Have you ever though of setting up your own contracting business? But before you even begin to imagine yourself running the business and driving your dream car…your mind starts to fill with concerns about funding:
How will I raise funding for equipment?
How will I be able to fund the running of the business before I get paid?
How will I fund, and finance bonds and guarantees?…
The longer you spend thinking about it, the longer the list gets. Before long, you’ve packed your notepad back into the darker reaches of your desk and determined to yourself to never be so stupid again to think that you could ever have enough money to finance the setting up of your own construction company.
Now, its back to reality, working for a boss you don’t enjoy; or writing the 10th report of that month; or sitting in endless – pointless meetings.
Does this sound like something you can resonate with?
Well, I know I can because I spent years thinking the same thing, I could never afford to set up my own business. It’s like you get conditioned from an early age, I know I was. Get a degree, get a job, work my way up the corporate ladder. Save for the future.
When I was growing up, literally all I wanted to be was a businessman (I didn’t know the work entrepreneur back then – and I still can’t spell it). But between my parents telling me not to spend my days dreaming – to get a good job, and my self-made limiting belief that it was impossible because I didn’t have the funding, my dream, remained just that, a dream, which year after year became more and more of a frustration for me.
It wasn’t until I had a massive epiphany about three years ago. I was talking my friend who was doing web design for a specialist contractor that I knew. The contractor in question specialised in doing driveways, you know the kind, they do tarmacadam, asphalt, cobble. Nothing fancy and certainly nothing sexy. Let’s call him Anthony, because that’s his name, actually.
Anthony had recently returned to Ireland from the US and he wanted to set up a business. So, my mate Steve built him a website only about driveways, ran some Google Display ads and literally within weeks Anthony was up and running doing work for clients.
But what REALLY made me take notice, is there was almost NO capital investment to get going, just some hand tools, a van, website and a $1,000 advertising budget.
In month one, he started off working with a gang of 4 guys, working on the projects that had come in from his Google Ad campaign. With each completed project, he made sure to get a good testimonial and put it up on his website. Within a matter of 3 months he was reinvesting the money he was making into more Google Display ads and soon, no matter where along the east coast of Ireland, if someone searched for a Driveways contractor, Anthony was in the first 3 ads. He literally had work on tap.
Within 6 months he has 5 full time crews on the road. Working on 5 projects at any one time! His time was spent meeting customers and running the business.
That was not all, literally within a 6-month period he was earning more money in a month, than a Quantity Surveyor or Construction Manager would earn in an entire year.
And he was only getting started. Why, because the specialised on #1 thing, driveways. All his crews, subbies, trades, suppliers were focused on one thing, driveways. His business was super focused and super profitable. And simple. When he wanted more work, he simply upped his ad spend and hey presto. His business was growing exponentially month on month.
I learned three major things that forever shaped my thinking:
👉 #1 You do not need much capital to set up a specialist contracting business
👉 #2 You can be up and running in a matter of weeks
👉 #3 They earn WAY higher margins than general contracting, margins of 20-30% are possible
So, that was my inspiration to go off and co found my own Specialist Contracting Business, but that is a story for another day.
But you still need money, right. Well true but two things:
- Not nearly as much as you think and a FRACTION of what you would need to set up a general contracting business; and
- There are literally numerous ways for you to raise that funding, if you don’t have it lying around in your bank account
So, I wanted to set out 8 ways in which you can raise capital for your business or leverage resources at no money down so you can start your own business. Now, before I get started on this list, it goes without saying that you need to know what kind of business your going to start, but don’t worry, if you want to know more about how to identify that; simply download our free guide here
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Ok, this is an obvious first suggestion, because its valid. BUT I’m going to quality it. This can work really well if you come from a family where your parents run or have had a business or a wider family member has had for that matter, because they will really understand what it takes to be successful in business and not only will you get funding, potentially; but mentoring and most importantly, patience should things not go 100% to plan.
If you cannot raise it from a family member with experience in running or owning a business; then it can sometimes lead to other problems, because they simply won’t understand or be used the emotional highs and lows of running a business.
Same comment as 1 above applies.
In both these instances, it is critically important that formal agreements are entered, with clarity around repayment terms, equity involvement etc. Just because they are family or friends don’t think that such agreements don’t need to be formally executed.
APPROACH AN OUTSIDE INVESTOR OR INVESTORS
Personally, this is a far better route than 1 or 2. Whatever your business idea, draw up a list of local or even national business people or investors that you admire and get in front of them to pitch your business plan. You will be amazed how many people are out there sitting on capital looking for an opportunity to invest in.
Not only will you get potential funding from these investors; more critically in my view they often come with years and years of experience, contacts and expertise that they can put to good use in your business. What I always advocate is to invite such investors to sit on the board of your new company. Run things formally from the outset, with 4 board meetings a year. This has two main advantages:
- You get the input of these investors in helping you grow your business; and
- Reporting to a formal board will make you way more likely to stay focused on your targets and objectives. The #1 challenge I find more small business owners have is that often they are only accountable to themselves, so it’s easy for them to miss goals, deadlines and targets and be ok with that. Where human nature is such, that if you are reporting formally to external investors you will be much more likely to hit those targets.
Banks are in business to loan money, but often getting credit without collateral can be difficult. However, the great thing about a specialist contracting business is the amount of capital required is a fraction of what is required to set up a contracting business, or many other businesses for that matter. It is not uncommon for a specialist contracting business to require seed capital that is less than a car loan, for example.
TAKE ON A BUSINESS PARTNER AND CO FUND
Taking on a business partner can be a great way to raise capital and share the burden. But the tricky part is identifying that partner. Naturally, it is a given that if you choose someone that they have or can raise their share of the investment required. More importantly, you want to know that you will work together well long term, trust me, that best mate relationship can go sour quickly enough, if there is not a common work ethic, purpose and drive to make a business work. So, choose careful based on what how you can complement each others shortcomings, work ethic and ability to co fund and, as with 1 and 2 above, make sure you properly document the partnership.
Check out http://www.fundable.com/
GET A BRIDGING LOAN
One of the big advantages of a specialist contracting business is how quickly projects can be turned over, for example, a drive way job takes generally at most a week. If you do kitchen remodelling, you should be out of there inside two weeks, this makes short term financing or bridging loans a potential option, check out https://www.jubilee2000uk.org/analysis/
HIRE OR LEASE RESOURCES
Another great thing is you can hire in or lease almost anything that you will require to get your business going, from your office pace, by using the new flexible working space arrangements, such as http://www.hubworkspace.com/ or your labour hire through agencies such as https://www.trsstaffing.com/ or your fleet requirements https://www.hippoleasing.co.uk/business-lease-cars or your office equipment https://www.oaklease.co.uk/office-equipment-leasing even your tools and equipment through services such as Hilti Hire https://www.hilti.co.za/content/hilti/META/ZA/en/services/tool-services/fleet-management.html
So, if you have ever thought about setting up your own business, but were put off by the invest you thought it required, two key outtakes from this:
Start with a specialist contracting business. They are
👉 Much less expensive to set up
👉 Way quicker to get to the point of work and payments
👉 Work really well with paid advertising so getting leads is not a challenge
👉 Much, much more profitable
Follow any or all of my steps 1-8 above and you WILL raise funding for your business
Owning and running a specialist contracting business might not be your idea of sexy, but…. let me promise you…
living life on your own terms, earning 3-4 times the margin of a general contractor and building a business that you can scale, franchise or potentially sell for a lot of money, starts to become pretty sexy, pretty quickly!
If you would like more information on how you can set up your own specialist contracting business, then download our free guide