# Cost of doing business???



## Turd Chaser (Dec 1, 2011)

Work has been really steady for the current contractor that I am with. However they are going through some changes and I don't think things will be good in the next year. With this happening, I am considering starting my own 1 man service shop and am looking to all of you for any help. For starters, what is an approximate starting cost? Including the purchase of tools equipment and a van.


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## plbgbiz (Aug 27, 2010)

What kind of changes are they going through?

What is it about starting a business that appeals to you more than finding a better job with a different employer?

What is your timetable?

What type of work have you been doing and is that what you will do as a OMS?

How well stocked with tools are you now?


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## johntheplumber (Feb 11, 2013)

I had been collecting my tools for 5 years before we started. We already had a $5000 used van. We had $300 in our bank account.


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## Plumber (Jan 18, 2009)

Turd Chaser said:


> Work has been really steady for the current contractor that I am with. However they are going through some changes and I don't think things will be good in the next year. With this happening, I am considering starting my own 1 man service shop and am looking to all of you for any help. For starters, what is an approximate starting cost? Including the purchase of tools equipment and a van.


What's the competition like? Are there too many plumbers in your neighborhood?

What's the economy like for your target market?

Hey, maybe Right Way Plumbing (the poster is rw plumbing here) is hiring.


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## wyrickmech (Mar 16, 2013)

Be ready the tools you think you need will grow the second you go on your own. The service world is full of tools that you need to function. Investment can be high and can eat into profits on the short term. But with management you will be ok.


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## plbgbiz (Aug 27, 2010)

Turd Chaser said:


> ....For starters, what is an approximate starting cost?...


Not to be too sarcastic, but it will cost every penny you have.

If you start with $50, it will cost $50.

If you start with $5,000, then you will probably use all of that as well.

You can start with as little as a few hand tools, a prestolite, a 3/8" corded B&D drill, and a 1980 Chevy Caprice two door with a Landau roof. The back seat holds the tools nicely and a lot of material fits in the oversized trunk. 

It is all about commitment to the cause, living within your means, and knowing exactly what your "means" really is.


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## johntheplumber (Feb 11, 2013)

we have purchased more than $40,000 in tools over the last 15 years. There are always more that I would like to buy. Purchase quality tools once. There are some tools that can be throw away but the majority of them need to be quality.


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## Turd Chaser (Dec 1, 2011)

plbgbiz said:


> What kind of changes are they going through?
> 
> What is it about starting a business that appeals to you more than finding a better job with a different employer?
> 
> ...


They have recently hired a consultant only to have him tell our owner that he is not making enough money. We raised our labor rates and material markup and have already lost several accounts. He is making more profit on the jobs that we are getting but we are getting less of them. Last year I averaged 48 hours per week. Mainly because our rates were low. I realize that we need to increase profitability, however I feel that there may have been a better way. Some commercial service customers had there rates increased by over $20/hour. Tough pill to swallow.


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## Turd Chaser (Dec 1, 2011)

I have been in the service field for several years and have already amassed a garage full of tools, including tripod, rigid 300, small drain cleaner (k50) hand tools and specialty tools included.


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## johntheplumber (Feb 11, 2013)

That is how you make more money. Raise your rates, Work less. Work less, make more money. You will also have less liability. You will loose customers at first, that is to be expected. You will retain most. The new customers will not know the difference. The ones that leave will learn fast enough that quality trumps price.


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## plbgbiz (Aug 27, 2010)

Turd Chaser said:


> I have been in the service field for several years and have already amassed a garage full of tools, including tripod, rigid 300, small drain cleaner (k50) hand tools and specialty tools included.


You already have more tools that I started with so I don't think tools are what you are lacking.


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## wyrickmech (Mar 16, 2013)

If you have the contacts and the tools what about the service van or truck? You are in a good place just use your head. The other thing that caught me off gard was the amount of paperwork contracts ,liability insurance,workers comp,OSHA training and MSDS program. If you are ready to double your hours go for it. That being said I do love it. The feeling of winning a bid or fixing a problem especially one that the home owner has caused. Going into business has its benefits . Just remember one thing don't charge so much that you don't get repeat business but charge a fare rate to you there will always be somebody that will lowball you sometimes.


