Advice on debt vs starting business

[lilacorchid]

The stars have aligned and I have temporary lost my cool reasoning and basically running around like a headless chicken trying to figure out what to do here.
My husband is gunning to start his own business come May. We can all live off my salary, with $100 a month to spare (and if we had to, there is fat to cut, this is living as we currently do.)
I expect the cash flow to be somewhat negative the first month or two due to a vehicle payment for the business, but picking up as the summer goes on and his work being able to cover the expenses by the end of summer.
On the personal side of things, our house has cost us a lot in repairs over the last year, and we are currently sitting on $10K of debt. My gut reaction is to get rid of that debt before he quits his job. His gut feeling is to quit before he ends up in the looney bin due to his job.
This weekend, another large house problem came up. Our water feed to our house broke and it's got to be fixed in eight more days or the city turns it off. Not tens of thousands to fix, but definitely thousands. It's going to push our debt free day back.
Question: Should we push his business launch day back? Or is it "only" a couple of thousand and go ahead as planned?

[DutchGirl]

How sure are you about his business becoming a success? Starting your own business is often a risk...

[secretwealth]

This is a tough one. It really comes down to a couple things: 1. whether you two can afford the 10k debt on your salary alone, which I assume you can. 2. if he stayed at his job, how much faster could you pay off that 10k debt? If it's a matter of 2 months, he should see that 2 month end as a goal, and just suck it up for another couple months to get the debt out of the way. Unless, of course, the workplace is abusive and toxic to an intolerable level, in which case he of course should get out now.

[lilacorchid]

DutchGirl: He works in heating and cooling. Our temperature swings 70C throughout the seasons and there is enough population base here to add one more guy doing this kind of work. (That's part of his complaint... we had the hottest summer on record last year and he was still home by 2 or 3 pm daily for some unknown reason.) Also, he already has nearly all the tools he needs; we just need a vehicle and if the business craps out, he can sell the vehicle to another guy starting out. In terms of risk, without counting lost salary, I think we might be out 10K if it doesn't work out. Counting lost salary if he didn't get a single job in a year: 50K

[lilacorchid]

secretwealth: His workplace is terrible. In the seven years he's been there, over 50 people have quit and I bet the business doesn't employ more than 75 people at a time! There is seems to be a shortage of work, even when other companies are making a mint, and he has to sit there, getting paid nothing, hoping work comes in as he gets paid by the hour, but only while on a job. They ask illegal things of their employees and get angry when they don't comply.
Other facts of interest: The 10K is on a HELOC and we own the house outright (minus the HELOC right now). We have no car payment (the business will once we buy a vehicle) and we could squeeze more out of the budget if we had to.

[bulgaria]

I see a lot of risk and uncertainty.
Personally I would not jump into such a situation unless there was no other way. So I would stay with the boss a bit longer.. so you have a guaranteed income and can deal with the debt first.
In my spare time (vacation/weekend etc) I could see if there is work available for my business.. once you have that ok-feeling the normal job could be fully replaced by the new business.

[Ego]

Do both. Keep the old job and start the business slowly. That way he will keeps his contacts in the business and spread the word that he's willing to do after-hours and weekend jobs. The business will grow organically. He (and you) will learn the sales, accounting, billing, licensing, collections, etc, without it being life-or-death.
I suspect it can be done without purchasing a truck, at least in the short term.
Good luck!

[secretwealth]

If he's forced to sit at work and do nothing while getting paid nothing (that sounds illegal, btw--maybe seek a lawyer?), that seems like a great opportunity to work on getting the business started, as Ego suggests. Do both.

[lilacorchid]

I will still be keeping my job and doing the book keeping on the side so it won't be life or death, possibly just really really uncomfortable.
He does not feel comfortable "poaching" clients from his present employer. His thoughts were to flyer our area and try to get the locals interested, though he wouldn't turn down work.
I suspect we could just get a decal for our vehicle and he could rent a truck for when he needs to haul around a furnace/ac or both for a job. In the end though, he wants a van to work out of. That's the whole business, minus my computer for doing the books. He doesn't need a shop; he just needs a truck to work out of.

