posted
Our business is a successful little company. We've been in operation for about six years, and turned a profit every year. Each year our gross recepits have gone up, except 2004 year to date, but it was down mainly because we changed how we ordered fixtures, and our profit actually went up.
We are a success story, we employ four other people, and turn away more work than we accept.
So why are my husband and I crunching numbers and seriously considering giving it all up?
Because what we make is not anywhere close enough to being worth the time and headaches, and it's depressing to see more than 50% of our profit go to taxes.
In 2003 we paid more in taxes than I made in my last year of work as a database programmer.
It cost us more money to be a legal business than it did to buy the materials for the jobs. When you added up all that we paid for licenses, bonds, insurance and permit fees it was second only to salary as our biggest expense. Our unemployment contributions climbed over 30% in the years we've been in business and we've never had an unemployment claim against us.
Looking at my tax returns makes me want to cry. It's damn depressing to see the government take FICA, social security, and self employment tax knowing that because my husband is also a civil servant through his job at the fire department - we'll never even get any social security at all.
We're tired. So much work, so much paperwork - trying to keep a business afloat and legal, when people down the road from us come in and underbid the jobs and then get them, because they aren't carrying the required insurance and paying all the license fees and reporting their income to the IRS. The current system favors the survival of an unscrupulous business over one that does what it is supposed to do.
The regulatory requirements on small businesses is so extreme - it's a wonder there are any legally operating businesses at all.
I know that more than likely, there will be one less in the weeks to come. I can't stand the thought of letting people go around the holidays, so we'll probably keep going until just after the first of the year.
Posts: 14428 | Registered: Aug 2001
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posted
Oh Belle! I'm so sorry to hear that. So what are you guys going to do?
I know how difficult having a small business is - I work for one. Besides my boss, there are just 2 of us working there. I guess you can be glad you don't have to deal with being licensed to deal with explosives....
Posts: 5879 | Registered: Apr 2001
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posted
We'll be fine. I'm much more upset about my employees, and I really don't even need to be - only one is full time, the others have other jobs and health insurance, and the one that is full time has other options.
Hubby has a job offer (more than one, actually) we'll wind up doing better as a family - more income for less work.
It's just sad - sad that building a company and handing it down to one of our kids isn't going to happen, and is probably going to happen a lot less frequently all over the place. Small businesses just have it rough, and I don't see anything likely to change.
Posts: 14428 | Registered: Aug 2001
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posted
I'm sorry this is happenning to you. I know it's not the same, but we faced something a little bit similar with our house. Our property taxes have gone up every year since we moved into our house, to the point where our mortgage payment has about doubled since we started here (3.5 years ago). This year, we almost lost the house--and living here really was our dream. I'm not opposed to paying my share, and I am a believer in society spending its collective money on things that are important to us as a society--but it has gotten nuts, and I don't believe most of that money is getting to where we as constituents want it to. I know these are complicated issues, but I know what it's like to stand on the edge of having to give up on a dream. I'm sorry you're having to give up on one of yours.
posted
Belle, if you're turning away more work than you take, can you hire more people and get more jobs done? If you can find one person who can supervise 4 people, you could almost double your workload.
The fees do get easier to bear at higher revenue amounts.
posted
As I recall, Belle has posted elsewhere on the impossibility of finding good workers in the field.
Posts: 13680 | Registered: Mar 2002
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posted
I hate saying it, but this is one of the reasons I wasn't upset to leave Canada. I'd actually looked into leaving Canada for a few years before I actually did.
Things are messed up when . . .
Posts: 8355 | Registered: Apr 2003
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posted
And yet, on the other hand, unemployment insurance, Social Security, and health insurance are all pretty darn useful programs, and worth the cost. There are prices to be paid for these programs, and there are also clear cases of inefficiency -- like in Belle's case, where her husband would normally not have to pay Social Security tax due to his government job but in this situation finds himself doing that anyway -- that should be eliminated, but in general I think we're better off with people having to put up with paying unemployment insurance than people not being able to receive unemployment pay.