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## plbgbiz (Aug 27, 2010)

Turd Chaser said:


> They have recently hired a consultant only to have him tell our owner that he is not making enough money. We raised our labor rates and material markup and have already lost several accounts. He is making more profit on the jobs that we are getting but we are getting less of them. Last year I averaged 48 hours per week. Mainly because our rates were low. I realize that we need to increase profitability, however I feel that there may have been a better way. Some commercial service customers had there rates increased by over $20/hour. Tough pill to swallow.


Have you talked about your concern over lost customers with your employer?
Has your pay dropped?
Are you getting less hours?
Are you paid straight hourly or are there any performance incentives?
Have you talked about how the changes will affect you personally with your employer?

You are concerned about job security. 
You are worried because your experienced employer is losing money and needed to hire a consultant to right the ship. 
You are uncomfortable with a $20hr billable rate increase.
You are more concerned with the customer's tough pill to swallow than your employer's.
You desire to start a business based on problems with your current employment.

These are five huge red flags that tell me you should not be starting a business. With all due respect, I think you are barking up the wrong tree.


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## plbgbiz (Aug 27, 2010)

plbgbiz said:


> You already have more tools that I started with so I don't think tools are what you are lacking.


Take a look here to get started thinking about the numbers.

You may also gain a better appreciation for why your employer's rate had to go up $20.

http://www.plumbingzone.com/f4/more-than-owning-job-17477/


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## Richard Hilliard (Apr 10, 2010)

This is a scary thread man. The first thing I would suggest is to stick it out. You talk about losing customers. Your concern with a startup is where I get the customers. Once you find customers how will you keep them if you cannot keep them where you presently are employed.

If you plan on being the low price guy to get and keep customers look where your present employer is by doing the exact same thing. There is no money in repeating the same mistake. You already have the perfect experience that has screamed low price does not equal success. Live by price you die by price.

My 2nd suggestion is learn to satisfy your customers and keep them before you go out on your own. There are way too many companies out there with multiple employees that have no idea how to satisfy the customer.

I am going to get bit here but let someone else pay for you to learn customer satisfaction verse trying to learn it while trying to build a business. Getting into bad habits and then trying to run a successful business you might as well run as fast as you can towards a brick wall.

It sounds like a good idea…………………. at the time. From the many posts here many are trying to have 1 good day in a row. Somewhere to start and somewhere to go.


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## plbgbiz (Aug 27, 2010)

Richard Hilliard said:


> ...I am going to get bit here but let someone else pay for you to learn customer satisfaction verse trying to learn it while trying to build a business. Getting into bad habits and then trying to run a successful business you might as well run as fast as you can towards a brick wall...


That is sound advice. :yes:


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## Plumber (Jan 18, 2009)

These threads for me are scary because they never ask if the location is good.

I like my analogy of putting your roach coach in the parking lot of a restaurant. Sure, you may get some business, but not enough to survive on, while you ruin the restaurant by stealing what little business they have.

During these times when a lot of established businesses are just getting by, why would a total noob try to compete with them?


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## Richard Hilliard (Apr 10, 2010)

Plumber said:


> These threads for me are scary because they never ask if the location is good.
> 
> I like my analogy of putting your roach coach in the parking lot of a restaurant. Sure, you may get some business, but not enough to survive on, while you ruin the restaurant by stealing what little business they have.
> 
> During these times when a lot of established businesses are just getting by, why would a total noob try to compete with them?


 
Why did all those companies fail? Not enough work? What did they do with the opportunity they had? What happened to the older company’s customer base? Why did they leave? Surely there are companies that are thriving. 2 of the top reasons why companies fail: no working cash and poor business decisions. Location has nothing to do with either of those reasons.

Back in October I went back to Ohio; keep in mind I was back in Ohio in 2011. My father was in plumbing and I had a company there for 15 years. I have many contacts. Half of my old contacts have closed shop. Half of them closed due to no longer having the energy to reorganize.2 of these companies had well over 50 trucks running prior to 2008. When companies close the employees must do something. Many started their own business and they will fail also.

Why? They lose work to too many unqualified and unlicensed personnel. They lose water heaters for 50 bucks to handymen and unemployed people. They cannot influence the home owner to use them for 50 bucks more. That is insane. I was talking to 1 plumber and a customer walked into his shop he said this guy just bought 2 ADA elongated toilets from him. I asked him why this customer bought elongated Ada toilets from him. His reply, the customer wanted them. I asked if I could talk with this customer for a minute and find out why he bought them. Pete was pleasantly surprised why the customer purchased the toilets. Want had very little to do with the toilet purchase. Simple concept yet bypassed by many and this is why homeowners move to the unlicensed and unqualified. Why should someone pay more for no difference?


