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From 0 to sub contract plowing in 1 month

Discussion in 'Introduce Yourself to the Community' started by DesMoines2500, Nov 19, 2012.

  1. DesMoines2500

    DesMoines2500 Senior Member
    Messages: 118

    This site has been a lot of help for me so I thought I'd pass along my experience so far. Setting up a legit company was easier than I could have thought and my insurance company was happy to provide the coverage needed.

    It all started this summer, a good buddy and me often get together for beers in his garage, the conversation usually drifts to how to make some extra loot. I have a solid job and a few rental properties, and he works a seasonal construction job that basically sees him go onto unemployment the second the temps drop. He also just happened to have a CDL and heavy equipment experience. So plowing just made a lot of sense. He'll be driving the plow 90% of the time. I'm the money. He'll plow my 3 rentals for free.

    With a $5000 budget we acquired a truck ($4500), a 2000 Sierra 2500 with a 7'6" plow. It's a beast, rusty as hell but seems to run great and was built to plow with lights and everything.

    $50 to file a simple LLC document (I'm not risking my personal assets!).
    $4500 for the Truck and plow.
    $150 to register the truck. Resisted to LLC of course (I'm not risking my personal assets!).
    $250 for 6 months of $500,000 business liability insurance. (not commercial)
    Set up a Federal EIN for the business online for free.
    $50 for an oil change.

    That where we sit today. I have 2-3 good subcontracting jigs lined up that will pay $55/hr with routes near our houses. The LLC and insurance made all the difference to them. I expect to make revenues of $5500-$11,000 this season based on averages snow falls in my area.

    Since I'm the money, the deal we worked out is that for every dollar made plowing:

    1/3rd comes to me (until I'm paid back my initial $5000 investment), then the LLC owns the truck equally.
    1/3rd goes to a truck maintenance pool including gas, tires repairs.
    1/3rd goes to the driver.

    We're both on a handshake agreement but that's not a concern. While I'm not excited to be the only one with a financial stake $5000, I know I can quickly liquidate the equipment so the risk is still low for me. Depending on how this season goes we may just buy a second plow next year. We both drive 1500 trucks, and having a light plow as backup probably wouldn't be a bad idea anyway.

    Still, we haven't plowed a single sqft of snow yet, but I feel like we're ready. The combination of 24/7 availability, our own personal trucks as backups, a dedicated plow truck really make it seem like this partnership could take off. It will all depend on how well this 2500 holds up I suppose. Just looking forward to snow.

    Last edited: Nov 19, 2012
  2. BC Handyman

    BC Handyman PlowSite.com Addict
    Messages: 1,838

    Sounds like your on your way to becoming a business(need income first) I agree, with the small investment you made, even if things go south you wont starve. I wish you luck this year,
    1 piece of advise I can give is: Both of you use your head, slow down & think before you act. This applies to business & the plowing.
  3. jasonv

    jasonv PlowSite.com Addict
    from kannada
    Messages: 1,114


    Has he ever actually plowed snow before?
    How about the insurance on the vehicle itself?
    Are you prepared for your beater to blow its tranny? (take that question every way that fits)
    Are you prepared with a backup/contingency plan in case the truck doesn't last the season?
    Have you checked the frame for cracks at the upper rear control arm mount? Has it been reinforced yet? Wouldn't want to break the frame in half mid winter....

    What KIND of jobs will he be doing? Commercial lots? Private driveways? Mix? How big?
  4. Wilnip

    Wilnip Senior Member
    Messages: 583

    sounds like you've done everything right! Now why not make your partnership right? Put it in writing and that way you keep the business relationship separate from your personal relationship. As you grow you will be sorry that you didnt. But congratulations and here's hoping you have a great season.
  5. plowguy43

    plowguy43 PlowSite Fanatic
    Messages: 5,264

    I'm assuming you didn't read any of the OP's posts. Every question you asked (at least the relevant ones) were answered.

    Good Luck this season, you really don't need a large investment or $50k brand new truck to plow snow. I learned that after a few seasons and have been enjoying a much higher profit margin with my (reliable) paid off truck/plow. payup
  6. ducaticorse

    ducaticorse PlowSite.com Addict
    from we
    Messages: 1,426

    Awesome, I was about to write the same response as you!! :laughing:
  7. ducaticorse

    ducaticorse PlowSite.com Addict
    from we
    Messages: 1,426

    Looks good. My only question is what happens to your cut after the truck is paid off. If you entered into the biz 50/50 you should have set up the financing for the truck as a loan to the LLC from you. That way you can claim it as a business investment/deduction on your own personal tax filings. You should also be earning interest on that loan that the LLC pays you and can write off as a business expense. Anyway, good luck!!
  8. DesMoines2500

    DesMoines2500 Senior Member
    Messages: 118

    I was thinking of pulling my initial equity out as a sort of partner draw over the next two years. The tax and payout aspect is definitely the greyest area for me. Over the years of running my rental property business I've gotten a handle on taxes so I'm sure I can learn the relevant tax steps for this LLC as well.