I wish there were better and more efficient ways to ensure that, but history has done a pretty great job of demonstrating that when these protections are not enforced, they rapidly disappear. "The market" suddenly won't force all businesspeople to behave ethically; as Belle points out, there are economic advantages to being unethical. As long as being unethical is also illegal, however, there's always the possibility that those businesses who are undercutting Belle's legal operation may be caught or exposed and punished for their transgressions -- unlike a pure market scenario, in which they would most likely prosper until the labor market dried up (which takes longer than most employees have.)
Posts: 37449 | Registered: May 1999
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posted
Tom, the problem is that the costs of compliance have a high fixed cost in addition to the actual payments to be made, and most of these costs are the same for 4 employees as for 10.
posted
"Tom, the problem is that the costs of compliance have a high fixed cost in addition to the actual payments to be made."
*nod* And this is the barrier, I think, that we've somehow got to address. What can we do to amortize those fixed costs? The socialist response, of course, would be to subsidize them for smaller businesses -- but, once you do that, you've managed to open a fairly sizable can of worms.
So, if you operate from the assumption that all employees, even of small businesses, do deserve some level of mandatory protection, what can we do to ensure that this isn't excessively onerous?
Posts: 37449 | Registered: May 1999
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posted
One possible thing for dealing with the overhead would be laws which allowed for small business cooperatives, which paid collectively at a lower per-business rate.
Of course, this is not adequate for certain kinds of things, like bonds to insure work, but it could be a way to improve the situation somewhat.
Heck, it would probably be a very useful economic stimulus to just forgive SS taxes on businesses under a certain size, subsidizing them from other revenues. It makes sense because SS taxes are only variable up to a point (which in itself should be changed -- one of the biggest problems with SS is that its regressive), and they create an artificial barrier to market entry, which is bad, generally speaking.
Posts: 15770 | Registered: Dec 2001
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quote:So, if you operate from the assumption that all employees, even of small businesses, do deserve some level of mandatory protection, what can we do to ensure that this isn't excessively onerous?
That's a tough one. There are too many employees of small businesses to require large businesses to subsidize them. There's only so much efficiency can help, but having a single payment point, with a simple percentage formula would go a long way.
Cooperatives might help, too, but I'm not sure they'd actually save effort.
posted
Belle, I'm so sorry. I know that y'all have been really proud of this business, and the sweat equity you have invested in it.
I pray that the new roads your family takes will be prosperous and happy ones. And good for you for waiting until after the holidays to let your workers go!
Posts: 32919 | Registered: Mar 2003
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posted
That would be a really, really stupid idea. Even for an individual, generally speaking pretty darn stupid. But for a business, which is much more a target of audits? Incredibly.
Posts: 15770 | Registered: Dec 2001
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posted
First off if someone is using bad business tactics to cut in on your business then you should report them to the IRS! If they are really doing these things they should be punished. On top of that I used to run my own business and it was the most fun that I've ever had. I worked amazingly long hours , sold services at a rather hefty discount and sold products on a razor thin margin. The thing is I was my own boss. All i had to do was simply work. That and I honestly don't know what field your husbands business is in, but couldn't you find someone simply competent and then train them up?
That and I very much hope that you all don't give up your dream, I understand that its very hard. I suppose its simply a shame that people have to give up their dreams.
That and to be honest I hate paying social security in the army as well. Though I'm rather sure you can pull social security and your military retirement. why won't he be able to take his social security because of the fact that he is a civil servant ( fire fighter)?
Posts: 1753 | Registered: May 2001
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posted
Are you running your own business for the money or because you like running your own business?
Posts: 2432 | Registered: Feb 2001
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posted
Even laying aside the moral issue, which would be huge for me to overcome and make me a complete and total hypocrite - I am too damn scared of the IRS to try and get away with not reporting income.
A long time ago, when I was just a wee teenager, my parents found out what can happen when the IRS thinks it's being cheated. In their case, they really didn't know they were doing anything wrong, there was no intent to defraud. And, when they found out what happened, and were contacted by the IRS, they owned up to it and agreed to work out a payment schedule.
The IRS idea of a payment schedule was to garnish their wages and tell them how much they would send, and tell them how much they should spend on things like clothing and food.
These were people who were willing to work with the IRS and pay back what they owed, and the IRS still treated them like criminals and we eventually lost our house.
Belle does not play around with the IRS. She is scared of them.
