Business start up as a builder/handyman
Discussion
Longish post on specific business start up, looking for general advice.
My brother is finally giving consideration to a business start up as a small builder/handyman. As I am unfamiliar with the area I have some fairly broad questions , some more detailed questions and ideas that I would like to run past the PH massive (keepin' it real).
For almost 30 years my brother worked on the building sites as a general labourer until he got fed up of standing up to his knees in water in February while the boss driove around in his Merc. He gave up the job and went to work shifts labouring for welders in a factory ( 6-2, 2-10). In the time before he went to work on 2-10, and after his 6-2 he did bits of work for neighbours and people locally, fencing, slabing, decking gardens, but he can also plaster, is a decent carpenter, plumber, roofer and bricklayer and can operate most pieces of site machinery. He did odd roofing tiles for old people, repaired leeking shed roofs, replastered walls for new kitchens etc. He was always in demand and bought a tipper pick up. He has a vast array of tools he has bought or salvaged and repaired over the years (stihl saws, mixer, wacker plates, scaffold). He is the only tradesman I have ever known who turns up when he says he will, works hard while he is there, does a decent job and charges a fair price.
About 3 months ago he took a job as a maintenance man becauise his repetitive labouring factory job in the welding shop was giving him problems with a shoulder which the doctor said would not repiar fully unless he stopped humping 50kg metal frames day in, day out. He hates the new job and as it is 8-4.30 can't get time to do his litle building jobs, at least during the winter he can't.
He is now thinking about starting up on his own. He seems well set up, but doing it for real instead of pin money is a different thing?
Few broad questions:
Sole trader or Limited Company?
VAT registered? ( he could stay under the threshold if he allowed clients to buy their own materials if it was expensive). As most clients are householder the advantages in being able to reclaim VAT would add 17.5% to his prices which might make him less competitive.
What liability insurance would he need?
Should he have a formal terms and conditions document for clients and himself to sign, or continue with a word of mouth as the agreed spec. price, payment arrangemnet (rarely let him down but he has had to chase money in the past and usually insiste on money for materials upfront).
How should he go about setting his day rate? I think he needs to factor in the cost of replacing/repairing tools, his fuel, holidays, pension, sickness, accountant fees, a PC for his accounts and letters. Anything else?
Formal route with a business plan and bank account or just give it a go and convert to this later on if need be?
How should he charge for other trades? He has contacts with carpenters, heating enginers, electricians but obviously bringing them in and putting them through his accounts will push him towards the VAT registration limit and he would be liable for their work i am guessing and I suspect many would want cash in hand without receipts. Best to let the householder settle those bills directly I think and make a 'tip' (say 10%) from the tradesman for finding the work or work on a quid pro quo basis with them if they find him work?
How should he go about marketing? I think he could make a living working within just 4 or 5 miles of home without expensive press ads. He has a local reputation and all his jobs are by word of mouth. Our local builder works by word of mouth and has a 2 year waiting list for larger projects. I think a few flyers, cards in his friendly local pubs/chip shops and cricket club (where he has done the repairs for some years for free) and an 'A' board with his name and contact details on at each job would be enough? I think he should use his own name and the locale in which he mainly works: Fred Bloggs of Wrexham. The local housing stock is mainly ex council housing built in the 1950s and 1970's, along with a decent Georgian and Victorian stock, all of which tends to lead to work needing to be done and seeing him working may be enough? I don't think he needs to stary much further, as people won't be paying for his travel time or fuel to get there Unless he increases his day rate for jobs further afield. He has good relationships with local builders merchants and the quarry for sand/gravel, so staying locally could be a niche market.
Finally, is this all too late in life at 50? He is fit, except for the shoulder but the job he now has is for a large company with a pension, sickpay etc but is poorly paid and the Health and Safety is drining him mad (he has to do everything in a hard hat, goggles, overall and gloves because of the site). Should he forget this idea and stick it out?
I told you it was a loong and detailed post!
Send him to https://www.businesslink.gov.uk/bdotg/acti and good luck to him!!
I would avoid the limited company route at this stage in proceedings. There might be some tax savings (not always guaranteed) but the complexity and additional costs and responsibilities of running a formal company can often outweigh any such savings.
