do with your business bank. This helps with cash flow and buying parts.
Setup credit with suppliers / distributors. Get started now and get the relationship started. Most will give you 15 - 30 days to pay. This enables you to get paid by your customer and then do the book keeping to get the supplier paid.


Be different. Have an angle that makes you unique.


Marketing: So important. Consider a partner or a freelancer to help with social media marketing and other ways to get your name out there to the people who need to find you. Spend your AD dollars wisely and be careful of old fashioned and expensive things such as the yellow pages. Most people look for you first on Google so you may want to do a Pay Per Click campaign for your local area and special key words, etc.


Read a few business books to help fill in the gaps in your knowledge about finances, taxes and other business techniques.


You are only as good as your products. Your products are really your staff and the limitations of their talent. Treat them well, and hire the best you can afford.


Ummm... that's about it for now. I hope this helps.
 
That is awesome Brother! It is really nice to work for yourself doing something that you love. Is there any specific information that you are looking for?
 
I am not looking to start up a business, have enough keeping myself busy but think that the advice coming thru is FANTASTIC. In my current job, I am working with a lot of young school based aprentices, and part of their studies is looking at how small business operates, and I will be using this great advice to pass on to them- First hand experience.
Thank you very much for the help !!!
 
Everything from egradner is pretty good info (though I could argue about the credit stuff).

One thing no one has mentioned yet is the legal aspects of your entity. Decide whether or not you guys are going to be a partnership, LLC, etc. It has very real impacts to the way you must operate and who (if anyone) takes the financial hit if something bad happens. Generally speaking, the more risk each of you is willing to personally assume, the less taxes taken out by Uncle Sam. For instance, if you go for a partnership and one of your partners screws up the welding on a frame and kills someone, ALL of you can be held personally responsible and lose, not just the business, but your homes and personal assets as well (assuming your insurance doesn't cover it, of course). On the upside, you get to be very flexible with the way your income is taxed, assessed, and spent. Many local governments will charge you property taxes based not only on your location, but the equipment within it as well. Your business model may affect this, too.

Get in touch with your local Chamber of Commerce and they can help answer some of these questions.
 
You guys are awesome!

Thanks for so much great advice. I'm lucky that my best friend is an accountant and is working on a CPA right now. My brother does professional graphic design in NYC and offered to help even before I asked. Couple of friends work in business law. I think LLC is the way to go for now.

Really guys and gals this is much appreciated and really scary in a fun way!

Ethan
 
I'm very interested in this...I'm trying to start something similar but 1) I'm in the old continent 2) I'm on my own 3) I'm pretty poor :)
I sustain THIS job with money coming from the OTHER job...it's hard but that's what I want to do.

Good luck Ethanol!
 
Ethanol said:
So I think the time has finally come for me and my friends to open our own shop. We have some great people (mechanics/bodywork/paint etc) and we have a tone of project bikes we're working on. We've been doing informally for a while now and it seems like the right time to finally get it off the ground.

So, if you have started your own business I'd love to hear tips, success stories, pit-falls, and anything else that might be handy.

Any links you could provide would be greatly appreciated too!

Thanks guys, you're the best!

Ethan
Click to expand...
Remember, you are consumers yourself. What you would find offensive or unreasonable, more than likely your customers will feel the same way. And always back up your work. :D Need signage/decals? Hit me up and I'll put in you in touch. :D
 
"me and my friends" all I can say is get an operating agreement, lay down what is going to be the reponsibility for each one, how much does each individual have to bring to the table, what happens if someone wants to leave the company (buyout), who does what etc.... An operating agreement can save you if someone is not doing what they agreed to do. This is something you need to consult with an attorney on this one.

+1 on getting a CPA or a knowledgeable accountant, I am an accountant and I usually train my clients to do as much of the work as possible to save money, quickbooks is very user friendly and it allows you to pretty much everything from preparing invoices for your client, keeping track of bills, payroll, bank reconcilation and preparing monthly financial statements.
 