As for hiring more people, it's darn hard to do. My husband is a master plumber, and we have two well qualified, really good journeyman plumbers working for us. The only reason we have them is we're willing to let them work for us part time. The competition for qualified workers is fierce, and since we are so small and don't offer big perks like health insurance, we can't really compete. We've tried hiring more people, had several this year alone quit after a few days (one lasted a total of six hours!) being I guess allergic to hard work.
We offer a starting salary that is more than twice minimum wage, for no experience whatsoever. Our starting salary is higher than the market around us (one larger plumbing company that we know well starts their people off three dollars an hour less than we do) Yet, we still have trouble hiring folks. So does everyone else - we sometimes sub for the larger plumbing companies because they can't get to all their work for lack of enough qualified employees. In fact, one of the disadvantages we have to overcome is again, that we're legal. We could hire a ton of people if we were willing to pay them cash and not cut taxes and not report their income. But, we tell people that we don't do that, and suddenly their interest in working for us disappears.
However...my post may have been premature. After staying up until about three am last night crunching numbers, we've come up with a plan to keep operating. It will involve scaling down, letting two people go, keeping our journeyman plumbers, and targeting our business on the more profitable jobs and turning down everything else. We may give it a shot, although the person who offered hubby a job said to name his price, and if he matches the one we'll name we'll go ahead and close down after the first of the year.
So keep tuned - It may work out yet. And if it doesn't, and this other guy matches the amount we're asking for, then we'll be in really good shape.
Posts: 14428 | Registered: Aug 2001
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posted
Black Fox - it's called the Windfall Exclusion Act.
It's a thorn in our side - I'll start a different thread on it. I don't think many people are aware of it.
Posts: 14428 | Registered: Aug 2001
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quote:Are you running your own business for the money or because you like running your own business?
The money has to be a major factor for someone running their own business. I doubt anyone who hasn't had to meet payroll can possibly understand the headaches or the amount of work involved. Sure, there are other careers with major headaches and very long hours. But the particular mix that comes along with running a business are unique.
If someone wants to have (some) control of their own destiny with far, far fewer headaches, then they can be a consultant and not seek to hire people. If they take that next step and start being an employer, they instantly lose much of the flexibility of being ones own boss, gain a ton of extra paperwork and other non-revenue producing obligations, and acquire much liability and risk.
The gain for all that is money in the form of a portion of each hour worked by employees. This money can be used simply to augment the owner's income or can be reinvested in the business to increase its worth.
Sure, there are lots of intangible benefits that go with owning a business. Most of those are available with a tenth the headaches.
quote:The money has to be a major factor for someone running their own business. I doubt anyone who hasn't had to meet payroll can possibly understand the headaches or the amount of work involved.
Amen, brother. There have been times when our own mortgage payment got put off so we could transfer enough of our own money into payroll to keep our employees from having to miss a paycheck.
My husband brought me home from the hospital with our newborn twins, kissed me on the cheek and left because there was an emergency with one of our biggest customers and he had to take care of it right away. I cried for an hour, terrified of being home with those babies by myself, and wanting my husband with me. But when you run your own business - sacrifices must be made.
I could give hundreds of other examples. Yes, there are some benefits, but anyone who thinks that being the owner is cool because you can take off anytime you want to is incredibly naive. The owner takes less vacations than anyone. Sometimes he makes less than anyone too - there have been years when one or more of our employees made more money than we did. Including this year.
There's also the frustration of not getting paid - we fought one in court and even though we had clear evidence that there was a contract and the people violated it by not paying us at all - the judge still found in their favor because our lawyer didn't word the lien notification properly. So we not only lost the more than $4000 we were owed, but we had to pay all the court costs as well, because (literally, I mean this) our lawyer didn't use colons on the notification of the intent to file a lien.
One person is still sitting on a $5000 dollar new water and sewer service we installed. WE filed a lien and he said he didn't care - he wasn't going to move and if his kids had to pay the lien after he died and they tried to sell the house that was their problem. He just refused to pay, and the law protects him we can't go and retrieve our pipe that was never paid for.
*sigh* It's just such a pain.
Posts: 14428 | Registered: Aug 2001
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quote:The money has to be a major factor for someone running their own business. I doubt anyone who hasn't had to meet payroll can possibly understand the headaches or the amount of work involved. Sure, there are other careers with major headaches and very long hours. But the particular mix that comes along with running a business are unique.
