If thinking of buying a home and of starting a business in the near future, it might be prudent to get the mortgage sorted while still steadily employed. Starting a business or financing a vehicle can be done anytime, but it is not always easy to obtain a mortgage. Doing things in the right order can help one reach goals years earlier.
If already self-employed, all hope of owning a home is not lost. Self-employment does make a lot of things in life more challenging, but by now you and I have honed our skills to become tenacious and creative problem-solvers!
Here are a few layman tips to increase the chances of approval. Use at your own risk.
1. Maintain a very good credit rating. Fix what you can, pay off outstanding and overdue accounts. If you need to improve your credit score, consider an RRSP loan. Most institutions will automatically approve RRSP loans where the funds are invested in a bank product. Make the loan payments regularly. Use the contribution to reduce your taxable income, this will generate a lower tax bill or a refund come tax time. Take the tax savings and pay down your loan, or keep building up that down payment. Once you are ready to buy, you can borrow your RRSP money to use as a down payment if you are a first time purchaser. In Canada you have 15 years to repay the money to your RRSP account. If you fail to do so you will need to repay the income tax to the government.
2. Save up a down payment. For most people a 5% down payment may be sufficient to qualify, but if you are self-employed and show lower income, or have less than ideal credit, you may need to have 10% or 20% to put down in order to get approved with a competitive interest rate. It is also wise to account for closing costs on your purchase, which can add up to a few thousand dollars. And don't forget moving and improvement expenses, hook-up fees, etc. A sound financial move would be to save 20 - 50% of the cost of your property as a down payment, and choose a shorter term mortgage of 10 to 15 years. Who wants to be in debt for 30 years? That is a huge burden to carry and it can restrict your choices in life.
3. Stay up to date with your financial statements - bookkeeping, income taxes, GST, NOAs, etc. Being able to show the stability of your business over several years and being up to date with your taxes will go a long way.
4. Find the right professionals to help you:
Realized today as I was working on a ladder most of the day, and working under an old deck too, that painting has helped me overcome two of my biggest phobias.
I used to be really scared of spiders, but working on exteriors in the Okanagan Valley where the Black Widow, Brown Recluse and Wolf spiders thrive, eventually provided enough exposure therapy to dull the panic attacks. Look close enough in any yard and you are likely to find one. Best just not look, and keep on painting ‘cause you ain’t getting paid till that section behind the bushes is done. Oh, and don’t forget that area under the deck...dang...
When we started our small contracting business, time is something that we invested heavily. Funds and experience and equipment may have been minimal, but time is something we all get an equal allotment of. If working for ourself is a priority, we will spend as much time as needed to get it off the ground.
The danger is that we stay stuck in departure mode. Imagine being on a long journey aboard a jetliner that was in lift-off mode for the entire 12 hour trans-atlantic flight. How stressful! Take off is exciting, but everyone's happy to sit back, take a deep breath and order a drink once everything is under control...
As entrepreneurs we must be effective problem solvers. Problems come in all variations: financial, health, technical, scheduling, staffing, etc. One type of problem that we will eventually encounter is people problems.
People problems can be particularly difficult to handle if you have an aversion to confict. Many people would rather experience just about anything but having to confront someone about a problem. I know, I used to be one of those people, and I still have to fight that tendancy. And that is a benefit of the road we travel as business people...it exposes our weaknesses and provides opportunity to confront them one way or another before you can achieve success. Learning to deal with people problems is one of the biggest hurdles facing a start-up. We all want to be liked and we all hope to get along with others, but things can go pear-shaped pretty quickly when mixing money, deadlines, personalities and expectations.
So here are 4 things I have found that help to difuse potential hot spots...
If each party in a transaction over-delivered by 5%, what room would be left for disagreement?...
"Oh, I don't really have a business, I just work for myself."
Is something often heard out in the field. It sounds like a simpler, more manageable way to work independently without all the hassle of running a business. Who wants the headache? Get work. Get paid. Repeat.
But getting stuck in that cycle is a problem...
