Do You Own Your Business or Do You Own a Job?
authors Aaron Enfinger | March 11, 2020
It is safe to assume most people have heard the phrase, “If you do what you love, you’ll never work a day in your life.” There are countless people in the construction industry who are living by this apparent, self-evident truth. But I want to challenge this mindset and ask, “Ok, but then what?” Yes, you are doing what you love, but isn’t there more to it than that?
Many remodelers and craftsmen are working in our rewarding industry because of the satisfaction they receive from their work. While the internal sense of accomplishment at the end of a hard day’s work is not unique to our industry, the feeling of satisfaction is undeniably strong in construction. The difficulty of a hard day’s work quickly fades away in the warm glow of accomplishment.
In the early years of my career, I worked alongside many self-employed builders, remodelers and craftsmen with demanding schedules. They were passionate about the intensity of the job, which resulted in beautiful projects. An interesting observation I had made was the businesses they were constructing lacked a certain feature about them. Yes, lovely homes and projects were built, but what I was observing wasn’t business.
The owners of these companies owned jobs in the building industry but did not own a building business. I came to see these businesses as temporary. Once the remodeler was older and had no one to take over, the job vanished and with it went the illusion of what was once a company. I noticed something missing and I asked myself, “Ok, you’re busy…but now what?”
If you want to build your own business, what are the things you should address before you step out on your own?
First, you must decide which type of structure your company will take. Moving from sole proprietor to a company registered with the local governing bodies takes careful planning and advice from attorneys or CPAs. Figuring out the correct structure at the start is important—whether you choose an S-Corp, C-Corp, LLC, Corporation or any of the other options, careful consideration of the tax and succession implications of each of the different structures is critical.
Once your company is properly established with the government, acquiring the proper licensing and insurance is next. Many municipalities require building licenses before issuing permits. The type of liability insurance you will need to purchase will be largely dependent upon the specific work your company is licensed to do. Working with an insurance agent familiar with construction generally and residential construction specifically will help ensure you have proper coverage.
Next, it is necessary to focus on marketing strategies, sales and production systems before your business can gain any traction. The systems you may have relied on are likely carried over from your days as a sole proprietor. However, if you do not make changes to these methods, you will still be building projects instead of crafting a business you deserve and desire.
Referrals are the lifeline of any small business, but they cannot be the only source of leads for a company desiring growth. A marketing plan, sales system and a production process all need to be created, developed and implemented. Careful planning, execution and tracking of these processes and systems must be instilled in the DNA of any company for it to grow. This is the difference between a job in the building industry and a company in the building industry.
Another critical piece of the puzzle is having a strong grasp of your business financials. Knowing your numbers and managing the metrics is the way to ensure success. For instance, what is the proper markup you need to charge? You will need to have enough gross profit to cover expenses and fund the growth your company will experience now that you’ve properly set it up. What is the net profit you are planning to earn so you can make it through the lean times? Do not leave these answers to chance! Plan, execute, track and repeat!
This is by no means an exhaustive list of all the necessary components of a successfully run business. However, you must be great at these to get there.
If you are finding yourself in need of help, the National Association of the Remodeling Industry (NARI) is an organization that understand this distinction and is actively pursuing a position of leverage. At NARI you’ll find a connection with other industry experts who have their shoulder to this plow. NARI is a source to connect with valuable industry knowledge.
Everyone has limited time during the day. Are you spending your days simply doing the work you love? Or are you building an organization that does the work you love? I suggest that when you fall in love with the latter, you will be more likely to build the quality of life you are seeking. The ability for you to earn money while you are not present is the result of owning a properly run business. Who wouldn’t love doing that? QR
Aaron Enfinger, CR, has been in residential construction for 23 years and is currently the general manager at The Cleary Company in Columbus, Ohio. Aaron has served on the finance committee, education committee and the certification board for NARI at the national level.