If the bulk of his customers are expected to be non-business, then registering for VAT is probably best avoided - unless his turnover exceeds the compulsory registration limit - currently £61,000 per annum. If he is expecting large initial capital expenditure (new equipment, computers, a van etc) then registering would allow him to claim back VAT on such items. If he remains unregistered for the moment, he can still reclaim VAT on pre-registration purchases of such equipment within three years of these purchases and the assets are still in use at the time of the VAT registration.
Regarding setting rates - his income needs to cover ALL his costs (both day to day and capital expenditure) plus it needs to provide him with sufficient margin to cover his personal non-business living expenses (his "Drawings" ). However, he will be constrained by needing to be competitive - so needs to be aware of what other "builder/hantmen" charge in the area. This area is suffering price stagnation or even def;ation at the moment because of the influx of Eastern European workers. This is going to get worse after 1 January as, despite the governments decision to restrict the influx of Romanian and Bulgarian workers, this only applies to those seeking employment. There are no restrictions at all on those who wish to set up as "Self Employed".
Advertising need not be too prohibitive. An entry in Yellow Pages or Thomsons can be as little as £300 to £500 per annum. Many small builders advertise in their local B & Q and Wickes type stores as well. If he is any good, the most effective form of advertising will be "word of mouth" - and it's free.
Insurance wise, he will need at least Third Party cover.
He needs to be aware of the Self Assessment tax requirements as well - registration details, Class 2 National Insurance rules, filing of tax returns etc.
If the bulk of his customers are expected to be non-business, then registering for VAT is probably best avoided - unless his turnover exceeds the compulsory registration limit - currently £61,000 per annum. If he is expecting large initial capital expenditure (new equipment, computers, a van etc) then registering would allow him to claim back VAT on such items. If he remains unregistered for the moment, he can still reclaim VAT on pre-registration purchases of such equipment within three years of these purchases and the assets are still in use at the time of the VAT registration.
Regarding setting rates - his income needs to cover ALL his costs (both day to day and capital expenditure) plus it needs to provide him with sufficient margin to cover his personal non-business living expenses (his "Drawings" ). However, he will be constrained by needing to be competitive - so needs to be aware of what other "builder/hantmen" charge in the area. This area is suffering price stagnation or even def;ation at the moment because of the influx of Eastern European workers. This is going to get worse after 1 January as, despite the governments decision to restrict the influx of Romanian and Bulgarian workers, this only applies to those seeking employment. There are no restrictions at all on those who wish to set up as "Self Employed".
Advertising need not be too prohibitive. An entry in Yellow Pages or Thomsons can be as little as £300 to £500 per annum. Many small builders advertise in their local B & Q and Wickes type stores as well. If he is any good, the most effective form of advertising will be "word of mouth" - and it's free.
Insurance wise, he will need at least Third Party cover.
He needs to be aware of the Self Assessment tax requirements as well - registration details, Class 2 National Insurance rules, filing of tax returns etc.
Edited by Eric Mc on Thursday 26th October 08:48
Leftie said:
He is the only tradesman I have ever known who turns up when he says he will, works hard while he is there, does a decent job and charges a fair price.
If this is true then that puts him in the "less than 1% of builders" category. He will be inundated with work. Yes, it will come in slowly for the first few weeks, then he will reach saturation point, i.e. Do I need to take on a helper
Marketing;
I have never sought a builder from the Yellow Pages. As for a website...
Most of the successful local builders seem to market either (a) in the local free newsletter, or (b) having some flyers dropped in the locale. If he can target a radius of within 5 miles of his house, that should be a catchment area of at least 5000 homes. Print costs will be about £200, delivery either free (if he does it himself) or one of the local delivery companies would do it for less than £300. So, for £500 he's reached 5000 homes. If he gets 0.5% response (half of one percent) he gets 25 jobs. If the average job is only £200 he gets £5000 back from a £500 outlay. He'll only have to do this once or twice, then his repuation will see him in work for as long as he wants it.
GarrettMacD said:
Leftie said:
He is the only tradesman I have ever known who turns up when he says he will, works hard while he is there, does a decent job and charges a fair price.
If this is true then that puts him in the "less than 1% of builders" category. He will be inundated with work. Yes, it will come in slowly for the first few weeks, then he will reach saturation point, i.e. Do I need to take on a helper
Marketing;
I have never sought a builder from the Yellow Pages. As for a website...