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## DesertOkie (Jul 15, 2011)

I agree with RH you learned plumbing on their dime. Now learn to run a business, not just customer service. 

Think about every job you are on from the owners point of view. Where did he make money/lose money on the job. How could it have been done better. What are the ramifications of the "making it better", if he is not doing it there are some. 

Are you changing you work from new to service? I would imagine it would be hard to start in new or mech when the plumbing owner carries the note on materials. When you are small one non payment equals bankruptcy. If you are changing your line of work learn that before jumping. You will be slow at it when you start.

Look at Richard H's profile and go to his blog. Read, read, read, he has been in the trenches making customers loyal for a long, long time(sorry RH). Take all the advice from him you can, it's free. 

Read on the subject of business and customer retention. There are a few threads about good business reads. Maybe Mr Biz will bump them for ya. Accounting classes & business classes if you don't already have them. When I talked to my accountant about trying the same thing as you are, he was damn happy I had lots of these and knew what I didn't know and what a P&L was. 

Index to the business section of PZ and read them all! Free info you can get while drinking beer at home is priceless. Look for what to charge and why and how. There are many different ways to run a company and most have been looked at here. 

Just my .02 from someone looking into the same thing.


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## Richard Hilliard (Apr 10, 2010)

Desert is spot on. The stuff I talk about will increase your revenue. Increasing revenue is good however if the way a business operates is in question increasing revenue only gives you more money to spend. As an example revenue gained at 100 dollars and you spend 110 increasing revenue to 200 will increase your spending habits to 220.That is why it drives me nuts to hear construction consultant gurus state blindly to raise rates when they are told by owners” I am not making enough money or profit”. 

You must look inward to discover where the problem is and then you fix the problem. After the issue is fixed then raise your rates. Otherwise the exact same results will occur. My suggestion is to bring in a business consultant that specializes in the operation of a business. To many consultants in the construction trades cover all aspects of the business. If you really think about it, these same consultants inform you to become a niche service provider company to become an expert in 1 thing and do it well. Quit new construction and become service only, yet they cover all aspects concerning running of a company from CSR, Book keeping, sales, service, business, overhead, and pricing etc. They are doing what they have just told you not to do? This does not make sense to me. When a consultant does not visit your business and then decides to diagnose over the phone run as fast as you can. Your business is not making money and they are going to believe the numbers you think you have?

Becoming more profitable does not always mean that you must raise rates or bring in more money. Discover where the business lacks acumen and take care of that issue. High overhead lower the overhead and live within the means. Large debts pay down the debt. Too many people in the office take from the office. You must fix whatever is wrong or not performing before you can start making a profit.


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## plbgbiz (Aug 27, 2010)

Good points Richard. :thumbsup:

This is why I have such an affinity for Ellen Rohr's approach to mentoring business owners. The mechanics of how the business does what it does are all scrutinized. It would be foolish to think that running a few numbers in Excel and calling it a budget would really float a sinking ship.

Countless surveys have shown that lack of money is seldom the main reason a person leaves a job. The same can be said for failing businesses. Lack of money means lack of proper management. Low prices are not an illness, they are a symptom. The real disease is not knowing how or being willing to actually steer the company. Lack of budgeting and financial report knowledge is just the tip of the iceberg.


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## Phat Cat (Apr 1, 2009)

Every business requires three things:

1. Product, service, expertise - This is what is sold.

2. Marketing - This is how you find buyers.

3. Accounting - This is how you determine if you are making money.

It never ceases to amaze me, that someone who only has 1/3 of the equation, thinks they are ready to operate a business. The majority fail because they hope to learn #2 and #3 on the fly.

With all due respect to the above three posters - head knowledge is only part of it. Experience of putting that head knowledge to work is the real pathway to success. IMO, the odds are greatly against someone learning #2 and #3 on the fly, all the while working in the field.

Not impossible - many have succeeded doing it that way. The vast majority close shop, don't know they are upside down, and don't make it.


