The same holds true for trade workers. A first-rate, highly skilled tradesman or tradeswoman gets that way through experience. But being highly skilled does not automatically translate to business success. The skills required for business have little to do with tool-working ability. Businesses almost never fail because the owner lacks sufficient technical ability to do the work. It's usually because of a lack of good business sense.
The keys to success in business lay in three areas: financial, marketing and people skills. You have to be a good money manager and people manager. You also have to be a promoter. If none of this sounds appealing to you, better think twice about starting your own business.
I identified money as the main reason most people go into business for themselves. I stated that owning a business offers the possibility of getting rich and that many business owners make six-figure incomes. However, they are not the majority. A harsh fact is that the majority of new businesses fail within their first few years of existence. Many more contractors go broke than get rich.
Big rewards and big risksIf succeeding in business were easy, everyone would start their own company. What stops most people are the risks involved. Big rewards entail big risks.
As an employee, if you lose your job, the worst thing that's likely to happen is you'll be unemployed for a while and lose income during that period. When a business fails, the owners lose income and all the money invested in the business, plus whatever is owed to creditors.
It might be your own savings, or it may be money borrowed from a bank or from friends or relatives. In any case, it's not a good feeling to wonder how you're going to put food on the table plus pay back what you owe.
Even if the company doesn't go bankrupt, sheet metal is a tough business with much competition. A few companies become very successful and generate the big incomes for their owners. But many more are barely getting by and their owners make nowhere near six figures. Many contractors end up earning less than they could working for someone else.
The main reason is that most sheet metal contractors who go into business for themselves don't have a clue about business economics. Their eyes get big seeing the difference between what they're making and what their company charges for labor. A worker who's getting paid $15 an hour notices that the company bills for labor at $60 or $70 an hour. He or she starts to think, "I could make two or three times as much working for myself."
This common type of thinking fails to account for overhead. A contractor needs expensive equipment in order to operate: trucks, tools, computers, radios and cell phones, insurance and so on. A lot of people entering the business think they can cut costs by working out of their homes and scraping by with old equipment. But even doing that, there are certain large expenses that can't be cut very much.
Insurance, tools, advertising and so on cost more than most new business owners can imagine. They must be paid for if you are going to stay in business. So, when money gets tight, the most convenient expense to cut is the owner's income. For every owner making $100,000 a year, there are dozens struggling to make it.