The entrepreneurial struggle can arouse some powerful negative emotions - frustration, self-doubt, jealousy, anger, disappointment, exhaustion, conflict, confusion, and depression, to name a few. As a business owner you put yourself out there on a daily basis and face the world, hoping other people will accept you and your offerings. You face judgement and rejection. You battle threatening market forces that are out of your control - competitors, the economy, technology, weather, etc. Your entrepreneurial mind faces negative forces from within yourself, the people you deal with, and the circumstances you work in.
It can be difficult to navigate through challenges while keeping your head right...
You might be thinking about taxes at this time of year. And that maybe causing you some stress.
Or you may be feeling taxed by the stress of a busy painting season just ahead.
I've been thinking about work stress recently, particularly about the toxicity of stress and the toll it takes on our health, relationships and general job satisfaction. Stress is real. The effects of stress can be as simple as being more irritable to more complicated - like the inability to sleep properly, addictions, memory loss, a compromised immune system. Stress can even lead to heart attacks and death. My observation is that some of us don't consider stress enough when looking at jobs. For me, I need to be more intentional about limiting it's influence in my work life where possible.
We are just painters after all, not surgeons, so why all the stress? Is it necessary? What factors lead to some projects being more stressful than others?
Governments tax behaviours that they deem unhealthy for individuals or society, to reduce consumption/exposure and raise money to finance the side effects. So...why not tax stress in your life, particularly in your business? Add a surcharge to jobs that involve more stress, put a premium on that stress to discourage and reduce the amount of stress and raise money to deal with the consequences of stress (vacation, massage, therapy, date nights, exercise, healthy food, etc...).
With that in mind I created a Project Stress Analyzer and Tax Calculator. I fill it out as part of the process for every project I quote in 2017. In fact, I print a bunch of these sheets and use the back side to make my notes during the site visit. If a project has an average (or lower) anticipated amount of stress there is no premium tacked on. But for every degree of stress above average I add 2% to the quote, to a maximum of a 100% stress premium...
Do you suffer from Dread of Red like I did for many years? Doesn't it seem that if you are going to have problems with a colour, it is likely to be with red?
One of my first bad spills was with a can of Benjamin Moore Collections in a deep red...right down this particular hallway actually, in the middle, on brand new carpet. I was so excited to impress a bunch of realtors, thinking this might be a great opportunity to make an impression and get some referrals. Well I think I succeeded in making an impression alright.
I've learned too that red paint, when you open the lid, can look pink. That can fool an in-experienced painter into marching back to the paint store assuming there was a tinting error. But we learn that the magenta dries out of the paint and it actually looks red, not pink, once dry.
And fast forward a couple of years where I experienced the dreaded 'red feature wall' that most painters encounter at some point in their career...the one that requires 8 or more coats of red, and still doesn't look good (poor or uneven coverage, 'picture framing', texture build up, slow curing...).
Over the years i've tried several things to try and solve this vibrant red coverage issue...cutting and rolling small sections at a time to keep a wet edge, putting the paint on heavy, different naps and sleeve materials, different brands and bases of paints, pink primers, etc...
A couple of months ago I had a cancellation. As happens from time to time. You just roll with it - because really there is nothing you can do about it, and sometimes it takes the pressure off of an over-booked schedule.
The problem is that it is very easy for a prospect to cancel a job when they haven't made a financial commitment. Unfortunately, as the contractor, you don't have the same flex going the other way. Imagine cancelling at the last minute on a customer - the bad rep you would develop, how you could totally mess up their entire project schedule and that of the other trades, etc...
Just a couple of observations about caring I've noticed over the years...
1. When you meet someone who really cares about their work, about people and about helping their customers, well, that experience is usually very remarkable. It is infectious and you can't get enough - it keeps you coming back and telling others about your experience. There is almost nothing I can think of that is better for your customers than genuinely caring about them and the work you do. Not a sale price, not a bonus offer, not branding or packaging. Caring about another human and caring about your work is a very difficult thing to compete against. At best, there may be a company that could care as much as you do, but the deck is stacked heavily in your favour as a micro business owner.
On the other hand...
