Questions on overhead and expenses in the HI biz

Originally Posted By: Tim Robertson
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Guys,


I am looking into starting into the HI biz, but have a few questions. How much does overhead, i.e. taxes, E&O insurance, marketing, tools, gas, supplies, etc et up of you gross profit? ![icon_question.gif](upload://t2zemjDOQRADd4xSC3xOot86t0m.gif)

I would do simple math and figure 3 inspections per week to start off, 3 x $250 an inspection=$750/week x 52 weeks=$39,000 per year in gross profit? After I pay out my expenses, how huch is left, 50%?...75%....I know it varies according the my market and other things, but any averages from you guys?

Thanks...

Tim


Originally Posted By: dbush
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Tim, your E&O Insurance is going to cost you about $3600 for your first year. Your tools depends on what you want to start with and how well trained you are on the tools. Some inspectors use a flashlight, an outlet tester, a couple of hand screwdrivers, and a couple of ladders. Others have every fancy tool in the world.


Now for the bad news, when you start out, you will MOST LIKELY not be at 3 inspections a week. It usually takes about a year to a year and a half to build up to that point consistently.


--
Dave Bush
MAB Member

"LIFE'S TOUGH, WEAR A HELMET"

Originally Posted By: gjohnson
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I would count on at least 30-40% of your revenue eating away by expenses. Joe H and I discussed this the other day and I wasn’t paying attention to my self.


There are numerous things to take into consideration:

E & O Insurance, Gen Liability, Workers Comp (which you dont' have to have if you are the owner, yet I highly reccomend you get)

Taxes (State, Federal, Local, you name it, it is taxed)

Marketing, Brochures, Cards, Handouts

Reports

And don't forget incidentals, Gas, Paper, Office Supplies.

All these things can really eat up...


--
Gary (Snicker's) Johnson - Free NACHOS
The NACHI Foundation
Executive Director

301-591-9895

Originally Posted By: Tim Robertson
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Guys,


Great info, keep it coming! I have most all the tools I need already, short of anything specialized (radon tester?).

I would run the business out of my home, at least as long as I could manage it, and also get the home office deduction, which I have been doing already, I have a separate office already set up, as well as a extra garage for workspace, tools, equip, etc.

I know 3 a week is high, especially for a starter, but I was trying to look ahead at least a year after things got rolling, I know the first 12-18 months would be tight.

I am in Columbus, Ohio, with a population of 700,000 in the city of Columbus. The Greater Columbus area, with a metrpolitan market population of 1.5 million people is the 34th largest metropolitan market in the U.S. I now need to find out how much competition is in my area.....


Originally Posted By: gjohnson
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What I have learned is to think of it in terms of cost per inspections. Take all your monthly expenses. And divide them by how many inspection you did that month. Hopefully the number per inspection is lower then the amount of revenue you brought in for the month.



Gary (Snicker’s) Johnson - Free NACHOS


The NACHI Foundation


Executive Director


301-591-9895

Originally Posted By: pdacey
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gjohnson wrote:
Hopefully the number per inspection is lower then the amount of revenue you brought in for the month.


Thaaaat's what I'm doing wrong. ![icon_eek.gif](upload://yuxgmvDDEGIQPAyP9sRnK0D0CCY.gif)


--
Slainte!

Patrick Dacey
swi@satx.rr.com
TREC # 6636
www.southwestinspections.com

Originally Posted By: jpope
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Another thing to consider. Don’t go into business thinking that you’ll start as the “low price inspection” and get more business.


Find out what your competition is charging and set your prices just a bit higher than the "average." Trust me, you can benefit greatly from this.


--
Jeff Pope
JPI Home Inspection Service
"At JPI, we'll help you look better"
(661) 212-0738

Originally Posted By: gjohnson
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It is the best way to figure out your expenses. I mean if you are charging say $300 for an inspection and your cost per inspections is $290, then something is not right and you know you need to adjust.


Of course the more you do per month the lower the ratio gets.


--
Gary (Snicker's) Johnson - Free NACHOS
The NACHI Foundation
Executive Director

301-591-9895

Originally Posted By: pdacey
This post was automatically imported from our archived forum.



Gary,


I was attempting sarcastic humor. Can’t help it, it’s in my NJ blood. Sarcasm doesn’t translate well in written form.



Tim,

You should also set goals for yourself. Both business and marketing goals. Start out with very basic numbers and then tweak them as you collect more information over the coming months. I've been actively inspecting for seven months but didn't have hard numbers as far as expenses were concerned until after 4-5 months. I played out two business scenarios in a spreadsheet for myself, one that is pretty modest and one that is somewhat aggressive. I input my data each month so I can see where I'm at.

Also, one of the keys is patience. It doesn't happen overnight. Always ask a potential client how they got your name so you know what marketing is working. I've gotten calls this month from people that received some marketing materials 2 months ago that I had recently abandoned because I thought it wasn't working.


--
Slainte!

Patrick Dacey
swi@satx.rr.com
TREC # 6636
www.southwestinspections.com

Originally Posted By: gjohnson
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don’t we have a sarcasm emoticon



Gary (Snicker’s) Johnson - Free NACHOS


The NACHI Foundation


Executive Director


301-591-9895

Originally Posted By: tgardner
This post was automatically imported from our archived forum.



Tim,


Poll your competition and set your fees 10% higher than 75% of them. Then send out your marketing materials with a "gift certificate" to put your fee back to average. "Something for nothing and the Kicks are free"

If you just left a job, figure out what your expenses for that job were. For ex.; travel to and from your old job @ 39 cents a mile, lunches, etc. Then figure out what your market area will be. Figure the average miles to travel at halfway (each day) to the outside circle of your area. Compare those with your job's numbers take the larger of the two, add in $20.00/ report for paper, ink, etc. as a variable expense. Now you're getting close. Take what you paid into FICA last year and double it (That's what you pay in self employment tax) add in 4000.00 for all insurances (except health). Add in what youryearly household budget is as a minimum. Alright! Take that number and double it. That's what you need to make ends meet. It'll cover marketing, flowers for the wife (you'll need those too) and leave you enough to live on.

If you can do it, you'll be a happy guy. Good luck!


Originally Posted By: ekartal
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Hi Tim,


You may want to hold off on Radon testing until you get used to the basics.

Erol Kartal
ProInspect


Originally Posted By: jmertins
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market, market, market…I am 8 months into my own HI company and the best tool you have is yourself!! Any chance I get I am explaining to people who I am and what I do. I make it a goal to hand out 5 business cards a day, even if i am not doing a inspection. I have had variable success wiht my brochures but great succes with my “walk ins and drop-offs”. If you can corner a realotr for 5 mins. it does amazing things. Also look into joining a “leads group” within your chamber of commerce. anything helps and works. I am doing 3+ consistenly since the beginning of the new year!!! icon_lol.gif