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## nhmaster3015 (Aug 5, 2008)

Wy is it that everyone that wants to start a business thinks about tools and a vehicle first? Those are on the very bottom of the list. The first thing you need to do is be able to read a spreadsheet and file business taxes. Next would be marketing and advertising along with cost / inventory management. Plumbing and tools are just that. The business of business is business.


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## Plumber (Jan 18, 2009)

Phat Cat said:


> Every business requires three things:
> 
> 1. Product, service, expertise - This is what is sold.
> 
> ...





nhmaster3015 said:


> Wy is it that everyone that wants to start a business thinks about tools and a vehicle first? Those are on the very bottom of the list. The first thing you need to do is be able to read a spreadsheet and file business taxes. Next would be marketing and advertising along with cost / inventory management. Plumbing and tools are just that. The business of business is business.


Or the common sense to hire someone to do those things. It can be a few hours a week.

We complain about the hacks and DIYs, but we think we can do everything in business because we got a computer.

Wrong.

That business manager had to go to college and work his way up to the title.

That ad man really has connections and a record of winners.

That bookkeeper/CPA knows accounting like we know plumbing.

Warehousemen really do know things that we don't.



Richard Hilliard said:


> Why did all those companies fail? Not enough work? What did they do with the opportunity they had? What happened to the older company’s customer base? Why did they leave? Surely there are companies that are thriving. 2 of the top reasons why companies fail: no working cash and poor business decisions. Location has nothing to do with either of those reasons.
> 
> Back in October I went back to Ohio; keep in mind I was back in Ohio in 2011. My father was in plumbing and I had a company there for 15 years. I have many contacts. Half of my old contacts have closed shop. Half of them closed due to no longer having the energy to reorganize.2 of these companies had well over 50 trucks running prior to 2008. When companies close the employees must do something. Many started their own business and they will fail also.
> 
> Why? They lose work to too many unqualified and unlicensed personnel. They lose water heaters for 50 bucks to handymen and unemployed people. They cannot influence the home owner to use them for 50 bucks more. That is insane. I was talking to 1 plumber and a customer walked into his shop he said this guy just bought 2 ADA elongated toilets from him. I asked him why this customer bought elongated Ada toilets from him. His reply, the customer wanted them. I asked if I could talk with this customer for a minute and find out why he bought them. Pete was pleasantly surprised why the customer purchased the toilets. Want had very little to do with the toilet purchase. Simple concept yet bypassed by many and this is why homeowners move to the unlicensed and unqualified. Why should someone pay more for no difference?


These are different times, to be sure. We tend to blame ourselves, but that saying "It's the economy, stupid" is very, very true.


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## Phat Cat (Apr 1, 2009)

Plumber said:


> Or the common sense to hire someone to do those things. It can be a few hours a week.
> 
> We complain about the hacks and DIYs, but we think we can do everything in business because we got a computer.
> 
> ...


Excellent points. Someone can always hire the expertise that is needed. The sad fact is, most start on a shoe string budget, and there is no money to pay for the knowledge / expertise.


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## Plumber (Jan 18, 2009)

Phat Cat said:


> Excellent points. Someone can always hire the expertise that is needed. The sad fact is, most start on a shoe string budget, and there is no money to pay for the knowledge / expertise.


Bookkeepers are cheaper than a Craigslist plumber. For $50.00 a month you can get the books done.

Ad men come with the places you advertise in. Some of the salesman I've dealt with had decades of ad experience and are very willing to help you in exchange for your business.

Business managers.....many CPAs qualify for that and can be used for a sounding board before you buy that $10k jetter.

So why don't plumbers avail themselves of other people's services? (That's a question).


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## Phat Cat (Apr 1, 2009)

Plumber said:


> Bookkeepers are cheaper than a Craigslist plumber. For $50.00 a month you can get the books done.


In both cases, you do get what you pay for.



> Ad men come with the places you advertise in. Some of the salesman I've dealt with had decades of ad experience and are very willing to help you in exchange for your business.


Good point!



> Business managers.....many CPAs qualify for that and can be used for a sounding board before you buy that $10k jetter.


Good CPA's - How does one find a good CPA? Your average plumber does not necessarily have the connections or knowledge to know who is good and who isn't.



> So why don't plumbers avail themselves of other people's services? (That's a question).


