In my first blog on "What 35 years in the flooring industry has taught me" focused on mainly contracting in general but here, the financial side is where the BIG mistakes are made! Especially if you are a less experienced contractor like I was at 18! Think about it, we are contractors! We know how to do our job, we can remove flooring, prep floors and install new... but we are NOT accountants or financial planners, and we often do not understand that world. BUT we better learn fast if we are to be successful! Check out the lessons I had to learn.
1. PAY THE IRS FIRST… THEN PAY THE MAFIA!
As a young (irresponsible) contractor the FIRST thing I did is get in trouble with the IRS. I made a lot of money, but didn’t even get close to putting enough money away and come April 15th I just didn’t have it. Then you get the letter from the IRS and you start packing your bags for your stay at the “stony-lonesome” What saved me, and this should be a point by itself, is I got a very demanding tax accountant with a kinda motherly personality and she took the kid (me) under her wing and held my feet to the fire! I dreaded meeting her quarterly. If I didn’t have my paperwork in order and enough money set aside for the IRS, there was hell to pay! Fear of the IRS and Sandy Esties has kept me in line for the last 35 years! This is a tough lesson to learn for new contractors and I would guess most younger contractors will have this challenge. So, pay the IRS and you’ll sleep better at night.
2. LIVE ON YOUR WORST MONTH.
I learned this one the hard way too. Contractors just starting out don’t realize that when running your own business, you will always have financial highs and lows, you’ll have good months and bad, and as the years go by, you have good and bad years… sometimes real bad years! As tempting as it is to spend as fast as you earn, you must save for the lean times so you can still pay the bills. I learned this one going into my first recession in the early 1980’s. I was doing great in the late 70’s so I overextended myself and bought the coolest, most expensive truck I could find. Then the work dried up and I had to find a way to make the payments! I grew to hate that truck (like it was her fault!) but I learned the lesson well: live according to your worst months, and let the good months be “icing on the cake.”
3. LEGAL LABOR
There is no integrity in dealing with “labor under the table, cash at the end of the day.” It is not fair to your workers not to have workman’s comp, L&I insurance, unemployment insurance. And if the state or the IRS catches you, you’re in deep trouble, and it’s just not worth it. Suck it up, and be a professional. Bid the projects correctly and employ your workers legally.
4. DON’T CHEAP OUT
There is a huge difference between GOOD tools, vehicles and equipment, compared to OK equipment and tools. You’re going to be doing this a long time so “buy the best and cry once” as the saying goes.
5. KEEP GOOD RECORDS
You need to be able to document everything, not just to the IRS or the state, but even to resolve a conflict with a customer. Say you sign a contract to supply a specific mastic for a certain floor material and there is a failure with the flooring. There are ways of testing after, but if you have a receipt for the correct mastic in the amount required, it would go a long way in protecting you. With regards the IRS, again as a young guy I was audited by the IRS and at the end the auditor was explaining all my mistakes and additional charges. She said, “Randy, you can’t pull numbers out of the air!” I sheepishly asked what she meant and she pointed to my gas receipts: I reported say, $1,500 bucks. She said, “You didn’t spend $1,500 on gas. You maybe had $1,462.18, maybe $1,536.34 but no one has exactly $1,500 even!” I learned round numbers are an IRS tell!
Take ‘em or leave ‘em, these are just some of my individual takeaways from 35 years in the contracting world. I saved an important one for last… my dad used to say, “floor contracting is a cruel mistress” and he was correct and here’s why: you can do very well in this trade but be warned that it can come to a screeching halt! You can blow out a knee, or hurt your back, any number of injuries can take you out. You must prepare for this possibility with insurance and savings, so you and your family are not left in a financial bind. Even if you are lucky to have a long healthy career, at some point the physical installing part of your career will come to an end, either by your choice or not. This may sound ominous, but it really is not! In fact, it can be really rewarding, because after many years of experience in the trades, you will have a LOT of valuable of knowledge that the younger contractors do not have. Flooring shops, distributors, equipment and tooling manufacturers, general contractors will need guys like you to fill the roles of everything from sales, project management, quality control, product development, training… and the list goes on. And YOU will have the knowledge and experience you can only get from time on the job!
That's what happened to me... I am now part of the team here at Bartell Global. We are an international company that manufactures a complete line of concrete placement, surface preparation, and flooring removal equipment like the TERMINATOR ride-on floor scraper. My long career in the flooring trade prepared me well for my current position as the product trainer for Bartell Global. I get to travel all over and train contractors to use our equipment, as well as help in the research and development of our equipment lines.
You never know where your path might lead. I’m glad to be able to shine a light to help other contractors have as much success and happiness in their careers as I have had in mine.