This post has nothing to do with painting in particular. It contains a simple piece of advice that I received from a real good friend who worked with me for a couple of years. I learned a lot from him, and one of the sticky-est principles is this...
Some people think that self employment is very risky, and that it takes special powers to be able to run a small business.
Others think that working for yourself involves driving a new truck, writing off your lunches, golf every Thursday, and working when you feel like it.
The truth is somewhere in the middle...
WHY: PERSPECTIVE CHANGES EVERYTHING
Something stressful will happen at work this week.
You will back into a colleague's truck, or you will let a customer down, or a builder will place unreasonable expectations on you, or your cash flow will dry up, or you will end up double or triple booked or short of work for the week, or you will paint the feature colour on the wrong wall, or a homeowner will bounce a cheque on you, or...a thousand other frustrating things will happen to you this week.
None of it much matters...
In our society we are conditioned from early days to ask for permission for everything and wait expectantly for others to provide our opportunities. This mindset is something that has to be deprogrammed when we take the step of self employment.
You can't just do whatever you want whenever you want - that is a distorted illusion of what being an entrepreneur is all about. However, waiting passively for customers to seek you out, to present you with opportunities, to hire you, is going to be a frustrating and discouraging approach...continued...
After over a decade of dealing with a variety of customers and situations, I've learned the hard way to recognize 'red flags' that potentially pose a risk to my business and peace of mind. The best protection I have found is to avoid working for certain prospects and projects. The 3 main red flags that I pick up on are:
1. Unreasonable expectations. A year a half ago I received a phone call that perfectly illustrates this red flag. In the middle of peak season a lady called and asked if we are available to paint the interior of her house in short order. She needed it done in two weeks. But there was a catch - she was on a very tight budget. Normally I like to look at every job, but I didn't think there was any way we could squeeze it in and the low margin was not an incentive to even try. Out of curiously I asked what the size of the house was. She replied 5000 square feet. That was pretty much the end of the conversation. For our small and busy business there was no way we could even think of taking this on. Going any further would have been a complete waste of both of our time.
When I started my business I had a very keen desire to help everyone and try to take on every job. This was not modest and it exposed me to quite a bit of stress and risk. As a rule of thumb a job consists of three factors - quality, scheduling and cost. I can usually accommodate 2 out of 3 (as long as one factor is quality). If someone expects all three, or makes other unreasonable demands, it's time to reset expectations or walk away...
Earlier this year I met a young man who was dealing with all the challenges of a start-up. But he was determined to succeed and kept going in the face of adversity. Several months passed and he really started to hit his stride. He finished the season on target and thriving. I needed to know what factors helped him to enjoy a quick progression to success. Jesse was kind enough to sit down with me for a long-format interview and share a few nuggets...
What got you interested in painting?
I was actually never really interested in painting. I came across a College Pro booth at Uvic, and it said "Entrepreneurs Start Here." I am in school for entrepreneurship, so naturally I ran over to the booth and began asking questions. However, this experience certainly has me more interested in the painting industry than I ever thought I would be.
How would you say your first season went? Biggest challenge? Biggest success?
In the end, my first season could not have gone much better. I ended up running the largest first year Franchise in BC's history.
My biggest challenge was dealing with setbacks. I had all of these plans going into the year, and it seemed like everything was going wrong. I had painters quit on me, upset clients, and I was also working more than 100+ hours a week in the beginning. I had to learn how to adapt to the situation quickly, and learn how to keep moving the business forward no matter what the situation was.
One of the biggest reasons I chose to take on this venture in the first place was for the learning. Therefore, my biggest success would be learning everything that I wanted along the way. I feel like I have grown more as an individual in such a short amount of time than I ever thought possible. I feel like I am capable of achieving anything I set my mind to (which is something I've always believed), but now I have proof. Also, before CPP I thought I knew a lot. I have now learned more than I ever thought possible, and feel like I know less than any other time before. This is incredibly exciting for me because I now know I still have so much more to learn.
I know you faced some significant challenges getting up and running. How did you manage to overcome them, stay positive and reach your goals?...
