New business - how long shall i allow myself to be paid?!

[c4l]

Been considering a new business for the past few months.

Think it will work but not 100% sure.

If i'm going to do it, will be from June 06 onwards.

In my business plan, cost-wise, how long should i allow for my own wage? I've been told to allow 6 months wages within my start-up costs on the assumption that the business does not make a profit for 6 months.

Is this a wise move?

[fastfences]

Hi Simon,

You can't really pre-determine when your business will reach a stage to pay a salary. Of course we (most of us) work to a business plan, wherein allowances would be made for a wage. But generally, with a 'first business' we're 'flying blind' and so many other costs absorb our returns.

Can you not see how things go for, say, the first month and revise your plans from there? I do think, though, that you're pretty much on the mark by allowing a 6 month buffer.
Cheers, Nigel

[Top Hat]

Pay yourself as little as possible.

Many businesses take a long time to get going, ours grew very fast, is very profitable, but still our deepest hole was 1 year in.

I know of others who couldn't take a wage for a long time.

[c4l]

Cheers for that Nigel.

That's what i was thinking - see how the first month goes but just don't want to leave myself too short.

Somebody did initially tell me to work with 3 months but i personally think this is far too short.

[c4l]

Couldn't take a wage??!

Scary!

Never thought of that one. I wouldn't be wanting a huge wage - just enough to cover the mortgage and a few bills. Wife's wage would have to sort the rest i suppose.

[gj]

I usually advise clients to prepare 3 versions of a cashflow forecast, one realistic, one optimistic and one pessimistic. That way the pessimistic forecast is usually "sensible". That forecast should give you a fair indication of the situation as regards the ability to pay a "wage" to you.

You say what figure should you include in your start up costs for the wages - I would say you should do the plan and see when it could afford to pay you, based on the pessimistic version. That then gives you a timescale for the amount of wages you need to cover in the meantime. That money then needs to come out of your savings etc.

You should be aware that banks etc are reluctant to provide funds to cover wages - therefore it is better if you cover your living costs for the 6 months from your savings, if possible.

G

[c4l]

I wonder if it's worth considering carrying on with my secure day-job and setting this venture up at the same time?

The new idea is in the line of Traffic Management - those companies that put cones out on motorways and other roads. I deal with this a lot at work at the moment and there is scope to make a lot of money in doing so.

The problem i have is that if i do it, although startup is quite low, I will need some training to be legally able to do the work out on site. This is not expensive - about £250 per person. However, often the work is nothing more than plant hire, although at other times, it's a full time 2 men and a van job. I would look to start on the plant hire side really. Basically, a van full of signs and cones would be my only start up cost but if i were to do it this way, it would mean that one the signs and cones are out, I would be sat twiddling my thumbs for anything up to say 12 weeks until the end of the hire period. Ok, the money would be coming in, but surely if i could carry on working at the same time, this would be better?? Surely, i could pay a temporary worker, or 'borrow' someone from a company that i deal with for £200 a day?

[fastfences]

yeah, Simon, whatever you do, keep working. Even if you transfer to a part-time or night job, you have a safety net. There's a lot less pressure this way, and you can actually pay a lot more atttention to the venture because you're not sweating upon where the next pound's coming from.

Cheers, Nigel

[c4l]

That's an even better idea Nigel!!

I currently work 8-5.30 as a civil engineering estimator. Even if i was to quit this job so as to put all my mental energy into the TM business, I could still do some hours as something else.

I was thinking of carrying on my current job and the new one, but i think it'd clash. If, for example, I got a call from a big potential client, 'can you come to a pre-order meeting tomorrow @ 10am', i wouldn't be able to say yes if i continued with my current job. And there's no way that a big Client is going to say, 'ok then, come either after 6, or at weekends'.

Lots to think about here!

[c4l]

Nigel, that's a cracking idea really. Like your thought into the fact that, with a wage coming in - even a small wage from stacking shelves at a supermarket, there's some pressure taken off the new business and i have the chance therefore to put my thoughts into new ideas for it, rather than work out how i'm going to feed Mrs B and the 2 pups for the next month!!

As my wife has jokingly just said too, 'if you buy a small van or pickup as you will need to, if you get a night job, you could 'borrow' other peoples cones and signs at night without being seen and cut your costs even further!'
Made me smile!!

[fastfences]

Simon, as part of your research, you'd better find out if there's such a thing as insurance for 'missing cones.' We've all seen them floating in the river and in many places they shouldn't be (except my van :wink: ).

