Should I Close My $4,000,000 Business?
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- Опубликовано: 24 апр 2024
- Should I Close My $4,000,000 Business?
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My inlaws went out of business because 1 customer didn't pay 300k. You can't carry these people, take action now.
Sad to say same thing happened to a family member of mine before and I saw it tear him down. The construction industry gets very messy at times if you don’t set your boundaries and stand by them, I 100% agree
Never allow a large company to dictate the terms of your business. Great advice.
LOL. thats the way real business is. large companies pay slow. They train their employees to pay slow.
@@ElectronicsWired You teach others how to treat you. Even large companies. You may lose the contract. But your dignity and peace of mind are more important than living in stress and not being able to pay your employees and make a fair profit.
@@Brian-rs4ug you don't teach big corporations anything. Step 1 is to realize your a small roach that gets to nibble on their crumbs . Step 2 is to find a way to get more crumbs so that you can stay full as you wait for slower companies to pay. He needs some other kind of excavation work that pays in weeks not months. He needs to use his relationships to add a little more to the bid for slow pay and or offer a discount for faster pay. Going in flexing muscle isn't going to work.
@@ElectronicsWired A discount for faster is a good idea.
Wrong@@ElectronicsWired
The guy aged two years in less than a minute
I am in the same boat and when you feel the need to 'grow, grow, grow' your small company, you never like the idea of of possibly losing topline revenue. But you have to from time to time, every 3-4 years or so, you have to commit to a year of getting rid of the 'bad business partners', because that's what those people are. I work as a contractor for several apartment complex owners and I promise you if one resident misses rent on month they are evicted, yet these same people are behind 2, 3, 4 and more months on paying thier contractors.
When you are breaking into a profession you feel like everyone is doing you a favor by hiring you, you can't believe how much they're paying you and you don't want to rock the boat. After a while you're confidence goes up and you look at the amount of money you're making seems normal. The frantic energy slows down and you're able to process everything faster. At that point you don't mind walking away from what would have been an unbelievable offer a few years ago because there is a better offer somewhere else.
This.
The big company probably thinks they can push him around because of his age. Keep up the good work, man, you have a great future ahead.
As a contractor I always did 50% at signing 50% the day work is completed.
Occasionally, if work expected to start more than six months out our terms were 1/3 at signing 1/3 after work started, balance same day work was completed.
Trust goes both ways. We were so good and desirable. Most of the time we were 18 months out.
Hes not getting 50percent down. I can guarantee that... That sounds like residential work to me. If anything he should do draw downs based on percentage of completion.
As someone who didn’t have anyone to ask advice but came to the same conclusion, if they need you they’ll find a way to pay you. My largest customer, a billion dollar company couldn’t get me paid but I figured didn’t need me. The minute I told them I wasn’t showing up to do a job until everything outstanding was paid and 50% paid up front, 25% at benchmark point and 25% uppin completion. I’m stress free at least I’m owing the job and employees are always paid
What I see here is a good young man, who is working his ass off and has a good head on his shoulder but he scaled too quick too large without someone to guide him. Find yourself a nice business tutor/advisor and restructure your business and trim waste. Don't quit because you worked hard to get to this point find yourself in the new direction.
6 years isnt really scaling to fast in construction. Issue is that he sounds like a nice guy. Nice guys dont get paid on time. Not in the construction industry. He needs to bid more to compensate for slow pay. Then offer discount for fast pay and add percentage to late fees.
I just love Dave. He is so wise and good at helping people. Also kind.
And straight tf forward lol
I agree with some things disagree with others. 2.things you should consider.
1..take on an equity partner who can buy a %.of your business for cash. That gives you a float u can use to bridge slow payers.
2. Invest in sales/ lead generation to get your own customers. Part of your issue is you are beholden to these contractors and you need your own customers. That way you can choose to continue to work with the guys or just get your own jobs.
I’ve been in this situation with my web dev company. Fortunately no debt.
5 years in and I’m still getting used to it” this is my house and you follow my rules” mindset.