Thanks CTG.

My good friend is going to be taking the reigns primarily. He will be the most financially invested and will make all executive decisions. I'm going to invest about 1/3 of what he does. The other people who will be working there will be people I have already rented a shop space with for over three years and everything has gone very well.

We don't expect to make money for quite a while and we're all ready and willing to pull 60+ hour weeks to get this thing off the ground.

It's not going to be a democracy or a friendly sort of agreement from 9-5, just work. Outside of that hopefully everything will stay laid back.
 
Rule number one of starting your own business. Get a job.
You will need three months living expense on the books.
Agreement, the quickest way to lose friends is sleep with their wives or go into business together. Find an attorney and a CPA, put it in writing. I have survived 4 years on my own, best thing I have ever done.
Good luck, and don't forget to have fun.
INUSURANCE...... You will be building a motorcycles that can kill someone, oops I forgot to tighten that bolt won't cut it. You said you own homes, protect them. Minimum 2,000,000 GL.
 
@Sonreir... true. Just wanted to steer biz newbies away from the strong temptation of going in debt early on. Running a positive line of credit is certainly essential. I've seen so many jump into the biz, borrow against their house, get a big shop and fancy tools only to fall apart 6 months later. Ethanol, I wish you the best and look forward to what comes of it! You'll never know if you don't jump in. As Seth Godin says "the worst thing that can happen is that'll you'll fail and no one will notice".
 
Get your best bud to set you up on QuickBooks and make sure you track ALL your costs. You can enter all your own data but it might drive you mad. Ask your bud to help get you started with the right accounts and ways to track your costs. learn how to use customer "jobs" to track income and expenses and learn how to use "Items". That is the key thing with QB.

Do it all as "expenses" and there's nothing to see. Use "items" and the books start to tell you a story. I run several companies and one is all about teaching our clients how to use QB to see what is going on in their businesses. We do all teh financial analysis and dig through to identify trends and advise them, but they can now use the system effectively.

The internet is your friend if you want to sell parts as well as services, so choose a market and aggressively occupy that space. Market the heck out of your business and remember that it has to be built on great service and reliability and honest dealings. We all make mistakes and how we deal with them tells others a lot about us.

Good luck.
 
I come from the legal field. Have a cnference with a business lawyer and LISTEN. It won't be cheap, but lawsuits are a LOT more expensive, bot financially and emotionally.

Get a decent accountant/cpa with some solid tax background. There are a lot of great tax benefits, but even more tax pitfalls!

Always pay what you owe the government BEFORE anyone else!

The rest of the advice above is spot on, and I really agree with keeping the debt down as low as possible. It is ok to rent tools, but money gets really expensive to rent over time. You can uually just return the tool . . .

Good luck! Nothing better than running your own business! I truly mean that.
 
Just want to say good luck if you go forward with starting your business. It's always been a dream of mine to work for myself on projects I want to be working on. My wife is starting very small right now doing some arts and crafts with an Etsy store, so it's nowhere close to the type of overhead you will require, but I can see it's very difficult starting up.

Not that this is much of an issue at the moment, but a great logo helps a lot. Not one your buddy did with every bit of info about your business, but a simple, easily recognizable logotype professionally made. I do these things for a living, and I always get the input from business owners who don't really know what a logo is about because they think it needs to tell an entire story, but really it needs to just associate with your name. Think Nike, Pepsi, Adidas...etc. The Nike logo doesn't have a basketball hoop and a tennis ball along side of a baseball bat...it's a simple swoosh.
 
Lots of good advice hear. The only thing I might add is if you are in an area where riding is seasonal, it's wise to come up with some other aspect of the business to get you through the winter. Charge to store customers bikes on a battery tender, eBay parts business, snow removal, etc. My best friend and I are discussing taking a similar plunge. He's been an auto mechanic for 20 years so our shop would be auto and bikes. The cars will generate a nice revenue stream so we can take our time and build a good motorcycle business on the side.
 
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