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  • #982352
    NathanBoxa
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    Hi all. Ive had a Victorian building license (DB-M) for around 5 years and its time to use it. I plan on using it in the Western Suburbs of Melbourne.

    Im going to try get into the NEIS program, that should help if im accepted.

    Got a few questions for anyone in the industry

    1. What kind of start up money would i need? I have 30k saved up sitting in an account ready to go.

    2. For quoting jobs i was planning on using a private estimating company, from memory they charge around $600.00 a house. This is just until i get going and can estimate the jobs myself more accurately.

    3. Is it ok to wait for the progress payments from client to pay the tradesman. I plan on asking some tradesman if a payment from me within 28 days is ok, if no then ill have to use my capital.

    4. Should i get jobs over other builders as i will have low overheads. I also plan on working an afternoon shift to cover the costs of leasing a small office.

    These are just a few questions of so many i have

    #1136292
    Gizmo
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    Hello,

    Regarding point 4. Why get an office to start with? I’m sure you have reasons, but why not consider working from home to start with? If it’s possible then this should help with keeping your cost down.

    #1136293
    Greg_M
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    I’m assuming that with DB-M, you may not have a trade background?

    For what it’s worth, my comments (40+ years construction, have had both DB-L and CB-U licences in the past)

    1. will depend on the scale of the jobs-small reno’s, probably fine if you don’t get ahead of yourself with turnover.

    2.I’d be looking at industry standard cost guides like Cordells or Rawlinsons as a base point and measure your actual costs against them to see where you sit.

    Chances are, outsourced estimating will be using something similar, unless they have specialist experience. In my opinion outsourced estimating is dangerous, unless you have enough experience to vet it properly.

    3. Highly unlikely any subbie will wear 28 days on domestic work, more like 7 if they don’t know you, 14 if you’re reliable. Commercial work fine, but the cost structure is completely different.

    4. Forget about an office until you have an order book spilling over, maybe a co working space or hot desk if you’re trying to create an impression and don’t want clients at your home (but this is common in domestic construction).

    Doesn’t matter how low your overhead is, you’ll be competing against those who actually do the physical work themselves, and do their books and quoting on the kitchen table … most are discounting their labour ATM to win work.

    Your other main competition is the bigger volume builders, they’ll just follow the market down if necessary, dropping prices as they go.

    Without knowing your background or experience, I’d say your biggest issue is finding a market niche … high quality, high margin, work is based on reputation. Volume builders will eat you on price at the other end of the market.

    Good luck with the venture.

    #1136294
    NathanBoxa
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    Looks like ill have to work from home, get a refresher in estimating and gather up some more capital among many other things. I think ill attempt the DB-U license before i start, as Ive heard a registered tradesman the few that are around charge more, which would be no good for someone starting out.

    Thanks for the good advise Estim8.

    #1136295
    Greg_M
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    NathanBoxa, post: 155349 wrote:
    Looks like ill have to work from home, get a refresher in estimating and gather up some more capital among many other things. I think ill attempt the DB-U license before i start, as Ive heard a registered tradesman the few that are around charge more, which would be no good for someone starting out.

    Thanks for the good advise Estim8.

    Not too sure how NEIS works, but maybe through that or some other program you can get some mentor support and get some insight into the inner workings of a successful company.

    In my experience the building companies that go well, are ones with the best internal systems for estimating, and cost control. Get that right and everything else falls into place … it’s also the area most small builders ignore, they run on turnover, then go broke when work slows down (been there).

    #1136296
    aussie_steve
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    Hi Nathan,

    I am a sparky in the western suburbs of Melb – good luck with the venture.
    In relation to some of your points – here are some thoughts;

    NEIS program – from my understanding good to help you with mentoring for your business planning phase, and some business support. From memory criteria requires that you have been out of the workforce for a period and also that you haven’t attained a qualification above a certain level – not sure if the builders qualification will exempt you or not.

    Relating to your questions;
    1) Don’t underestimate your start-up costs. Write a list of key things you will need – insurances, business registrations, accounting set-up costs, web site presence, how will you manage your books (I would suggest looking at an accounting program solution from the outset, as things can get very messy if you start from excel or some other way – especially when their are subcontract labourer transactions occuring). Many accounting programs include estimating modules – such as quickbooks contractor version, so you may kill two birds with one stone going this path.