Success is not the antidote to feeling like a failure...
photo credit: Steffens-Colmer Studio; Vancouver Archives
Painting is a good way to make an honest living, especially so if you have your own business. You learn all sorts of real world skills that help you create value for your clients and your family. When it's hot, you work indoors or in the shade. When it's cold, you work inside. There is plenty of work available and there is no danger of the trade becoming obsolete anytime soon. The barrier to entry is quote low, as you don't need a lot of tools and equipment, nor do you need much schooling and ticketing. And the sky is the limit if you want to grow your business.
The main problem with painting is that it can consume your two greatest assets. Assets that are far more valuable than mere dollars. If you let it, painting will soak up most of your time and the best of your health. It may come for your family too. Once these critical assets to your well being are gone, they are irreplaceable. The moment you stop applying liquified colour with a fuzzy-tipped stick, that's the moment you stop making a nickel...
WHY: PROFITING FROM THE RIGHT APPROACH
This week I met a new colleague, a fellow painter and business owner. He mentioned that he has been busy working 7 days/week in order to catch up on work prior to an upcoming family vacation. He is midstream on a small housing development of 10 homes that is progressing quickly. His phone is ringing with more work from the install department of a big box retailer. He was in the paint store at dinner time waiting for colour matches for the next day so he could keep his crew of seven guys running steady and keep the client's project moving forward. Then he said it...
'I've got 3 estimates waiting for me when I get home.'
Boy do I know that feeling. There goes the rest of his evening. A whole day dedicated to his painting business. A whole week. A whole month...
I've had a love, hate, love relationship with estimates...
If you operate your micro contracting business as a sole-proprietor or a partner in a partnership, one challenge you might face is remitting your personal income taxes in a timely manner.
One of the most effective business strategies was gifted to me about five years ago by a close friend who operated several micro businesses.
It is an extremely simple solution, but very powerful.
Michael Gerber, author of The E-Myth says: 'the system is the solution'. This system might work as well for you as it has for me...
So a few years ago I took my daughter to see a particular show that was on tour. One of the take-aways for her was the chorus to one of the songs. She would sing that line for months afterward. I think she may have actually learned something pretty important that day.
Around that time I learned the same lesson, but I came to it from a different route.
The summer lake house had about 4 feet of water in it...
Today is moving day.
10 years after starting my painting business it was time to sell it and move on to another opportunity. Change is complicated, both emotionally and logistically. And it got me thinking about how things like moving away or starting a new business require you to be 'all in', because everything is about to change. There is a sink or swim urgency that awakens your senses and forces you to rise to the challenge. Feels like the opposite of being in a rut.
But it requires a lot of dedication and hard work. Lots of hard work. It's almost always easier to avoid change and see it is a threat.
What does this have to do with you?...
Steve Montador, aged 35, died today. He was a well liked and respected professional hockey player. News articles are indicating a possible connection to his long battle with depression.
During the pre-game skate at my weekly hockey game tonight, I noticed the sign above.
Rick Rypien died on August 15, 2011. He was one of three NHL hockey players that summer to have their life cut short due in large part to depression.
It is true that there is a strong link between concussions that many hockey players suffer and depression. Still, it got me thinking about how if such successful, talented, wealthy, physically strong men, in the prime of their lives can have such serious battles with depression, surely it can affect anyone.
Experts claim that mental health issues affect at least 20% of people. The thing with depression is that it also affects the people you have relationships with. So a lot of you are dealing with the fallout of depression...
As an entrepreneur, you will enter into negotiations on a regular basis with suppliers, employees, prospects or clients.
There are times people just need you to go the extra mile in order to keep a project moving forward toward the goal.
It's OK to trust your gut and make someone happy, making an investment in goodwill.
Other times, people may be out to squeeze the profit out of you, or pressure you to meet unreasonable expectations.
Their demands are a way of gaining control of the transaction and taking your power away. This is a critical stage in a business relationship. Will you blink first?
There is a lot of information available out there on negotiating. But one simple, easy to remember principle that I picked up along the way has served me well over the years...