I could venture a guess, but I don't want to have to duck and run. :no:


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## Plumber (Jan 18, 2009)

Phat Cat said:


> In both cases, you do get what you pay for.
> 
> Good point!
> 
> ...


Plumbers could use Angies List to find these services.

The plumbers who know their limitations, are willing to admit it and hire people to do things, are the ones that succeed. Every single successful company has a battalion of outside consultants.

There's a song by Motorhead about knuckleheads:

"And we don't like advice,
We always pay the price, 
Pearls before swine."


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## plbgbiz (Aug 27, 2010)

Phat Cat said:


> ...I could venture a guess, but I don't want to have to duck and run. :no:


That one is easy...

Because we are an arrogant lot with headstrong attitudes that do not possess the confident humility needed to get help where we are lacking.


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## wyrickmech (Mar 16, 2013)

Do what you are good at and outsource the rest threw outside source or hire. As long as you have that cost figured in on your rate as overhead you should be fine


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## victoryplbaz (May 19, 2012)

Turd Chaser said:


> They have recently hired a consultant only to have him tell our owner that he is not making enough money. We raised our labor rates and material markup and have already lost several accounts. He is making more profit on the jobs that we are getting but we are getting less of them. Last year I averaged 48 hours per week. Mainly because our rates were low. I realize that we need to increase profitability, however I feel that there may have been a better way. Some commercial service customers had there rates increased by over $20/hour. Tough pill to swallow.


 
Just because they lost a few accounts dont me much. If your doing less calls but more money its really a even trade off. Much better than doing more calls at less dollars.


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## Richard Hilliard (Apr 10, 2010)

Plumber 
You bring up good points. 1 point that is not and has not been discussed; you don’t know what you don’t know.
When you’re not aware of the numbers (accounting) how do you know if you have the right 1 when you hire outside?

The same applies for marketing. Marketing actually covers a ton of things. 1 it is to discover what is wanted, necessary, and will work in your marketing area. 2 it is to brand your company 3. It is to find clients for your product and services 4. It is to set you sales process and aid the process. How do you know who to get?

As an example internet marketing do you go after the organic search engines or do you go for Google Maps? Keep in mind when you do an organic search frequently the Google Maps pops up first then the organic search shows under it. Which marketing firm do you trust and what area do you want to show up on the internet. If we think that most people are using smart phones you would choose Google maps over organic search.

Your marketing should also influence your products which influences your service. Cat listed 3 important items and now we see how marketing affects her number 1. Marketing also reflects the price and helps set customer expectations and standards. Yet we neglect marketing and limit it to yellow pages, post cards, and fliers. The best thing that happened for plumbers is the internet. Now your web site can reflect your marketing. A video showing why you do what you do, what you do, and then finally how you do it sets the expectations and standards. Once again we are plumbers with tools, trucks, knowledge and skill to install products and service.

Accounting is the most important of the 3. Numbers do not lie unless the business picks and chooses what numbers to view. This will go back to you don’t know what you don’t know.

When you do not have the cash flow you cannot hire outside help.


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## Richard Hilliard (Apr 10, 2010)

These are different times, to be sure. We tend to blame ourselves, but that saying "It's the economy, stupid" is very, very true.[/QUOTE]




The state of the economy has had an effect on many businesses. In the past people would wait for service. They were stuck. Call volume has dropped significantly. The companies that have increased their call volume are dumping huge amounts of money in advertising to keep those phones ringing. Frequently the way business is run has remained the same with these companies. Many companies were successful despite their inefficiencies. Once the call volume dropped it started to bring out the inefficiencies. The inability to recognize these faults before the ship started to sink has created a worse environment and has shut more doors. The unwillingness to change business models has aided in the destruction of the economy. Business is not the same as it was in 2000 and it not the same as it was in 1980.


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## James420 (Nov 14, 2012)

Richard Hilliard said:


> These are different times, to be sure. We tend to blame ourselves, but that saying "It's the economy, stupid" is very, very true.







The state of the economy has had an effect on many businesses. In the past people would wait for service. They were stuck. Call volume has dropped significantly. The companies that have increased their call volume are dumping huge amounts of money in advertising to keep those phones ringing. Frequently the way business is run has remained the same with these companies. Many companies were successful despite their inefficiencies. Once the call volume dropped it started to bring out the inefficiencies. The inability to recognize these faults before the ship started to sink has created a worse environment and has shut more doors. The unwillingness to change business models has aided in the destruction of the economy. Business is not the same as it was in 2000 and it not the same as it was in 1980.[/QUOTE]

It makes me wonder if the latest recession was more of a correction. I made a lot of money between 1997 and 2007 working for someone else, so did a lot of other people. What our economy looks like now is what I expect it to be for another 7-10 years at least. Big businesses are still laying people off, new house construction is better than it was a few years ago but its not great.

