I did what you said and became a tradesman: paying off start up costs

[LumberJesse]

Hey folks.

I remember one of the first things that stuck with me reading this blog years ago was finding out you can make a good living as a tradesperson. Two years ago I started working construction, and after getting tired of being employed by others, I started my own business doing high-end painting and mid-range remodeling. I've gotten so busy that I'm bidding constantly and will be hiring my first guy in February, and probably another in the summer. It's great! At my current trajectory we could be retired by 40 if I have a couple guys working for me and stay after it.

In the meantime, I'd like some advice about my few assets. Currently I have a truck (paid off) cargo trailer (paid off) dump trailer ($8k left) wife's car ($8k left) student loans ($8k left) and credit cards for starting the business ($7k ish). Altogether i'm sitting at about $32k in debts.

I've done the math and set some goals, and figure I could break even on the dump trailer. I bought it to rent, but it's not nearly the money maker I want it to be to make sense of the maintenance costs and time investment. Labor/services are much more profitable. I'd be able to sell it for right at what I have in it, or take a small loss, but lose the monthly payment. Does that seem sound to you?

That'd bring me down to $26k.

I bought the cargo trailer (a 6x12) for my business, but realize that it's gonna need about $2000 of work (wrapping and maintenance) before I can get it good to go. It would definitely save some time having all my stuff with me all the time, and would be great to be able to leave at jobsites for my guys. But I can also flip it for a couple thousand profit and pay down almost all of my start up cost with that money. Does that seem dumb?

My wife's car is a 2011 Prius. We overpaid but we were in a bind and figured if we're gonna finance it, finance something fuel efficient and reliable. It has 100k miles now and is in great shape, so should last us a long time. After the CCs are paid down, this is first on the list.

Student loans are low interest so last on the list, I think 3%.

My math shows that if I sell the trailers, I can be debt free with no issues by late April early May. If I don't sell them, I'd be looking at closer to August. The issue here is that I'd like is to be well positioned to buy a home by Jan 2023. To get a decent down payment, I really need to be debt free as soon as possible. Selling the dump trailer feels kind of silly since I know I'll either buy another one or a van for my guys down the road, but the reality is that it's not 100% necessary right now, and I'll need to spend another $2500 on various other pieces of equipment fairly soon anyways. I can always buy one next winter in cash and just live with it til then, right?

Am I in too big of a hurry? Not enough of one?

By the way, either way, I figure I can get to $1M in investments, own a house, a couple newer cars, and have one or two businesses mostly managing themselves by age 40. I'm 27 now. I think I can do a lot more than that, actually, but it seems like a good fall back.

Thoughts?

TLDR: become a painter and make $150k a year and more if you hire guys

[LightStache]

Too big of a hurry IMO. It's good to have urgency to pay down debts by being frugal, but I don't think that includes selling business assets that you plan to repurchase in 12 months.

I applaud your goal to hire and grow your business, but not to be "well positioned" to buy a house in a year. I interpret that to mean you want to pay off your short term debts so that you can take on a higher amount of long term debt. That's dumb.

As someone who's owned a couple homes (and chosen to rent at times) and a small business, I look at these simply as two asset classes -- real estate and private equity. IMO your small business has a much higher risk-adjusted return so it's financially unwise to make decisions that prioritize a home purchase over the business.

ETA: You and your wife have put yourselves on an awesome trajectory -- congratulations!

[lhamo]

Are you charging enough for your work?  You might first experiment with raising your rates.  Maybe combine it with a cash back referral bonus if happy customers send you new clients (who actually sign a contract). 

Or maybe you can hire/train somebody to do the bidding and pay them a low base + higher commission.  Would free up your time to do the stuff that brings in the money.  If you think meeting you is important to landing the client then you go to the initial meeting but leave the employee behind to do the measurements, etc -- I've seen this model with several contractors we have had come for bids (owner or manager shows up with crew, does walk through and outlines job, then crew stays to measure while owner/manager takes off to another job)

[Fishindude]

The truck and cargo trailer are paid for and you use them, just take care of the maintenance and keep them.
If you don't use the dump trailer much, sell if for whatever you can get and be out of that debt.   Use a dumpster service or trucking outfit in the future and simply pass the cost along to the client.   Also, don't borrow money to buy tools for your business, start building up some cash in the business and pay for things cash.

The other stuff; credit card, car & student loans are just stupid personal debt that need some Dave Ramsey-ish attention to get them cleaned up.   Save some money and use cash in the future.  Quit borrowing for stuff you can't afford.

Lots of good trades people out there, but not all that many good contractors.  You make your money in contracting by "putting the deal together" for a client, hiring all the subs, buying all the materials, providing all the labor, etc. and getting appropriate mark ups and profits on all of that stuff.   Very few can do enough business as a one or two man show to make any serious money.   

Start focusing on the business end of your business and think about how you can do more and make more $$.    Work on your math and estimating skills, computer skills, client relations, employee hiring and relations, job cost tracking, etc., etc.