If they're on site for a lengthy period, you'd have all sorts of people (possibly) misappropriating them.

N

[c4l]

Like myself you mean!!? haha.

The done thing in the industry seems to be to charge out a cost for stolen or missing or damaged cones. This way, the Client, the likes of the Highways Agency or big nationwide contractors then takes responsibility for making sure they're safe and secure.

For example, if they were to use a security guard, he'd keep an eye out; if not, and the cones get stolen, they're charged for them, usually first time @ around 75% of their cost new on the assumption that they've been used previously and have depreciated somewhat, then after that, at new cost.

Same with damage. If a contractor working on a motorway knocks one into the road and it gets flattened by a HGV, it's their loss as they must pay for it - an incentive therefore to make sure cones etc do not go walkies the wrong way into the traffic!!

[c4l]

One thing to find out about is insurance though otherwise. I heard of a company a few years back who ran out of sandbags whilst putting signs up on the motorway. A sign fell over at night and blocked sight of a lot of cones. Behind the signs was the cones and the TM company's 7 ton wagon. The wagon had a vehicular crash cushion on the bag (you'll have seen them - big yellow springy looking things!) but the car was a 1980s Corvette travelling at around 95 mph. Hit the back of the wagon near enough at combined force of about 90 mph as the wagon was moving slightly but killed the driver on impact. TM company got torn apart legally because of it. Luckily they were insured.

Scary stuff nonetheless!!

[c4l]

How lucky is this!!?

Arrived at work this morning to be told that the yard that we have around the corner is being cleared out. In the yard are a load of old portable offices, an old van that is used when the others are all in use if need be, an 02 plate Ford Focus, a load of wood, tyres, you name it - it's there! Mainly stuff left over at site that cannot be returned. Idea behind getting rid of it being that they can still sell some stuff off before it becomes worthless.

Part of the email said 'TRAFFIC MANAGEMENT EQUIPMENT - Offers - good for schools, churches etc'. So, lunchtime i went and had a look, there's piles of signs and cones. I made an offer and was accepted. £25 for a heap of stuff!!

Sign frames are around £80 each for a big sign - for which i have 2, small ones £50, which i again have 2, and cones - big cones are around £16 each for the 'Bigfoot 1m' - i have 3 and 'Bigfoot 500's are normally around £10 each - i have 5 - all for £25!! Bargain!!

Lots more stuff there - just nowhere to store it as yet. No one else is vaguely interested in this stuff so i may speak to a local farmer about renting a corner of a barn for now. Currently on the decking outside and the wife's not too impressed!

So convenient for me at the moment! Such good timing!!

[fastfences]

Unbelievable! Great start, Simon. Are you buying the van, too? :wink:
Cheers, Nigel

[Hayles]

Take it as fate Simon!

Good luck :D

[c4l]

I know - great spot of luck!

Nah, going to give the van a miss i think. If it was £25, yes maybe. Otherwise no.

As im going to start slow and try and hire labour for doing the work from a friends company as and when required, as well as keeping my day job, I intend to rent a van for this. Basically, when hiring the equipment, it'd be a case of 1 days hire for setting up and 1 days hire for collecting in. Found a place local, http://www.easirent.com, that will do hire of a Kangoo or equivalent for £17 a day. This is public rates too - probably get it for about £14 as a trade rate. I've used this company in the past and know they also do 1/2 day hires. Probably about £10. Far cheaper than purchasing one. Maybe not relatively, but keeps start up costs down.

Will just need to buy some reflective magnetic signs for on the side of the hire vans. Will look good if people are seeing my name over a number of different, newish vans - good image - despite me not owning them!

[gj]

Guess the cones stop people from parking on the decking though!*??

Well done - sometimes things like this are meant as a sign! Sorry!

Graham

[gj]

Hi Simon

Have just been to your website and put in an email for further info on a Toyota Yaris for my daughter.

Wouldn't even have known about you but for the UK Business Forums.

Regards


Graham

[thekitchendesigner]

Hi Simon,

I agree with the option of getting a part time job to fund bills, mortgage etc while the bulk of your time is spent growing your business.

I started by paying myself to cover bills but soon found out that taking a wage wasnt such a viable idea, despite the business working. I currently have an evening job twice a week which only brings in a small amount, but enough to cover certain bills, allowing me to take no wage from the business. My partner has also worked lots of overtime to help which has been fantastic.

Its allowed me to build up the client base very well and keep the bank happy, but learned from doing it a different way!

Good luck!

P.S - HAving a p/t job & running your business does = lots of hours, but its worth it!