I'm hoping that this isn't the summer that we see 4.50 gasoline, that will be a real killer for everyone.


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## Richard Hilliard (Apr 10, 2010)

James420 said:


> [/COLOR]
> 
> 
> 
> ...


 James
Each down economy has cleaned the system. This is my 4th 1.I still believe the one in the 70's was worse. Gas jumped 3 times the price, people waited in lines for food and gas. New construction stopped and what new was going on in Ohio was forced to install electric appliances. Groceries doubled. This is when the steel industries shut down. Erie, republic, union drawn, USS steel. Timken roller bearing dropped half its work force, Hoover sweeper moved to Mexico. Ford closed their plants in Cleveland and Canton.

I have the same idea that this is our new economy and has been for the past 3 years. The way business is done must be revisited and must change This change will happen year to year. We are not doing the same thing that we did in Jan of 2012.


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## James420 (Nov 14, 2012)

Richard Hilliard said:


> James
> Each down economy has cleaned the system. This is my 4th 1.I still believe the one in the 70's was worse. Gas jumped 3 times the price, people waited in lines for food and gas. New construction stopped and what new was going on in Ohio was forced to install electric appliances. Groceries doubled. This is when the steel industries shut down. Erie, republic, union drawn, USS steel. Timken roller bearing dropped half its work force, Hoover sweeper moved to Mexico. Ford closed their plants in Cleveland and Canton.
> 
> I have the same idea that this is our new economy and has been for the past 3 years. The way business is done must be revisited and must change This change will happen year to year. We are not doing the same thing that we did in Jan of 2012.


The worst part of the gas crisis was that tankers were loaded in the Delaware river and other ports all over the country and were told not to pump off, as there really wasn't a shortage, oil companies just wanted to get paid like we have now. I'm not into capping profits or revenues but what the oils companies are doing now is even worse. They got a taste of what they could make and they won't let go of it. At the current price of of oil, gasoline should not be 3.60 a gallon, more like 2.80 a gallon.


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## johntheplumber (Feb 11, 2013)

its a flipping rip off. We also have enough oil under Alaska to supply North America for generations to come but certain people wont let that happen.


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## plumber101us (Feb 25, 2013)

you will also have to learn tax laws and accounting. Unless u want uncle sam closing u down and siezing your assets and puttin u in prison. and if u really want to make it and cover your tail u will need to charge five times what you pay your highest paid tech to be able to make a profit and do all the government requires {taxes, social security, licenses, insurances.workmans comp,truck insurance, govt.mandated employee insurance [obamacare] truck tags and insurance,etc,etc,etc, Not a cheap thing starting your own bussiness, I have over a 100K in tools and still investing.


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## James420 (Nov 14, 2012)

johntheplumber said:


> its a flipping rip off. We also have enough oil under Alaska to supply North America for generations to come but certain people wont let that happen.


Right now they are pumping enough out of the Dakotas to supply most of the country but we are lacking the pipelines to do it. In the northeast they are rail caring from the Dakotas but imagine how many rail cars it takes each day when a small refinery produces 150,000 bpd. The other thing that kills it for jobs and prices is Europe, the NewYork Harbor brings in approx 750,000bpd of gasoline from Europe, Europe uses alot of Diesel and fuel oil so gasoline is a by product for them. Instead of flaring it off, they send it here and get paid for it. 

Btw, the pipeline out of Canada would of brought good jobs but oil sands crude is nasty stuff, like sludge, the stuff out of the Dakotas is like kerosene its so lite. The Oil sands stuff has only a few refineries in the US that can produce that crap, and the effect on prices would have been nil. The refineries like the old Sunoco in Toledo, Ohio I believe are getting the crude from the Dakotas, any refinery getting crude from there via pipeline is probably making 4-5 million a day.


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## DesertOkie (Jul 15, 2011)

Drilling for oil is killing the planet. Don't you care about the world your kids will live in?


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