I worked for a company that got caught holding the bag for a bankrupting developer. Killed the company I was working for. A $500k accounts receivable is too much risk for a small company like this guy’s
Don't give up man, this is just part of business. Overtime you will build proccess and eventually hire people to handle these things. Keep going and you could turn this into $100 million dollar business one day. I sold my first business for $18 million to a large company. They paid me $4 million and were supposed to pay the rest over the next 5 years. Never saw another dime after the first payment. They pretty much told me we have more lawyers than you, good luck. Never ended up getting the money but I learned and kept moving forward. It's still painful even today but I do think it made a better business person and did go on to build other successful companies.
wow get some lawyers dude that's 14 million
You should have built another business, sold that to a big company and got all money upfront or at least with watertight terms and THEN gone after your 14 mil.
@@naomiomi7340 you must be unemployed
Liar
Don't let your customers control your business. Best advice!
My dad just charged more to important customers who were slow to pay.
My dad also paid every payable FAST. More than once when both he and a competitor were vying for the same equipment from a vendor so he could bid on a job, my dad got the equipment.
Im in a similar situation. I am a plumbing contractor in Florida and we do commercial projects. It seems to be the norm that every general contractor “pays their subcontractors when paid”. Usually means that we get paid 50 - 70 days later. I feel that if I took the approach of asking for deposit before the works starts that I would just be kicked to the curb by these GC’s.
Invoices with time gated discounts typically are the first paid by a company/corporation, even if a fraction of a percent. I've used this method to combat slow payers and calculated what the discount cost may be as less than my cost with collection efforts would be.
I get paid sooner with less "effort."
You do have to give at least 10% deposit in construction. Of you want 50% ask for the 10%, then 40% progress payment, then 50% balance. You the company dictate your payment terms within perimeters of the law. Start ling a job with out a deposit is insane!😊
Correct. it sounds like he isnt getting draw downs.
I would do invoice factoring and pass on the interest.
I’m a 20+ year contractor with a remodeling business. It is super common to do 50/50 payments. Dave is just entirely wrong on this. I personally require a smaller amount up front along with progress payments, but there is no way I would ever start a job without a deposit.
If a contractor doesn’t get a deposit, that means he is literally financing the job (including material purchases) for the homeowner until payment. That’s a super risky and dumb thing for any company to do. It would be a red flag for a company to not want a deposit and a red flag for a homeowner who doesn’t want to pay one. It’s unreasonable to expect a company/person to take that risk.
The only real exception is repeat work from someone you know and trust, typically subs doing work for general contractors they already have a good relationship with.
I'm a fence builder and there is NO WAY I would do a job without a 50% deposit. If they don't feel comfortable, I give them a list of materials they they can order themselves from my supplier with my contractor discount. It makes sense if you're a sub since the GC is providing materials, but if you need to front materials, you need that cash.
Very true. I’m in the industry and Reggie Jenkins is correct here
We have our customers pay for paint directly to the paint store (in my company) and they pay us 1/3 down payment for the labor. It’s really just a good way to weed out scammers or non-committed people, and we always do great work so people know they can trust us
Maybe I’m confused but how is he wrong? He’s advocating exactly what you said.
@@bosstime2010 sort of. He ended up paying the guy 50/50 but only after being forced to by his wife. It’s a mixed message at best.
Thanks for the advice! I'm new to financial planning and wasn't sure where to start. Any tips on finding a reliable financial adviser or resource to guide beginners? .
As a beginner, it's essential for you to have a mentor that is verified by finra and SEC to keep you accountable. I'm guided by a widely known financial consultant Stacey Macken .
Truly, investing has changed my perspective on how one can succeed in life; working multiple jobs isn't the optimal way to attain financial freedom and unfortunately, we discover this later in life. Currently earn as much as 12 grand weekly and this has improved my financial life
YES! that's exactly her name (Stacey Macken) I watched her interview on CNN News and so many people recommended her trading skills, she's an expert and I'm just starting with her....From Brisbane Australia
This Woman has really change the life of many people from different countries and am a testimony of her trading platform .
Wow. I'm a bit perplexed seeing her been mentioned here also Didn't know she has been good to so many people too this is wonderful, I'm in my fifth trade with her and it has been super
We do demolition, and we have a customer that decided that we did more work than they told us to do, and they shafted us to the tune of $225,000.
We made the mistake of obeying the GC, instead of seeking the actual customer's opinion.
We are supposed to be getting a check for $43,000, but months go by and the check is not arriving.
