As an actual business owner, what would you tell me?

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I just want to start by saying I am not a full time welding business. I am a lead welder in the jet engine manufacturing field, but I still love general welding/fabrication and do it on the side. Basically, I shot way over my head and “succeeded”. I say that loosely, because nothing has really happened yet. Basically, I sent a local precast stair and concrete company an email, introducing myself, asking if they have a railing vendor, telling them that you can spot a precast stair railing a mile away versus a custom built railing, etc. I attached pictures of my work, thinking maybe they do 50-100 stairs a year, and maybe half that want railings. I thought, well that would be a great income and could be managed on the side, given I’m just delivering it in bulk. I didn’t think anything would come of it, at most I thought I’d hear back with the numbers I just explained. Well, to my utter surprise, only a few hours later, I got a call. I let it go to voicemail, then I get that, and an email back to call back. I do, then we go over things, what they’re looking for. They are looking to have just simple, straight picket stair rails. Little did I know, they typically use 500-700 railings YEARLY. I feel pathetic I even tried because I obviously cannot meet a commitment like that. It would be a dream to run my own company. But when you factor in the inevitable 7 day weeks, employees, employee benefits, higher overhead, etc. it just isn’t glorious. But when you see the money coming in, it is. I mean, I clear 4 figure checks at my day job, take home. But some of my higher end railings net me $1,500-$2,000 for only a couple afternoons work. I do love my job, I’m paid well, good benefits, work flow and hours/time off is flexible. I feel I’d be stupid to give that up. But when you think of potentially grossing $500k+ a year by doing simple prefab railings, I just don’t know what’s more stupid. What would you do?
Reply:What do you think is the right thing to do? Sounds to me like that's a pretty good gig.
Reply:FIRST ,, you GOTTA e able to sustain life for one YEAR minimum,, 18 months is better, with no income.Can you do that while working 14 hours a day, 7 days a week?AND, that is after you pay for the equipment, and supplies that the business needs.Are you willing to take the risk of doing a $2000 to $4000 job, and never get a nickel pay?? that happens WAY too often.Who will do your books, and pay the taxes and bills, while you are working 14 hours a day?That NEVER goes away (my wife was great with the books, and bills)If you haven't thrown up,, yet,,Sit down and write a "business plan",, YES, you gotta have one, trust me,,Come back and ask more questions when you get that far..Chatting on a forum will COMPLETELY GO AWAY for at least five years,,Oh, yea, know where you can get a biscuit at 3a.m. in the morning,, you will be getting a LOT of those,, once you start.
Reply:Please do not till the real story of self employed. I did that from 1973 to 2004. But risk was bigger for me.Looking back at what did I would have a mobile welding and never have a shop. All my work was QUOTE and inspected by groups trying to find errors not to pay.Dave

Originally Posted by SweetMK

FIRST ,, you GOTTA e able to sustain life for one YEAR minimum,, 18 months is better, with no income.Can you do that while working 14 hours a day, 7 days a week?AND, that is after you pay for the equipment, and supplies that the business needs.Are you willing to take the risk of doing a $2000 to $4000 job, and never get a nickel pay?? that happens WAY too often.Who will do your books, and pay the taxes and bills, while you are working 14 hours a day?That NEVER goes away (my wife was great with the books, and bills)If you haven't thrown up,, yet,,Sit down and write a "business plan",, YES, you gotta have one, trust me,,Come back and ask more questions when you get that far..Chatting on a forum will COMPLETELY GO AWAY for at least five years,,Oh, yea, know where you can get a biscuit at 3a.m. in the morning,, you will be getting a LOT of those,, once you start.
Reply:There is a reason you can "spot them a mile away".  Because they did fit the budget and have been acceptable for years.  They, like many places, are looking for cheaper alternatives.  If you can find out what they pay currently, then i suspect you will find out you cannot compete.You say 500k would be nice.  That is a minimum $1000/rail at 500/yr.  Can that be. Done? With Material, finish, handling equipment, delivery, labor insurance, overhead ...
Reply:$500k/year turnover is no good if you spend $499k/year on costs.... if you know what I mean.What would be the commitment from the concrete company? What's to stop them turning around after a few months and saying "you're too expensive so we're going with this company instead"You need more than one customer.Not to sound like a wet rag, just saying. I see business opportunities all the time... but they always come with quite a lot of risk and more commitment on your part than the customers.Having said that, you'll know better than us internet heros about your personal situation, so if that's what you want and plan to do, then good luck, hope it works out

