Burn Rate….

When the idea of creating a company enters your mind. The next think is “I have a wife, (2) kids, a home and a life style…. So much RISK.“ The biggest question is how can I afford to make this work. SHOW ME THE NUMBERS…..

I broke this down a couple different ways; company tree to understand what a lien construction company looked like and salaries. Knowing the first yr plus would just be the (2) owners and no help, no PM’s, no Supers, no labor, no controller….

But, ideally when would we be financially stable to bring in help. WHY bring in help? Solid question. Vacations, have mornings w/ the kids and get them on the bus, coach sports, take long weekends, have a life. This goes back to the “life style” mentioned above. I know I can solve most issue w/ hardwork & my time (as I don’t have to bill for it). Goal was to create a boundary…..

Then we added projects (2) per PM & (2) supers. Even when writing this chart I put 5/6 on there. Why do we need so many projects? Was it ego? or was it out of necessity? Goal was to understand what the burn rate of the employee salary vs average size project. Was is sustainable?

Then we added Development division; Specs or light commercial…. Even added the dream div of Concierge. It looks so controllable on paper like this…..

Moving to the blue ink.. This is overall salary costs per div + controller. Then brokedown just Custom + Development. Just Concierge and just Custom..

Results was a target of (4) projects north of a million dollar contract. This would equal 7-9 months of work and $190k in O&P. This was acceptable and knowing that there would be no other employees the Overhead would be lower and Profit would only grow….

Reality was a blend of everything.. We received (1) custom new construction, (1) custom renovation **Should have stopped there. But, we landed a deleveopment project in Boston and (2) spec. homes in metrowest. The specs were $650-750k contracts so this equaled one of the projects we had in our plan.. This brokedown (2) projects (development brownstone & custom reno) for one of us and the MetroWest had (2) 7k sqft specs and (1) 13k sqft custom. This should set us up beyond projections. But the burdon of bookkeeping, managing, insurance, client meetings, purchasing resulted in endless days. Honesly, 6-months in I wanted to stop. But, these projects were 8-14month durations. It’s hard to unwind once accepted and work started. It looked better on paper as most things do.

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