We have a diversified business, thank the good Lord, so we survived this.
Thank you for sharing your experience.
Thanks Dave. I run a one man law firm in South Africa. I will now demand deposits upfront and not take any work without one. Also going to become firm.
Wow, I love the expansion that Ramsey solutions has made. I am 28 years old and I have heard of Dave Ramsey all my life and I have owned a business for the last five years. It is really nice to see the other side of Dave as a businessman which he is clearly very successful at.
William's proactive approach to managing business challenges by addressing debt and customer relationships is commendable. 👏 Streamlining operations and focusing on reliable partnerships can dramatically enhance business sustainability and personal well-being.
Good stories and advice from Dave.
Great advice Dave!!!
William here’s right about getting rid of or getting those companies on track with paying. I’m not going to say sell the equipment though. Keep expanding if you can but retain good relationships. I’m 36 and this is exactly what I went through this year. You’re doing fine dude. Keep going!!!! Cut the fat or make the fat pay first or fees occur.
Dave is right, great advice.
I own a very small cleaning business I do not charge a lot but if they miss one or two weeks they know not to expect me back. I am not working for free for anybody
I always do 20% upfront when signing the quote (to lock them in) and an additional 40% upfront before starting (so my materials, preparation time and everything is at least a bit paid for ) And the last 40% you get when delivering the end product. It's all about your cashflow!
Aseome advice Dave 🎉
Love this!!!!
Great advice, that 32y experience helps!
in the roofing world we always take 50% upfront from the customer.
Very well done Dave
SWI (Sharon Wants It) Love it. I totally understand!
I’ve been in construction for 25+ years. I never start a job without 40% down at the signing of the contract. Then it’s another 25% at 75% completion. Then remainder to be paid upon completion. Don’t bother me if you don’t like it, I have plenty of work.
Problem is all major construction contracts are pay when paid. It’s an industry problem. Maybe 10% upfront for a really small contractor and a finance charge on payments over 60 days.
Why doesn't he get a funding company to keep liquid? They'll do all the collection for up to 60-90 days.
Typical of large companies being slow to pay. I retired from a very large, multinational company. They were horrible to subs because their terms were Net 90. Smaller companies couldn't afford to be a supplier for this company because they didn't have the capital to carry this company for 90 days. On the flip side they demanded Net 30 from their customers.
I’m in the contracting business. He’s not charging enough. 17 employees and only $4m revenue?
My business had to stop selling to a Fortune 100 company because collecting was to time consuming. Their buyers were begging for our product. Unfortunately, the buyers don't write the checks.
I explained that my banker agreed not to go into the paper business and I agreed not to lend money... I gave a 1%10 discount or a 2% cash discount- - those terms with the slow payers really helped with lowering my cumulative recievables back down to under 30 days total.
William, breathe and celebrate what you have accomplished! Great advice from Dave and maybe my favorite clip. Would love an update someday. Thanks for sharing!
Papa Dave. What does crazier than a bean mean?
Dave, just wondering. What about mechanics lien on the land? When I sold some land , I sold it cashed out to me before a spoonful of dirt moves, before anything lienable to the property is enacted. I know contractors who filed a lien on the property the day the work begins or had the developer name them on a bond for more than the bid.
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks
@@Lourd-Bab However, if you do not have access to a professional like JUDITH ANN PEACE, quitting your job to focus on trading may not be the best approach. It is important to consider all options and seek guidance from reliable sources before making any major decisions. Consulting with an AI or using automated trading systems can also be helpful in managing investments while balancing other commitment
@@Dunker762 Oh please I’d love that. Thanks!
@@Lourd-Bab Judith Ann peace is her name
Lookup with her name on the webpage.
In Oregon they have added contracting law to help with this, after 60 days the contractor can charge interest for no payment.
In our industry 50/50 is the standard. Normally the last 50 is net 30. Bigger projects are 50 and then balance draws. That is because we have materials and labor building specific products for that client. Excavation I would imagine, 10-20 % once on site, draws through out so you are no more than 10-20% out and net 30.
I would ask for payment first before beginning any job and draft a contract.
My business, my rules!
Even if the client sets the terms, implement a discount for payment within 10 working days.
