Had a residential development that tanked almost 5 years ago. The developer finally paid up after a while. A small portion of the approved PUD (Planned Unit Development) was built and successful. The developer called last week and wants to "dust off" the rest of the development. It could turn into a large influx of work load.
I was painfully honest with him. He's going to come to office this week to talk turkey. I believe my remark was, "Bring a current bank statement with you if you're serious."
Here's the decision:
We have an extra set of GR-3s and all the necessary equipment for a third crew. The investment would have to be in the vehicle and personnel department. I'm of the opinion that I would also have to hire someone to 'supervise' the crew and ride herd on the project (at my age I'm not as excited about this kind of work as I used to be).
That leaves me with an equation of truck + 2 or 3 new warm butts = X expense and
X expense = just about how much I could gross from the project.
therefore: net = minimal amount.
On one hand, breaking even (+/-) to increase a firm's net worth with assets and cash flow might be an option. If other developments kicked off I would be in a prime position to profit. I cynically look at that as "blue sky".
On the other hand; who wants the added work and minimal net profits just to make the business larger?
Am I getting too old to make good business decisions? I won't be doing this forever.
just mulling the cider...
It is doubtful real estate will heat up as fast as the developer hopes. If you buy a truck you have to pay for the truck. Employees you can lay off.
Are your existing trucks paid off?
How close to retirement are they?
If the answer is yes and soon, that makes a new truck reasonable.
Would you rehire workers you had in the past?
That reduces your training investment.
Do you really need 3 for the work this year?
Is the developer going to start slow, or does he plan to presell to a certain point and then want all the work done yesterday?
Is the developer starting from scratch with his field people?
You really do not want to get into a hand holding job.
Of course your's is a better problem to have than many others.
Paul in PA
Rent a vehicle. You might be surprised how inexpensively you can rent a vehicle for one month. And in our state I think the existing insurance policy covers the vehicle.
I do crunch a few numbers. Mostly I just just use logic.
I have always attributed starting a new crew the same as starting up a new business.
Using the old adage that it takes 18mos after startup to make a profit makes it all simple math.
To reduce long term expenses and costs, I offer my new hires an option to let me lease their vehicle on a short term basis and use and flip-flop equipment between crews on an as needed basis.
The only times I have added extra crew was to accommodate the extra flow of work from an existing client that provided guaranteed work flow.
Spread out the existing employees that are trained to your needs and put one in control of the new crew. People usually stepup when asked with confidence.
It comes down to who you need to satisfy, you or the dream.
The other solution is to raise your rates accordingly.
0.02
Give him a number that gives you a healthy net. Why kill yourself for "net = minimal amount"? Let the other bozos "stay busy" working for peanuts.
Did you really ask for his financials? To me, it's meaningless. I've seen plenty of clients with plenty of money still not pay. If you're really concerned, setup an escrow account or something similar so he can't decide not to pay you if he's having a bad day.
> Had a residential development that tanked almost 5 years ago. The developer finally paid up after a while. A small portion of the approved PUD (Planned Unit Development) was built and successful. The developer called last week and wants to "dust off" the rest of the development. It could turn into a large influx of work load.
>
> I was painfully honest with him. He's going to come to office this week to talk turkey. I believe my remark was, "Bring a current bank statement with you if you're serious."
>
> Here's the decision:
>
> We have an extra set of GR-3s and all the necessary equipment for a third crew. The investment would have to be in the vehicle and personnel department. I'm of the opinion that I would also have to hire someone to 'supervise' the crew and ride herd on the project (at my age I'm not as excited about this kind of work as I used to be).
>
> That leaves me with an equation of truck + 2 or 3 new warm butts = X expense and
> X expense = just about how much I could gross from the project.
>
> therefore: net = minimal amount.
>
> On one hand, breaking even (+/-) to increase a firm's net worth with assets and cash flow might be an option. If other developments kicked off I would be in a prime position to profit. I cynically look at that as "blue sky".
>
> On the other hand; who wants the added work and minimal net profits just to make the business larger?
>
> Am I getting too old to make good business decisions? I won't be doing this forever.
>
> just mulling the cider...
>
> On the other hand; who wants the added work and minimal net profits just to make the business larger?
>
That is the key point that I personally took away from your post.
A good problem my brother.
I think you will handle this well.
This might be a good time to find that young LS that wants to buy your business in a few years when you are ready to retire. This might give the Young Buck the opertunity to make the money to buy you out.
:good:
Three thoughts.
1. You don't gear up like that for a single job unless we are talking about a multi-year deal. You might gear up if you feel that it is the beginning of better times.
2. Finding qualified staff, or even "warm butts", isn't going to be easy in our market area. Good luck.
3. It sounds to me like it's time you raised your rates.