Murphy's Golden Rule: Whoever has the gold, makes the rules.
Reply:Keep in mind that most if not all companies that give you work live by one train of thought.... The more work they give you the cheaper they want it done.Lincoln 330 MPXModified TombstoneLincoln LN-25X-TVTMagnum PRO 250LX GT Spool Gun¼ Ton of Torches OFC-A / OFG-ASMAW FCAW GMAW Air Carbon Arc Gouging#Freebird Welds
Reply:Awesome replies guys, thank you. Like I said, it seems glorious but when it is just you, and not just clocking in and out and collecting a check, it’s hard. I’ve been doing side work legitimately for about 2 years. I have a garage, equipment, and a slowly growing client list, on top of regular new ones. Could I afford to not be paid for a year? Absolutely not. My current role has afforded me a house that I’d lose. It’s easy for me to forget that there are weeks I don’t get side work money, whether it be lack of work(which I purposely did right now because I had such a busy year). Or it’s ****ty customers exploiting the 30 day net on payments.
Reply:Great point, kind of the same above you. They luckily have pricing on their website for what they charge for railings. Obviously it’s marked up, but I don’t know by how much. I think their longest rail is for 7 steps with a 42” platform, and that is like $950. No way I’d build that for less than $1,500. It’s just the largest volume of work I’ve ever seen come my way, and I want to be sure I have all the facts in front of me to make sure I’m not stupidly saying no. Although, I have no choice anyway because I’m a lone man, no way I could build that many sets of rails in a year.

Originally Posted by Munkul

$500k/year turnover is no good if you spend $499k/year on costs.... if you know what I mean.What would be the commitment from the concrete company? What's to stop them turning around after a few months and saying "you're too expensive so we're going with this company instead"You need more than one customer.Not to sound like a wet rag, just saying. I see business opportunities all the time... but they always come with quite a lot of risk and more commitment on your part than the customers.Having said that, you'll know better than us internet heros about your personal situation, so if that's what you want and plan to do, then good luck, hope it works out


Reply:Don't forget the taxes. The government will take anywhere from 20-40% of your profit in taxes. Plus you have to pay the 15% self employment tax and your state income taxes. This goes to Munkul's point on costs. The costs are always more than you think. You'll need a good system for recording all your costs and accounting for everything. Even that will cost money. The business plan is a great suggestion. The cost of this is much more than the steel, filler materials and your time. You need to get a handle on that before you think about pricing the first job.Miller Multimatic 255
Reply:If there was a big ole pile of money to be had someone would be grabbing it.www.urkafarms.com
Reply:I agreeI do not forget insurance too.A business is a leaky ship bigger the more leaks. Most weld shops do this by charging.This why the guy burning the rod is getting $15.00 per hour and shop rate is $65.00 per hour. The good news is you still make profit. Dave

Originally Posted by Louie1961

Don't forget the taxes. The government will take anywhere from 20-40% of your profit in taxes. Plus you have to pay the 15% self employment tax and your state income taxes. This goes to Munkul's point on costs. The costs are always more than you think. You'll need a good system for recording all your costs and accounting for everything. Even that will cost money. The business plan is a great suggestion. The cost of this is much more than the steel, filler materials and your time. You need to get a handle on that before you think about pricing the first job.
Reply:Call them up and discuss with them the amount of railings you are prepared to do in your spare time without jeopardizing your day job. If they are still interested consider everything others have said here regarding liability and costs and then talk price.---Meltedmetal
Reply:“ I think their longest rail is for 7 steps with a 42” platform, and that is like $950. No way I’d build that for less than $1,500. ”This is all I need to know to say No.Stick with the one-offs where you know you can make money on the side and work when you want to. Don’t quit your day job. Welding and fabricating are not that much fun to lose money doing it.Last edited by wb4rt; 15 Hours Ago at 12:17 PM.Burt _____________________Miller Syncrowave 250Millermatic 211Miller 375 Plasma Cutter Hobart Handler 12010FtDrillBit.com
Reply:I would say that the company would be using you as third bid. So no they would not be buying 500 t0 700 railings from you. They will award the winning bid between multiple bids and before long all of you are suffering. So are you competitive enough to win the bids? Is your work superior to the others? Can you find supplies in this era of tight supplies and shortages? Are your employees going to be dicks?I would offer to bid on the one-offs that are a bit difficult and need your expertise to complete in a timely manner. If your bids are too high, nothing lost. But I would certainly go solo as now is the perfect climate to do so. So many never have the opportunity.Weld like a "WELDOR", not a wel-"DERR"

