From 100-0 realquick. A fresh lesson learned this morning by yours truly.

by JustaRunnin. Posted on Sep 11, 2020    12    16


In this short story I will explain how a 31 year old man(me) blew his life savings by starting a company on his own, doing what he loves and is very good at.

In February some time this year I started my very own llc, I had a business plan I worked on for months and had finally saved up enough money to go start looking for my own jobs as a contractor.

The plan was to start small, but be ready for the big opportunity when it comes. I am a heavy equipment operator (construction worker) and was able to purchase my very own mini excavator. Finally after all this time working for “the man”. I started out digging residential drainage, with plans to scale as soon as possible. I purchased a diesel tank, pumps, trailer, and other miscellanies tools needed to work on a commercial job site. Just a couple months ago things were looking good, not great, but good. Covid has affected us less than other small business’s because we are “essential” and I work alone most of the time. I was actually starting to make enough money to pay my bills. I was no longer trending down, but up, and so soon! I was so proud my hard work was paying off. Then one day after work as I’m sitting in my garage relaxing my phone rings and I get the biggest contract my company has seen thus far. (I was doing 5k jobs and this job was 20k) I couldn’t believe it. Then after getting to the job site I started picking up more contracts from the owner of the property. Several of them were for bulldozer work, which I would have to rent, but I took that into consideration when I prepared the estimate. Then came the rain, and rain, and rain, and more rain. The job site flooded, and me being the drainage guy decided to fix it for free. The first time it took about 36hrs to pump all the water off the job. And that’s where I made my first huge mistake as a contractor. I did not charge for those 36hrs, but now I had set a president. Every time it rained I was expected to do this and did, at first it was no problem. But as the hours pumping added up so did the days spent paying for a bulldozer that wasn’t making me any money. It was too wet to make any money bulldozing. I got behind on my rental payment, but I knew I could make it up as soon as the rain subsided. And I did, I completed thousands of dollars worth of work in a very short time frame. However, I sent the invoice last Friday expecting it to be paid immediately (because that’s how we have been working thus far). There was one payment that was late before this but it was a processing error on our end. This morning I sent a text to my normally financially punctual client. The response was bad, he informed me that I wouldn’t be receiving a payment for two weeks. The next phone call I received was from the rental company, they need a payment or they need their machine is what they told me. I explained my situation, and they are coming to pick up the machine this afternoon. I am behind on my personal bills, the rental company is talking about filing a lien on my clients property, and to top it all off my mini excavator will not start.

Lessons learned -

  1. Create a payment schedule between yourself and long time clients that will cover your costs.
  2. If something on rent is not making you money - get rid of it. Even if it costs you money to ship it back and forth.
  3. Just because someone offers you a big number, does not mean it is a profitable number.
  4. Do nothing for free, something that seems easy to you can become time consuming and thus money consuming.
  5. Pray, because I’m going to need prayers to get myself out of this mess.

Current financial situation is -$10,000 in overdue bills with $11,500 in unpaid contracts. The rain has returned and the rental company is picking up their bulldozer this afternoon. About $2000 of the overdue bills are personal and I’m worried they are going to come take my Jeep. Which has become a tool itself.

Any advice from anyone who has been in a similar situation would be appreciated, prayers would also be appreciated.

Learn from my mistakes!


Comments

DoctorDumay 1

Can you get the company to stand in for you with the rental firm? They are the ones who are behind on paying you, and if anything, they owe you big time.

chickenroads 3

Yes ask the company if they can help you 9ut with particular payment now. They know you just started & are trying to get on your feet. Also look to get some relationship with a local banker that can give you some float when it is needed.

  JustaRunnin 1

The client is private, he is financing his own children’s sports complex so I’m trying to work with him as kids sports are important to me. That being said I don’t think he has it to put up front. Not for another two weeks anyway. I could use some advice on how to approach my bank, I used a local one for exactly this reason but I never know how much to ask for or how to ask.

chickenroads 2

Well first thing you need to know how much to ask for. Sit down & put an excel sheet together with your expenses & what you think you will need to get back on track landing jobs. Also where are you located?

  JustaRunnin 1

Houston and surrounding areas, “office”(my house) is in north Houston, but the job site is in Alvin. What really gives me pause is there are bigger more expensive parts of the job coming up. And the client is already a getting behind in payments. I’m pretty sure he just dropped 100k on turf though so I’m trying to not get too pessimistic.
I hate to take my excavator to other jobs with this one not done, buy I may have to.
My monthly operating costs are 7k without paying myself, 11k when I can pay myself.

chickenroads 1

I'd try to get some money from the bank to float you to your next job. Possibly try to get a second job going & run 18 hour days to get you back in the game & keep the lessons you just learned moving forward.

fovc 2

This sounds like a tough spot to be in, very sorry to hear! That said, it sounds like you're fundamentally sound, just in a bit of a crunch. Definitely talk to your bank, though that could be too slow moving for you. Check out Accion or see if there are similar lenders around you. You can try searching through CDFI to look for lenders that might be able to move quickly. File any applications you can today so that you can have cash in hand ASAP.

In terms of cash management, I'd prioritize the personal bills as soon as you have a bit of money. That will hit your credit score and impact your ability to get more credit down the line. I imagine you also need the Jeep to make money. Debt owed by your LLC cannot be used to go after your personal assets (that's the LL in LLC), so you have much more leverage when negotiating business debt than personal debt.

Let the company take the bulldozer back, but let them know you won't be paying for the transportation costs. (If your client complains, let them know it's due to the delayed payment. Once they catch up you can rent it again, though the rental company will likely make you prepay your next rental).