[bulgaria]

Want is not equal to needing.
So does he really need it.. you already said that he can hire a truck if needed.
I don't think it matter that much in the beginning if the side business is profitable; since you want to get started. Making profit becomes more important when he drops his day job.
If I would be in your situation I would certainly not accept him quitting his job causing more debt and causing also a lot of risk for you and your family.

[CS]

I'd also say nix the van. If he really wants the business and some sanity, he can make it work without it.
Doing both would be a good way to go. Once you start getting some work, and referrals, quitting the day job would be a much less stressful proposition.

[Ego]

The company he buys the furnace/AC from will deliver it for a fee. They'll also take away and recycle the old one - again - for a fee. I bet his current company has large equipment delivered to the job site and the old one hauled. Factor these into the pricing.
The Mustache Money guy talks about how useful car roof racks are for this kid of work. Supplies are strapped to the roof, equipment in the trunk or back seat. While it is not as convenient as working out of a fully stocked truck, it could work.
Also, national companies like HDSupplySolutions are delivering everything down to the smallest nuts and bolts directly to job sites. He would have to be extremely organized when placing the order, they'd deliver it onsite and he'd do the work.
This can be a bit of a pain on the front-end when you've got to think through every detail of the entire job but it makes per-job accounting much easier and you don't need to haul around a truck full of every conceivable supply.
Personally I believe this is the future of this kind of work. It also makes his business scalable. He can think of labor as another input and eventually hire it out. His expertise is costing the job.

[lilacorchid]

secretwealth - I think it's total bull that he has to be ready to work all day, but get nothing for it. Their after hours on call is garbage too. As a unionized government worker, I'm outraged!!! But it seems that this kind of treatment is standard in his industry, and definitely at this company. They don't even want to pay fair wages per hour.
There were some lawyers brought in a while back when the bosses wanted them to sign an "Employee Handbook" that was a disguised contract. In the end, I think they did because you either sign or get fired. That's the kind of place we are dealing with. The only reason my husband hasn't been fired (besides doing good work) is they can't keep staff on so he can pretty much tell everyone off whenever he pleases and still be employed.
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To add to the discussion: We aren't FI, but we do have some savings, and I'm in no way going to lose my job unless I do something really stupid like steal from my employer.
We are discussing incorporating the business right from the beginning to keep us from getting sued. My thoughts (and I need to check with a lawyer and/or accountant) is to lend the business the start up money by using our HELOC, and then have the business pay us back the money plus fair interest. (Hopefully that will be more then what we borrow the money for.)
I can't see him not getting work. When it's -30 and you think your pipes are going to freeze, you take the first guy who will come out, not necessarily the cheapest guy or the best guy. That being said, I don't project him making as much as he has at work for a couple of years. The trade off is the flexibility for the home life.

[lilacorchid]

Ego - I will look into the delivery costs. I know that at the place he work, they send an apprentice or helper ($10/hr guy) to drive across the city and pick up the parts and take it to the jobsite if something is missed. I don't know if it is just to give the junior guys something to do or if it's more cost effective. The city is small and we live about two miles from the wholesalers.
I have been over to MMM's and I know how he preaches things! I'm not sure my husband will go for it, and I'm not sure how the public feels dropping $4k on a guy who shows up in an unmarked vehicle with crap strapped to the top. People around here already think the industry is shady due to a large company being caught taking advantage of little old ladies. Having a vehicle with a decal is partly PR too.

[Christopherjart]

Why not start the business part time to people close to home in the evenings and weekends. If he leaves work at 3 many days that gives a lot of opportunity to work afternoons at first.
Pay for the big expenses at home while part time and go full time once the debt has been taken care of.
Sure if you really want a van perhaps you can get an inexpensive new one while he still has income from his job to pay for it.