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Reply:Availability of material, with current shakey/unpredictable everything.  Will be a great debate on when or how much metal to buy up front. Awarded the job today, what will steel prices be tomorrow. I agree with Shovelon.  It could be a great opportunity. The fabrication is the easy part.
Reply:I agree with the others saying that you don't want a 1 customer business.  Just don't.  There's risk in all businesses, but putting all your eggs in one basket increases the risk substantially, without a matching increase in the potential reward.Secondly, once you get into the realm of hundreds of identical, simple units a year, you're not in the custom railing business, but the job shop business, and the job shop business is a race to the bottom.  You're in until someone else finds a way to cut $15 a rail out of the cost.  The name of the game is efficiency, and as a small 1 - 3 man shop, that's not easy.  The shop with 35 employees, that's building 10,000 railings a year is getting better deals on steel than you. They're doing their own blasting and powder coating in house, and on a conveyor line instead of batch ovens at that, whereas you're having to pay another company to do so.  They have lower skilled (thus lower wage) employees doing 1 task all day long, rather than a couple highly skilled people doing everything (for instance, they have a girl making $14 an hour answering the phones instead of the lead welder stopping what he's doing every time the phone rings, etc).  You're going to have a hard time competing with the level of efficiency that they can achieve on higher qty orders.  That's not to say that a production job shop is a bad thing to run, but just know what you're getting into, and have a realistic expectation of what it takes to play in that sandbox.  It's not usually the right niche for small 1 - 3 man shops.  Shovelon has the right idea.  You don't want their 700 basic railings a year.  You want their 25 fancy railings a year.  The ones for the customers that don't want to look like a prefab railing.  The ones for the job they do for the lobby of a national companies district office, etc.  The ones where quality is the driving factor, price is way down the list.  Remember, turnover is vanity, profit is sanity.  In this market, that's probably the thing they're having the most trouble finding a good source for, and that thing fits the niche you already have, allowing you to grow within your specialty, not jump headfirst into an entirely different one.  And, you ultimately want to be that guy for a number of different customers, so if something happens to one (and stuff happens to customer's all the time - businesses get dissolved in divorces, owners die, businesses get sued out of business or the purchaser just decides to go with another company for any which reason), you can move along with nary more than 10% of your sales affected.  I'm self employed (full time, commercial shop, etc, not a garage outfit) with no employees (with firm plans to stay that way) and more of the problems I face are related to too high of a work volume, rather than too low of a work volume.  There are a lot of perks to staying small, but the tradeoff to that is that volume can sink you quickly, so plan accordingly.  On that subject, I actually just had to inform a customer that they've got more demand than I've got capability for, and that I'm no longer able to continue producing 5 of their products.  That's not a fun email to write, and would have been way better to head off in advance than now, but live and learn.And again, don't put all of your eggs in the basket of one customer.Who is John Galt?
Reply:Let it go.You're not equipped for it.One customer is a job, not a business.They have too much power over you.What if you bill at 30 days and they pay at 180 or more days ?Read up on businesses that sell to Walmart.They think it's a good thing.  They get pushed for higher volumes and lower prices.  It kills them.Walmart doesn't care, they just pick up newer suppliers.Continue to operate in higher margin custom high quality work.Keep your stable income, stable insurance and health coverage.
Reply:The OP is getting some good advice here. (Some I think is too negative but that may be good too.)BUT, keep your options open and keep making contacts. I have 6 employees now and some good long term customers. People I met along the way were key to that.
Reply:One ingredient to a successful startup business is having a customer with a big amount of work to do.  Sounds like this isn't the right fit for you, but do keep in mind that most small business startups really scrape for customers.  The phone isn't ringing off the hook with work for most new guys.  So to have steady work is a real blessing.  Your goal, ultimately, would be to build off of that customer and get some more eggs in the basket.  But one solid customer from the get-go is tremendous.Of course, you don't actually have that customer.  And I agree that you're probably going to be used for the 3rd quote, which means lots of work pricing stuff out with potentially zero income for your time spent.  The comments about racing to the bottom are spot-on.I've been made many, many promises which are seldom fully realized.  Especially if I'm dealing with a salesman from the potential customer's company.  They're optimists by nature, and sometimes it gets the best of them.  Very few people within a company have the power to actually guarantee you work.Another truth that's been mentioned in this thread already is to ignore the gross and look at the net profit.  I'd honestly rather have a smaller gross while netting the same amount; I don't like to see cash just flowing through my hands.  The costs in running a production shop are enormous; I was foreman at a relatively small welding shop before I went out on my own, and it was an eye-opener.  I've made quite a few mistakes in my life, but not having any employees and not having a brick and mortar location (I'm mobile only) were both good decisions so far for me.  I can pay myself well enough to live the way I want to, I can put some money in the bank, I get to see new places regularly and sometimes look like a hero doing it (most of my work is repair), I can call my own schedule within reason (but it's still 40-60 hrs per week on average), and I hope to be able to retire one day.  What more can a person really ask from their job?