    For your reference my Electrical Contracting business start-up costs were roughly 10K administrative cost related – with vehicle and tools of trade adding considerably.

    2) I don’t have any experience with outsource estimating – I always believe this is the key step you need to do yourself – especially as on clients premisis and customer facing. I always believe you really need to be the face of your own business from the outset.
    Of course if you are looking to bring some expertise along with you this is a different story, and probably sound – so many risks of getting burnt under-estimating, and customers won’t pay you for your own stuff-ups.
    I think you already plan to build your skills here – and this is critical as although $600 might not sound like much to win a job – but when you factor in your conversion ratio this could really add up (especially in early stages with no history or references your conversion could be very low). If you were at 1 in 3 success rate early for example you are paying someone else almost $2K for every job you get)

    3) This is the area I suggest you sort out before you even spend a cent.
    I think you need to have your subcontractor plan resolved – and have engaged with subcontractors and agreed to terms of engagement before you can even confidently plan the next steps.
    If I had an unknown builder ring me out of the blue telling me he had a weeks work that he needed done straight away, and if I did it I wouldn’t get paid for 28 days – well lets just say the conversation would be rather short.
    If you have discussed prior though and have subbies on board with your plans, agreed response times from when you secure a job for them to be available -and payment times agreed – then you are in a position where the subbies are ready to go.
    I would suggest though that you really need to be considering 7 day payment terms in your planning though – and be plan on paying a reasonable rate especially on start-up to have blokes ready to go for you.

    4) Competing on price in this slow market is frought with danger I believe.
    I think you really need to complete some work on the above 3 points first, which should give you a reasonable idea relative to your starting costs. Factor in ongoing costs, then work out your break-even.
    Workflow will probably ebb and flow initially, and pricing based on required ongoing volume will only see you competing at the bottom end and running out of cash sooner rather than later.
    I would suggest keeping your expenses low, but charge a reasonable market rate. Keep your standards high, buy good quality materials so you minimise your warranty risk, demand excellence of your subbies (only possible if your pay rate and terms match this intention) and sell yourself.

    Just one final point relating the working capital. Cash flow issues is the thing that sinks most businesses within the first 12 months. On face value, I think your starting W/C is very slim in this industry, and could put severe pressure and stress on you.
    Someone once told me that the time you are most likely to get approved for additional funding is the time you least need it. Their point was, that the chances of getting someone to lend to you when the preverbial has hit the fan is next to ziltch.
    I would suggest considering establishing emergency cash flow funding sources in advance of commencing – I personally would have thought $50K accessible funding would be a minimum, with $80K being a nicer number for start-up. Most probably this will require a complete business plan to be prepared – hence your suggestion of the NEIS program entry would probably be a good starting point for you.

    All the best with it mate – hope it all goes well for you.

    Cheers,
    Steve

    #1136297
    Anonymous
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    Wow. Thanks estim8 and Steve – so much info and advice for Nathan in just two posts. I am blown away by your generosity and willingness to share your experiences.

    You guys rock. :)

    Love your work,
    Jayne

    #1136298
    NathanBoxa
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    Wow certainly is a lot to take in.

    Back to running costs i did an estimate on a house valued 140k. As a Builder i have to have enough money to pay for each stage. Going by the Vic Contracts Act i have to pay out 49k to complete the lock up stage?

    So technically with 30k i can forget about building even a unit?

    #1136299
    aussie_steve
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    NathanBoxa, post: 155474 wrote:
    So technically with 30k i can forget about building even a unit?

    I would think so Nathan – the budget you have set would probably restrict you to reno work for the first 12 months or so until you built up a bank to progress. Perhaps not a bad low risk entry strategy?

    Alternatively have you considered teaming up with someone in either a partnership or joint venture? Patnership probably not a preference as such a large percentage end in tears. But strategic JV’s with clearly defined terms and time periods could be your entry into the business – especially if you were able to establish with someone with the few things you appear to need some help with – namely cash, estimating experience and trade skills.

    Perhaps you might be able to find yourself a key contractor who will benifit by both gaining access to the work, and a % of the profits. You bring the builders cert and project management skills?