I would think that money is a very poor reason to start your own business, largely because so many fail and so many don't make all that much money in the end. If you just want to make lots of money, I'd think you should go work in some lucrative field where you can make a lot more money on a guaranteed salary with less work and responsibility.
In contrast, I would think the reason to start your own business is if you don't like working for other people, enjoy the sort of hard work it takes to run things yourself (some people do enjoy it), or are passionate about doing something that isn't done elsewhere. If that's your reason then it might be worth it, because all the hard work may be enjoyable. But if you don't have these motivations, I don't see how it would likely be worth it for the money, unless you have a sure thing of some sort.
Posts: 2432 | Registered: Feb 2001
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quote:I would think that money is a very poor reason to start your own business, largely because so many fail and so many don't make all that much money in the end. If you just want to make lots of money, I'd think you should go work in some lucrative field where you can make a lot more money on a guaranteed salary with less work and responsibility.
Assuming you don't already have a lot of money to invest, starting your own business is one of the best ways to create wealth. Sure, it's risky. It can be very risky. But ultimately, it's the only way (other than capital investing) to earn money for the work of others. And that has a far greater upside than almost any other available job.
quote:In contrast, I would think the reason to start your own business is if you don't like working for other people,
Then be a consultant.
quote:enjoy the sort of hard work it takes to run things yourself (some people do enjoy it),
Enjoyment is a necessary, but not sufficient condition, for succeeding in business.
quote: or are passionate about doing something that isn't done elsewhere.
In this case your not likely to be able to hire people unless the business succeeds.
quote:If that's your reason then it might be worth it, because all the hard work may be enjoyable. But if you don't have these motivations, I don't see how it would likely be worth it for the money, unless you have a sure thing of some sort.
Again, a sure thing isn't necessary. Evan a running a failed business will do things for your resume that are simply unavailable elsewhere, assuming you last a year or two.
posted
My family owns its own business, and my dad went into it because he's allergic to being told what to do. He'll do something because circumstances compell him, but not because another person does.
Yeah, the first five years he worked 12 hour days. Even now, it's very, very hard to get vacations. They also staked everything financially on this - if the business had gone under, the joke was that the baby would have been sold into indentured servitude. Most of the jobs provided are blue-collar jobs paying just a few dollars over minimum wage, and labor is BY FAR the most expensive bill. It's frustrating also because they are underbid not by other businesses in town, but by companies who do the labor in China - their costs are expontentially lower. Also, the business has passed the 50 employee mark, so all the Family Leave Act laws kick in, and those GREATLY increase the price of labor. Add in the taxes and fees levied by a city in which he is not allowed to vote, and it drives them crazy, though.
So why do it? Because the greatest risk also promises the greatest reward, and it's nice to be able to build something and call it yours. When it does work out, it can work out spectacularly.
Posts: 26077 | Registered: Mar 2000
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quote:Assuming you don't already have a lot of money to invest, starting your own business is one of the best ways to create wealth. Sure, it's risky. It can be very risky. But ultimately, it's the only way (other than capital investing) to earn money for the work of others. And that has a far greater upside than almost any other available job.
Starting your own business is no more effective at making money than simply investing in high-risk, high-payoff stocks. They are essentially equivalent, except when you start a business you work for (and run) the same company you own stock in, rather than a different company (or none at all if you are independently wealthy). Thus, when you work harder, you directly make your stock go up in value.
And truthfully, I still don't think it's a good venture as far as money goes. It's too risky. A few businesses make good money, but more businesses fail. For the same reason it would be unwise to invest in risky high-gain stocks, it is also unwise to invest in starting your own business for the sake of money. If you want to make money off the work of others, invest in a safer index mutual fund, rather than go for high-risk, high-gain stocks or your own business.
Posts: 2432 | Registered: Feb 2001
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posted
*pins "most self-assured off the cuff zero real world experience statement of the week" award on Tres*
Posts: 15770 | Registered: Dec 2001
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quote:And truthfully, I still don't think it's a good venture as far as money goes. It's too risky. A few businesses make good money, but more businesses fail. For the same reason it would be unwise to invest in risky high-gain stocks, it is also unwise to invest in starting your own business for the sake of money. If you want to make money off the work of others, invest in a safer index mutual fund, rather than go for high-risk, high-gain stocks or your own business.