Perhaps setting a due in 7 days of invoice, and then having interest rates or 20% there after... IF they cannot abide by the 50% up front, and 50 due at time job is done. Also, I believe he can put a lien on any property he does work on and is not paid on time... this puts additional pressure on his developer to pay his bills on time.
Probably should start credit checking and monitoring your customers. Determine terms on their payment behavior with other vendors.
As business scales, cumulative costs will increase. Business 101. It’s the margins that matter. 8-10% net profit is absolutely the aim and healthy for a scaling business. Once you get to a certain scale, nearing that $5m revenue mark, you are not going to be returning 20-30% net profits like you could when it’s you and one other person. It’s just not feasible without profiteering or some sort of fraud, or ridiculously high inflated gross margins.
I thought 50/50 was the rule. And if its a bigger jobs then deposit, followed by progress payments and then the balance. That gives you the opportunity to get paid as you go and stop the work if the don’t pay.
Typically, the seller sets the terms of sale. I get that this line of business is (as I understand it) fraught with slow pay … but, no one makes a business take a job. If the customers payments become an issue, simply explain to them you can no longer contract with them unless they pay 50% upfront. I worked for a company that had terms of 30% on order, 60% on delivery and 10% 30 days after completion. Never received a single complaint about those terms. It is all just upfront agreement at the end of the day.
Every single customer will pay late if they can get away with it. I see soooooo many people fail because they cannot handle these conversations
@@vickie_hearne I worked for a company that did about 4 million a year (10 years ago)
And the owner was constantly treating our valuable vendors
Like they were his bank credit line. I thought it was pure abuse and ended up resigning.
Me too...a Pespi distributor...he would hold back his invoices to make his P/L look good for bonuses, and hired me, temp !! To take his angry customer calls ! I realized what was going on, processed 4+ month of invoices, and then quit. People are disgusting
He’s not burned out because of debt. He’s burned out because he’s building up more mental pressure than the rate of release. I used to own a landscape construction business for 14 years. Construction is a nightmare of a business to be in. And the payoff isn’t high enough relative to all the headaches that you have to deal with.
The bigger the client the worse they treat a subcontractor. The contracts are 100 pages long, insurance liability all shifts you BUT all contracts are negotiable. Get a good construction lawyer and get support through trade associations like Association of Builders and Contractors.
The Brazilian wood is probably tiger wood or IPE. I’m not paying for your porch and hoping that you will actually pay for it when we’re done.
Dave should know that big companies (ie Fortune 500 companies) can't cut large cheques from the trailer on the day the job is completed. It doesn't work that way. Hopefully the caller can get paid within 30 days of completion for the final 50%.
He is a great business coach. Don't take any crap
it's a lot easier to say that when your millions. than small businesses
Dave has opinions that are 20+ years old. .coms are not riskier than other companies. That’s 2000 mindset. Contractors charge homeowners deposits to start work. Sharon wasnt a GC. He wasn’t a ‘sub’. She was a housewife hiring a company directly to do a job.
I would suggest that this guy diversify, as in: move a few pieces of equipment to Alaska and start a gold mine.
Save the southern work for the wintertime.
Find a mentor in the mining industry, file the claims, and get to work on the permits, then downsize down south and scale up in the north.
Be choosy about the jobs you bid on. Find the ones that fit your timeline, and enjoy life, a lot more.
Large oil companies pay 90-120 days out. People who do business with them charge 100 to 200 percent more than the oil companies who pay fast. They would save lots of money to pay quicker.
Reach out to the clients proactively with your terms.
She didn't make you Dave, you made the final decision. Thank God you didn't get screwed.
Pay your subs a percentage when materials are required
You need to offer an escalation on the AR. 30 days late = 10% more, 60 days = 20%.
You don’t do that if they have a balance due you can’t absorb the loss, if they don’t pay you….
Aren't companies paying a few percent of each invoice to a factoring company and get money immediately?
Dave controls the "Horizontal and the Vertical".....