Once you have a minute, let your client know that you'll be billing them for any future pumping work. Just because you did it for free a couple of times does not mean you have to continue operating that way. Include a line item in your next invoice that says something like "Floodwater pumping: $X,000; Goodwill credit: -$X,000".

You learned some lessons the hard way, but lessons = human capital = investment in your business. Stay positive and get through this! If you do reach out to Accion, they have (free) business coaching programs that could be very helpful to make future lessons less painful.

RobinGood19 2

Every win and every fail is an investment in our business...


You got this!

hawaiianryanree 2
  1. Thanks for sharing the story. Not easy to put yourself out there like that.
  2. Keep your head up. Although things seem grim, this is just a desperate time, and everyone is short on cashflow. In "normal" times, i doubt people would be so aggressive on chasing the payments on exact dates / agreements. Most relationships require a bit of flexibility, but right now it looks like you are getting absolutely 0.
  3. I would, utilize your salesmanship, and try to nurture these relationships to your advantage. But because youa re a new busiiness owner, and eager to take new contracts, people are "honeymooning" you, and loving the fact they can take your lower bid + higher effort / possibly slack on the payment. Swap that. Try to use your new business / high grit / quality worksmanship, as a seling point as opposed to feeling like you are "faking it til you are making it." Sell your value, and stand by it. Dont think that you are being the bad guy here. You got screwed a bit, and it trickles down. happens all the time.
  4. In the future, try to mitigate your cash flow risk by either factoring (3rd party cash flow coverage), and including the factoring cost into your estimate (even blatantly).

    ​

    For now though, I think your biggest issue is mental defeat.

    Ive watched CEO's of multi-million dollar companies get through sickening and crippling cash flow issues, (over 6-7 digit debts), by simply having delusions of grandeur. Im not recommending to be delusional. Moreso, simply remove the thought that you are fucked from your head. You will make it just fine. Its stressful, and it sometimes doesn't "Feel good,"

    but people want their money, not go to court. As long as you can recover the money eventually, even if in installments, you can then pay your debts back, and try to recover you position.

    Try to get financial backing.

    ​

    As far as immediate plans. Id try to get, either through a Financial institution, or Family / friends, some sort of financial patch for this.

    IF you cannot. Try to buy time from your lenders / companies you owe.

    If that doesn't work. Then you have to wheel / deal with collections / other people who are trying to take your stuff. But always just remember.

    People would rather get paid, late, than screw your life up for spite.

    So be nice, transparent, and dont over promise. Do not keep digging. Speak to people plainly, and with as little emotion as possible. Just be a good honest business person, and come up with an achievvable plan to recover the money to the people owed.


    You'll make it. keep your chin up, and good luck my friend :)
lonelywolfceo 2

Sorry to hear. Thanks for sharing your story. I almost blew my brains out several years ago, I was broke and about $10,000 in debt and put my entire life into a start-up that miserably failed.

Now I'm doing pretty well for myself, have a team working for me, making a great living and supporting my family (and extended family). I'm a little older than you, also have a wife and kids.

Key for me was re-structuring my mindset (look up Napoleon Hill. there's a book), my thought process. Everything fell into place. The right calls began to happen, the right contracts, the right deals, everything worked out.

Now I definitely have some problems as an entrepreneur today as well, but these are none that I can truly complain about.

The lessons I learned from putting in 15 hours a day for an entire year in a horribly failing startup were invaluable. This experience you've accumulated will be the path that leads you to success.

Best of luck

Onion_guac 2

Credit card or personal loan, you can 100% get this money - do it intelligently and make sure you can make minimum payment, but plan I’m paying off the full balance within the month, as soon as your client provides payment. I think you can make it happen, take a moment to breathe. It sounds overwhelming but like you said, it may not be the mountain you think it is.

Carytheday 2

Dumb question, but do you not have a credit card to buy you some time on some of these payments?

Do you not have some people you can borrow from, or some way to get a loan or line of credit? You have a business that could generate hundreds of thousands of dollars in the relatively near future, but you’re at risk of going under for just 10k?

  JustaRunnin 1

That’s my biggest dilemma, but to be honest this morning was kind of my first realization that things were not going well. I knew I was behind on the rental payments, but expected to be paid this morning and just continue working. To be honest my credit isn’t great, and the company’s credit is new. It’s good, but it’s new which may as well be bad. I haven’t explored very many options for loans (probably because my early attempts didn’t go well) I looked for an investor for a very brief period early on unsuccessfully.
The only people I know with money are related to my fiancé, I don’t want to bark up that tree if I can avoid it. Also, I’ve had problems with people seeing what you were able to see so easily. I have gone through all the correct steps with the city of Houston, I am minority owned, and I absolutely love the industry which makes me better than average at my job. This company has the potential to scale into the millions with one contract. I really believe that and I’m determined to do it for my family and myself. I believe if I could get in front of the right person and make them understand that I would be off and running. I know the guys I would hire if I was able to land a big contract and if I could get the capital to hire them now it would free me up to search for contracts we want instead of contracts we need.

Honestly until you said it like that the 10,000 seemed like a huge mountain standing in front of me. And right now it seems like a small stone in the shadow of the mountain that is the potential of this company.

Seedpound 2

They can't take your life - Learn from these mistakes and get back on the trail

  JustaRunnin 2

Thank you sir, I will do exactly that.

techietraveller84 4

Sending positive energy your way!

Wish some of that rain could have headed to the US west coast to put out fires, instead of flooding your jobsite.