Tres, that just means you have a low tolerance for risk.
That's okay - so do I. I practically gave myself an ulcer the summer I worked in the office for my dad. Being an entrepreneur takes a specific kind of personality.
Posts: 26077 | Registered: Mar 2000
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posted
That was neither self-assured nor based on zero experience. But, perhaps I should take any award I can get.
quote:Tres, that just means you have a low tolerance for risk.
Well, I don't think so. I can't say with certainty, but most financial planners I've read seem to agree not playing high risk with stocks or businesses is a more sound financial plan. And I'm usually more risky than most when it comes to money.
posted
Xap, if you don't have significant money to invest, then starting a business is your only choice. Look, I've done this. Kat's family has done this. Belle's doing this. Lots of people do it.
If done correctly, the risk can be minimized to time and invested capital. If financing is necessary, then you're going to have to personally guarantee loans as well. Careful planning can somewhat minimize exposure here.
The return on capital invested cannot be matched. Assuming you can afford living expenses, the only other risked resource is time. At least some of that can be captured by the improved employment prospects of being a former business owner.
I managed to create 67% annualized return over 11 years from a tiny intitial investment, not counting the comfortable salary I managed to draw for the last 8 years of that time period. You can't match that investing in stocks without being very, very lucky. Also, I had the chance to know everything going on with my investment and to affect the results.
posted
Oh, you mean you've either run your own business with employees or invested almost all of your money (well, any amount for which you'd be in major financial trouble if you lost it) in high risk stocks, Tres?
Posts: 15770 | Registered: Dec 2001
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posted
Nope, but I said I had more than zero, not tons of experience. I've worked for a small company like this and I've got two uncles I know fairly well who've started businesses themselves (one is very successful because his product is in high demand, the other is not so successful.)
Dag, You did well, and I know many do, but many others aren't as successful as that. Belle sounds like the company is doing decently well, but still is saying it's not worth it. Others fall flat.
You did put in a big initial investment, I suspect, but in the form of time and effort rather than money. I'm not sure how much salary (if any) you took those first three years, but I suspect someone of your skill and intellect would probably do very well as an employee too - especially if you worked as hard in the salaried position as you surely must have to start a business venture. Over three years, if you invested all that money in stock, I think you'd have a strong return... especially if you took a good deal of risk, seeking out unknown startup ventures to invest in.
posted
My cousin started his own business without a signifigant intial investment - right when he got home from his mission. He DID have help from his family - namely, storage space to store the materials. But he and his wife make enough at it to support themselves - and they get all the intangible benefits as well.
Posts: 26077 | Registered: Mar 2000
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posted
Hmmm... any other business starters have experience with this one?
I'm inclined to think katharina's cousin's case is the average one - they make enough to support themselves, but with the intangibles as the thing standing out above the other options.
Posts: 2432 | Registered: Feb 2001
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posted
If kat's talking about the same cousin I'm talking about, he's hired a few people, too, if only for temporary employment. They work a lot of hours, but love the flexibility, time and content wise. Last summer John would skip out on work to watch the Olympic basketball team with me at eleven in the morning. Amy (the wife/my sister) started a 9-5er a couple of weeks ago, and getting up every morning to go to work is driving her crazy.
Seriously, though, I think John's going to be rich someday. There's something that successful politicians share with successful entrepreneurs, and he's got it. I don't; I couldn't have imagined trying to start a business while I was an undergrad, but he pulled it off.
Posts: 794 | Registered: Aug 2000
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posted
Starting your own business, providing you either have access to materials, information, and/or levels of effort that are necessary to make it owrk, is one of the ONLY ways to make serious money for yourself in this country.
Sure, there are a lot of businesses that fail, but how many of them are in the bar/club/food industry, where the overall failure rate over a 5 year peoiod is somewhere around the 75% mark? More than half, I am sure, and that throws the curve off for the whole industry. Those sorts ovf ventures are almost impossible to finance, as most banks won't even consider putting up the necessary money to make them work. There are a TON of other industries that are sucessful, either as a part-time side job or as a full-time job.
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