Most of the successful local builders seem to market either (a) in the local free newsletter, or (b) having some flyers dropped in the locale. If he can target a radius of within 5 miles of his house, that should be a catchment area of at least 5000 homes. Print costs will be about £200, delivery either free (if he does it himself) or one of the local delivery companies would do it for less than £300. So, for £500 he's reached 5000 homes. If he gets 0.5% response (half of one percent) he gets 25 jobs. If the average job is only £200 he gets £5000 back from a £500 outlay. He'll only have to do this once or twice, then his repuation will see him in work for as long as he wants it.
I will use that when I se him, he is a bit nervous. last time he was self employed he knew nothing an=bout tax and NI and the tax man ate him alive and he spent 2 years paying it back!
Only one piece of advice to offer here, and that is he must quote any jobs that he may be offered on a per job basis, NOT on a so much per hour basis. To keep going as a self employed handyman you need to charge a much higher hourly rate than most people would be comfortable paying. Charge by the job and no one will know you are charging more per hour than they make in their employment.
71% - do they really?
The next question then would be - how many of those 71% actually end up using a LOCAL service they fpund on the internet.
My personal experience is that the vast bulk of people chose local tradesmen based on conversations they have with their friends and acquaintances.
The next question then would be - how many of those 71% actually end up using a LOCAL service they fpund on the internet.
My personal experience is that the vast bulk of people chose local tradesmen based on conversations they have with their friends and acquaintances.
Leftie said:
VAT registered? ( he could stay under the threshold if he allowed clients to buy their own materials if it was expensive). As most clients are householder the advantages in being able to reclaim VAT would add 17.5% to his prices which might make him less competitive.
That's a bit of a red herring, surely?
The VAT has to be paid eventually, so if he claimed it back on materials he buys, he would then have to charge customers VAT.
I guess the only disadvantage is that he can't quote ex-VAT prices. But that leads to a lot of bad feeling - I had a neighbour who ended up in court with kitchen company as they never mentioned VAT in their (verbal) quote then added it on to the bill.
deva link said:
Leftie said:
VAT registered? ( he could stay under the threshold if he allowed clients to buy their own materials if it was expensive). As most clients are householder the advantages in being able to reclaim VAT would add 17.5% to his prices which might make him less competitive.
That's a bit of a red herring, surely?
The VAT has to be paid eventually, so if he claimed it back on materials he buys, he would then have to charge customers VAT.
I guess the only disadvantage is that he can't quote ex-VAT prices. But that leads to a lot of bad feeling - I had a neighbour who ended up in court with kitchen company as they never mentioned VAT in their (verbal) quote then added it on to the bill.
He would be obliged to put VAT on all his charges, labour included. So a job that took a day, say £120, would become £141. If he used a bag of cement at £3, if he was registered for VAT he could only reclaim the 45p VAT he had paid. The househiolder, who isn't VAT regisrted would have to pay £141 a day instead of £120. As I understand it, he would also have to put VAT on the bag of cement, so £3 would become £3.52p to the customer. Total job price if registered would be £144.53 compared to £123 if not registered. He would then only reclaim the 45p, puting another 7p in the Chanvcellors pocket. I think.
Eric Mc said:
71% - do they really?
The next question then would be - how many of those 71% actually end up using a LOCAL service they fpund on the internet.
My personal experience is that the vast bulk of people chose local tradesmen based on conversations they have with their friends and acquaintances.
The next question then would be - how many of those 71% actually end up using a LOCAL service they fpund on the internet.
My personal experience is that the vast bulk of people chose local tradesmen based on conversations they have with their friends and acquaintances.
Eric, as an obviously very much older member of this forum I would not expect you to embrace, nor even understand internet marketing. However I am suprised you "poo poo" the concept so readily. Does your business have a website? I thought not. Don't worry about internet marketing it will never catch on, bet they said that about the TV, Radio, The car, Supermarkets, Sliced Bread...........
no need to be so patronising.
I think there is a floor or limit beneath which the internet does not operate. I think a significent percentage of local tradesman business operates beneath this floor. Word of mouth is still the single most powerful marketing tool for this sector.
Andy
I think there is a floor or limit beneath which the internet does not operate. I think a significent percentage of local tradesman business operates beneath this floor. Word of mouth is still the single most powerful marketing tool for this sector.
Andy
Edited by andymadmak on Saturday 28th October 22:11
Gassing Station | Business | Top of Page | What's New | My Stuff