I work is construction and I do progress payments 30% deposit, 30 materials onsite, 35 practical completion and 5% final sign off. The bigger companies are the worst payers 😂
Apparently some of you don’t know how GC/subcontractor contract language works. The GC writes the subcontractor a contract with language based on their contract with the Owner/Developer. Now there can be different payment terms but usually 50% deposit is for vendors/purchase orders (depending on the company) and not subcontractors. Subcontractors can request different payment terms if it’s short term work/special occasion, etc. If GC isn’t paying the subcontractor on time per the agreement it’s usually because of slow owner payment, outstanding notice to contractors or something else. If a GC is flat out not paying a subcontractor for no reason after being funded by the owner, subcontractor has rights per the executed agreement. This 50/50 nonsense is totally false. I like William, sounds like a smart guy who is frustrated with lazy developers/general contractors. You can’t “fire” who you are working for but you can take legal action if not getting paid on time. Terrible take.
you should always make customers put 50% down in construction to atleast cover materials and labor
Do government contracts instead of those cheap home builders. Bid on road and utilities.
They pay even slower.
@@ElectronicsWired Was his problem getting paid slowly or not getting paid enough?
require a smaller amount up front along with progress payments
The reason he is getting more work from the guy who doesn't pay is someone else who he didn't pay cut him off. People who don't pay you, don't pay others. Get it up front and make sure that the check clears before starting the work. Take their check to their bank and get a cashiers check made out to your business, if you don't trust the check not to bounce.
This is the funniest one I’ve seen. Absolutely classic
The bigger the client the longer they take to pay…. Facts.., they think u need them more
His type of industry doesn’t work that way. The 50/50 might work for carpenters, but not heavy civil. However, he can make it better, but not exactly the way Dave is suggesting in this particular instance. Thanks
Although Dave gave him great advice he has so much equipment debt he sounds petrified to have those conversations. What good is a million dollar contract with a company that won’t pay you?
Only smart guy Dave has ever talked to.
homebuilders and developers are notoriously slow payers. especially now because work is too tight
Maybe his customers are slow payers, because THEIR customers are slow payers. As long as they end up paying, and you've already put enough aside to cover overhead, it's just a matter of being patient.
Wrong
@@New-bw4kz Well, it depends on the kind of person you are. Showing slow payers grace has served me well way more often than not. But you go firing clients over timing if you want. That's your prerogative.
What if he is directly working with the developer? They are the direct payment because they took out the loan for the development.
Not his Problem if their customers are slow payers, that's on them pay me NOW
Sounds like he needs to pay $40k salary for an AR analyst
Yes
Maybe the best AR analyst will set you back $80K but depends on the area.
Businesses don’t operate debt free and why wouldn’t you use the banks money.
If they’re paying late, but always paying, it’s more of an inconvenience than a deal stopper. Just build up a larger business account to be able to float it, don’t complain, and keep making bank. This is completely normal in commercial construction.
Till one of the developers goes out of business and the sub is left holding the bag.
@@2themaster yeah it has to be within reason. You can’t let dudes rack up more than you can afford to lose. I know a taper that got screwed on $300k and had to shut down. You can’t let them go crazy.
Nah, Dave's right. He's basically being their bank and he's not even getting paid interest. Just because it's normal doesn't mean it has to be accepted.
@@DennisHochstetler if the dude wants to keep the business, he probably does need to accept it. Net 90 payment schedules is how much of the commercial world functions. It’s not necessarily right, it’s just reality.
He should try to set stricter boundaries, like maybe a net 30. But past that, pushing too hard could just drive his business to zero.
More likely - 3.2 million equipment really worth 1.5 million. Definitely fire bad customers.
Thesexdevelops dont care. They will make promises to guys like this, tell them to make it up on the next job and so on. Bad business.
He needs to agree on terms he can live with.
He also needs to diversify. Look for smaller projects which will cash flow more quickly and help ease his mind.
Finally, he needs to work on his banking. Line of credit for emergencies, learn to keep cash on hand by taking a percentage of each project and sliding it to a money market until end of year or emergency.
Generally i agree with dave on this.
Happy wife happy life👍
daves example of a sponsor not paying is nothing close to Wills issue lol. Dave says some words, if he doesnt get paid its not like he spent $100k worth of diesel/labor etc on a land clearing job. i get his point, but its not comparable, one is annoying, one can ruin wills company
Same $hit that all small businesses dealing with. I feel u
6:21
Didn't take too long to figure out why he doesn't profit more
he makes 8% profit .
quote your jobs 8% higher and you double your profit .