    #1136300
    NathanBoxa
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    Ok, Work from home, brush up on the estimating, gain some more capital, build a relationship with some trades and start small.

    In regards to Renos, does that include Extensions? I can afford the build stages of an Extension and i can apply what Ive learnt, is kinda like a small house. Same build stages, requires a license and can use a standard building contract. If im mistaken let me know

    Ill keep away from Renos like upgrading a kitchen or bathroom ect. Too scary. I cant imagine anyone being to happy if work is delayed and they got no shower or bathroom oh yeah and work starts with a sledgehammer.

    Again thanks for the advise is helping put things into perspective.

    #1136301
    aussie_steve
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    Spot on Nathan.

    Yep, keep away from the small renovations, too many competing in that space and waste of your licence to be honest. Grey Army and other franchise types in that space, and you have nailed the customer attitudes.

    I think extensions fit well for your starting point. You build your bank while getting the education in the skills and market you need, and you manage a low risk profile in that space rather than having all your eggs in one project.

    Let us know how you go – I have a funny feeling the 12 month report is going to be pretty positive.

    All the best.
    Cheers Steve

    #1136302
    builder dbu
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    NathanBoxa, post: 155318 wrote:
    Hi all. Ive had a Victorian building license (DB-M) for around 5 years and its time to use it. I plan on using it in the Western Suburbs of Melbourne.

    Im going to try get into the NEIS program, that should help if im accepted.

    Got a few questions for anyone in the industry

    1. What kind of start up money would i need? I have 30k saved up sitting in an account ready to go.

    2. For quoting jobs i was planning on using a private estimating company, from memory they charge around $600.00 a house. This is just until i get going and can estimate the jobs myself more accurately.

    3. Is it ok to wait for the progress payments from client to pay the tradesman. I plan on asking some tradesman if a payment from me within 28 days is ok, if no then ill have to use my capital.

    4. Should i get jobs over other builders as i will have low overheads. I also plan on working an afternoon shift to cover the costs of leasing a small office.

    These are just a few questions of so many i have

    HI Nathan

    I m assuming you’re attempting to contract build as opposed to speculative build? If so, 30k will not do it. My rule is for your first job, you should have equal to the amount of a lock up (Cash) on a contract sum. Trades generally will want to be paid upon completion until you develop a trading history, then out to 7 days. Suppliers 30 days, but this is not guaranteed on a start up. your ability to get competitive rates on start up will depend on how quick you pay.

    Use a contract estimator on the first few jobs , then invest in one user – constructor or framework program, this will set you back around 2.5k.

    You probably know that you cant enter into a contract unless you have a DBU or someone with one that executes that contract. Warranty insurance will be another obstacle too.

    Good luck!

    #1136303
    NathanBoxa
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    builder dbu, post: 155707 wrote:
    HI Nathan

    I m assuming you’re attempting to contract build as opposed to speculative build? If so, 30k will not do it.

    Im working on gaining more capital. Will certainly give me peace of mind.

    builder dbu, post: 155707 wrote:
    You probably know that you cant enter into a contract unless you have a DBU or someone with one that executes that contract. Warranty insurance will be another obstacle too.

    I have a DB-M and access to a DB-U through family. And with insurance i spoke to the HIA and im confident they can help me organize that.

    Few other things have come to mind.

    1. With extensions what should my starting Markup percentage be?

    2. If a client rings to have an extension done without a planning permit should i offer a service to organize it for them for a fee? Im not sure on this one, seeing as i have limited cash, i don’t want it tied up on a lengthy planning approval.

    #1136304
    Gizmo
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    NathanBoxa, post: 155349 wrote:
    Looks like ill have to work from home, get a refresher in estimating and gather up some more capital among many other things. I think ill attempt the DB-U license before i start, as Ive heard a registered tradesman the few that are around charge more, which would be no good for someone starting out.

    Thanks for the good advise Estim8.

    Make sure you can get a phone number that can move with your business and across exchanges this way your hard work in marketing your number is not lost.

    #1136305
    NathanBoxa
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    Small update

    Have applied for funding to do the Cert IV – Building & Construction course with the HIA. Without funding the course is $4300 with funding $1800.

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