[GandK]

I'm going to disagree with many of my fellow posters. The word "illegal" would be an employment deal breaker for me. I'd get my husband out of that situation as soon as possible.
If I were in your shoes, I would create a "business fund" and set a goal amount for it (X) based on your mutual understanding of the things your husband MUST buy in order to generate an income. Then agree that he can go ahead and quit his current job whenever the business fund contains X. How he chooses to get to X is up to him. Sell things, side jobs, etc. Let him worry about that, while you focus on keeping your household running and dealing with your water feed, etc.
I think your husband should be far more concerned as an aspiring small businessman about the specter of his current boss's illegal activities possibly smearing his own reputation. That would be a much worse image problem than the unmarked vehicle you describe above. Illegal is an emergency, IMO.

[jennypenny]

>>I'm not sure how the public feels dropping $4k on a guy who shows up in an unmarked vehicle with crap strapped to the top.
Too funny. I was just talking to my brother and asked him about it. He said his business almost doubled after he got his custom truck and matching trailer. He also said he was able to charge more because people thought they were paying a "business" and not just "some guy." They expected to pay more. HTH

[GPMagnus]

Lilac
As someone who has started a business, let me give you some advice:
1. Is there a need for his services? You assume there is but it is absolutely crucial to actually find out. If he is uncomfortable with poaching clients, he can put up fliers 20 miles away and if he gets work, the gallon of gas will not be a huge expense.
2. Find someone who has the main required asset (=the truck) and who needs to sell it or who will rent it out to your husband - ideally for a cut of the charge. In general borrow assets and have variable rather than fixed costs, and low low low Primary Sunk Investment.
3. 50K of lost earnings is a lot of money - it's possibly 5-10% of your retirement fund, so heed the advice of the others and tell your husband to start the business as a side time thing. If he is going nuts at work, get him to do useful things like design fliers, decide pricing, arrange his tools - people underestimate the amount of preparation to open a business and when you are doing things on your own time without a pay check its much harder ...

[lilacorchid]

Christopherjart - I think it has to do with competing against your primary employer. I'm not entirely sure he signed something saying he wouldn't do that or what. I can see him doing admin stuff in the afternoon, but he never knows until that day (and sometimes until 2 or 3pm) if he has more work or is done for the day. It's an endless source of frustration for me. His paycheques are part time (he gets on average over the year, 30 hours of pay per week) but he has to be available 8-5 daily. He's on call every three weeks for a week, so that effectively blows that time away too. His thoughts are that he would rather be sitting around at home working on his own business for zero dollars per hour then sitting around at work for the same pay.
GandK - That's how I feel and I have been harassing him for YEARS to get out of there. He stuck around to get his ticket, and then for a while just because he felt he owed them I suppose. I don't know why the sudden interest in quitting, but I think he is pretty fed up with their BS.
jennypenny - Thanks for the insight!
GPMagnus - 1. Yes, there is a need. He works for another company, he works for himself... there is a shortage of guys in his trade, and an even bigger shortage of good guys in his trade. 2. Thanks for the advice! 3. We had a soft start date of ten weeks from now, and then all this crap happened. I told him that he needs a business plan, a name, marketing ideas, laywer/accountants, etc all set up before I feel I'm comfortable with him letting go of his wage. I want it all there, ducks in a row, before he tells his employer to take a hike. (And to clarify, the 50K was gross income plus the loss on the vehicle if we had to set it on fire on the front lawn and couldn't get a dime for it. Worst case senario. Actual wages lost the first year would probably be closer to $20K gross.)
firefighterjeff - Thanks for the advice. He definitely has trouble planning jobs and I was going to design a job sheet for him... he can go and do the estimate, check boxes of things he will need, and then if he gets the job, he knows what he's in for. A trailer hitch on our vehicle is a great idea! I'll run it by him.
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Long term plan for this business is to have me quit where I am once our son is in school and train me in the trade as well. At that point, we should be established and be able to take on jobs at will instead of just because we're desperate.

[lilacorchid]

(Also, if it all falls through or he decides he doesn't want to be a business owner, it's currently super easy for him to find a job. All the old guys are just getting too old to do the labour anymore and no one goes into the trades it seems.)