    Luckily this this is one of my best friends (best man at wedding etc...) and we won't have any arguments over money... famous last words I know. We both fully understand that I'll be getting my money out over the next 2 seasons. Once the truck (and all my other out of pocket expenses) is paid off, I'll be signing the truck over to him. So basically, he's pocketing all the money he makes because I'll be paid and the truck will be his. It's a sweet deal for him an he knows it. We came up with this whole plan after about 12 beers each, so he's probably just surprised that I actually followed through buying the truck and setting everything up.

    As far as catastrophic failures go it's a built 2500, so it's pretty tough but "if he dies, he dies". Experiment over, I'm not sinking anything more into this endeavor this year. There's definitely going to be a fair amount of just dumb luck needed, but so far, everything is going well. Plus, I need a truck throughout the year for rehabbing rental houses anyway, so there are uses for the 2500 in the off season.

    And PS, I'm making HIM buy the cutting edge for that blade, he needs to put some skin into this...

    What could go wrong!
    Last edited: Nov 19, 2012
  9. Spool it up

    Spool it up Senior Member
    Messages: 912

    a quick 18'' ought to shape things up ! Good Luck .
  10. BPS#1

    BPS#1 2000 Club Member
    Messages: 2,394

    $55 an hr.

    Oh yeah, you are so gonna shoot a fat pig in the axx on that one.
  11. Meezer

    Meezer Senior Member
    from Indiana
    Messages: 291

    So does that mean that you will abandon whatever customers you may have???
  12. DesMoines2500

    DesMoines2500 Senior Member
    Messages: 118

    We're going to go through one of the biggest lot management companies in town. If we break down there are probably a hundred other trucks to fill in. Its actually why I went this route, since it's our first year plowing being in a larger team should give us great experience and connections. There are a lot of unknowns and experience this year is just as valuable as money... ok... maybe not exactly as valuable.

    As for $55/hr, I love more. I like money. I had 3 companies who wanted our services. One was $45 and the other two were $55/hr. I went with the larger $55/hr company for hte reasons above.
  13. BC Handyman

    BC Handyman PlowSite.com Addict
    Messages: 1,838

    again, you sound like you got a good handle on things. Glad to see that someone had put some thought into the business, unlike some who dive in with only thought being: I got plow & truck, lets plow for $ now.
  14. DesMoines2500

    DesMoines2500 Senior Member
    Messages: 118

    Thanks, the waiting for snow is getting to me. Everything seems good on paper, but no work to do yet. The lot management company said a lot of their regular trucks were out of the business after last years dry winter so with decent snow we could end up sitting nicely.
  15. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Did this company tell you when you'll get paid?
  16. Meezer

    Meezer Senior Member
    from Indiana
    Messages: 291

    Maybe so, however, a lot of "companies" usually have in their sub-contractor agreement some variation of this blurb:

    If contractor fails to show up for a job, complete a job or is unable to perform a job in any way whatsoever, that he/she agreed to complete, then the contractor shall be charged back for the company cost to complete that job at a rate of $100per hour. Company shall have the option of withholding said amount from any future payment due contractor until said amount is satisfied.
  17. CashinH&P

    CashinH&P Senior Member
    Messages: 448

    And thats why I dont sub contract. Sounds like your on top of every thing else. If I were you I would sub contract this year and try to get my own accounts next season.
  18. DesMoines2500

    DesMoines2500 Senior Member
    Messages: 118

    15-30 days after the job. They're huge and have year round contracts so they have long relationships. The others were 15-45 days and the $45 place.
  19. DesMoines2500

    DesMoines2500 Senior Member
    Messages: 118

    I'll have to read the contract carefully. That's a non started for us, with only one truck there's no way to guarantee it will never be out of service.
  20. ducaticorse

    ducaticorse PlowSite.com Addict
    from we
    Messages: 1,426

    Forgive me if I understand this agreement wrong. But, you just wrote that you're giving your buddy a free loan, with zero percentage of net profit, and after he pays it off, you have no vested interest in this endevour. There shouldn't be ANY arguments from your buddy on this one because you just financed an entire business for him at zero cost to him, and absolutely zero profit to you.....