Getting Into the Business...

[vector40]

Hi guys! For those I don't know, I'm a member of this site from a year or so ago. Despite a lack of any formal training -- just the knowledge I picked up from sources like this, and a few other bits and pieces -- I concocted the idea a while ago to start up a lockout business, and several months of delay later, I am now actually doing so.

I want to really extend a thanks to this website, by the way, and all of the contributors and members who make it possible. I literally would not be doing this without you.

Anyway, I figured this process might be of interest to anybody else with a mind to enter the business themselves, so I thought I'd talk about the experience I'm having as it occurs. It's 2:00 in the morning, my quads are sore, and I may or may not be making sense, so LET'S SEEEE...

Info: I am 19, a college student, and trying to do this part-time. As a matter of fact, I'm trying to do it very part time; two or three callouts a week would be pretty good by me, and it's just extra cash, not to support myself. I already own a vehicle, I already have nearly all the equipment I need, and I (at the moment) have the additional money to handle my startup costs. I'm only trying to do lockouts; I have neither the equipment or resources nor in many cases the knowledge to offer other areas of locksmith work. I live in California. If any of the above differs from your situation, which I imagine it will, you need to modify what I'm saying appropriately to fit you.

Anyway...

My research showed me that, to get started in this business in the state of California, the county of Santa Cruz, and the city of Santa Cruz, I'd need several pieces of paper.

California -- specifically the Bureau of Security and Investigative Services -- requires anyone doing any aspect of locksmithing to hold a specific license. Unlike other BSIS fields (private investigation, alarm installers, security, etc.), however, there is no requirement either to demonstrate or even to possess any experience or skills; they don't care. The application involves primarily getting fingerprinted through a LiveScan location (I went to the local sheriff's office; they stick your fingers on a machine and press keys), which will be used for a background check through both the Department of Justice and the FBI. You fill out forms and you need a couple passport-type photos. Total costs: about $150.

The county of Santa Cruz demands, like I imagine most places in the country, that anyone operating a business under a fictitious business name hold a license. "Fictitious" sounds like you're running a con game, but all it means is that business names are assumed to display the surnames of the business owners in the name itself. "Smith's Appliances," "O'Reilly's," and "Kurosawa, Gerlitz, and Young" are examples. (Remember, last name, not first.) I think there's a couple other specific requirements, but that's the meat. If you want a name that doesn't include your own, like "Ace Locksmiths," you need a fictitious business name license, which the county issues. You just send in a form, got it back in a few days -- with the requirement that within 30 days I contact one of several court-approved publications (newspapers and periodicals) in the area and ANNOUNCE the fact that I had opened this business with a fictitious name and who I was. I suppose the idea here is to warn the public that a new business is rampaging around with a fake name; I'm not sure if this is a standard requirement, though I imagine it is. Haven't yet taken care of this. License cost me $30.

The city of Santa Cruz, like just about everywhere, requires that anyone doing business in their city hold a license. I think this is a tax thing, for the most part. You fill out a form, fairly basic. The one catch here, which I didn't expect, is that Santa Cruz also has a municipal (city) ordinance (law) that says anyone operating a business from a home -- which is not, technically speaking, zoned for commerce -- has to have a clearance from the zoning department. It doesn't matter if you don't do a d*mned thing there; indeed, I was told that most cases are exactly like mine, where the "address" of the business is nothing but a mailing address, and the owner does his "work" elsewhere. But even without a storefront -- like a mobile locksmith operating from his vehicle -- you need to list an address, and if that's your home, you need to be cleared. No hassle to it -- except it costs $200. It's just a money thing, something you'll need to be used to if you operate a business. The city wants its cut. Total cost including the zoning fee and the license fee (which was determined partly by the type of business and partly by my number of employees -- none) was about $245.

Taxes. California has a sales tax, but unlike some states, it does not apply to services. I'm not selling a tangible good, just opening doors, so I'm clear of that. Sweet! Income tax is another story, of course, and since I'm operating my own business rather than drawing a paycheck from The Man, I need to deal with federal and state income tax myself. So: keep records of all earnings, all business expenditures, receipts of both, and fortunately my parents hire a tax guy when the IRS comes 'round, so the actual filing should be straightforward. But DON'T SPEND THAT MONEY! This is a good lesson for someone like me, whose revenue may very well be going to beer money; if you don't have an actual cash reserve in your business, you may be scraping under sofa cushions when tax season creeps up on you.

Sound smart, don't I? I'm just making this up as I go.

Insurance. Most locksmiths carry policies covering... well, covering their arses, which is a good idea. Unless I trip and fall through a plate glass window, which I will sincerely try to avoid, my potential for damages is very small, so I am avoiding the premium and skipping the coverage. Now, The National Locksmith (one of the larger industry rags) offers a $10,000 (uh... $15,000? one or the other) bond with subscription. This is an unusual sort of thing; it doesn't actually cover your work or your dentures, but if you visit a house, change the locks, and come back the next week with a key you made to rob the place... the bond covers the CUSTOMER for his losses. It's sort of a confidence bond; it lets the customer be reassured that I'm not a crook, or if I am, he's got a fallback. And quite frankly, it lets you say "Bonded!" in your advertising, which people probably don't have a clue as to the meaning of, but seems like something you want to have. Make sense? Subscription and bond for a year from TNL: $63.

Because locksmiths do enjoy -- and require -- certain privileges, some manner of identification is important to have, the "ID" or "license" when someone demands your ID or license. In many places, this means your business license. If there's a locksmith-specific license, that's it; my BSIS license, which has a photo, is ideal. I believe TNL also issues a photo ID identifying you as a locksmith. These are the things you'll want to be able to flash when a cop asks what you're doing to that car, or you need to get into a restricted area to find a customer, or when you're trying to apply to ClearStar and they hate humans, or whatever. Stick 'em in a leather wallet or something and practice your Law and Order flash. Ain't we cool? (Note: don't... do this.)

So if you've got all this, and you've still got two nickels to rub together, you're a legal locksmith and the owner of a legal locksmithing business. I haven't actually done the rest yet, so I'll end this chapter here -- but next time, we should be talking about business cards and stationery, equipment, marketing and market research, and eeeeeverything else...

Watch this space!

[Raccoon]

Sounds exactly like me only 9 months ago! Cheers man!

I went through the same dance, though my fees were cheaper for the most part. $25 for the city license (annual), $50 for the residential zoning (one time), $150 for bonding through a local agent (annual), and that's just about it to start.

I too need to sit down with a CPA (Certified Public Accountant) to talk taxes. I've been doing 9 months of business and haven't saved a nickle. I know city/state/federal all want a piece of the action, sales and services both. I believe the city alone wants 6% GROSS with no deductions, which I certainly hope does not include parts and hardware re-sold to the customer at no markup and which I already paid sales tax.

A lockout business is great, and I did pretty well. But you will quickly start receiving calls to change keys. Don't pass up this business-- buy a pinning kit and some pre-cut keys so you can service these calls. Like me, you may even get the totally random contractor asking if you could master key their building. JUMP ON THAT SH*T! I billed $4340 and walked away with a sparkly new code machine with cash to spare, and the next job I get will be pure profit. Now I'm cutting auto keys and that is becoming very high demand for some reason (the local dealers and garages are refering their customers to me and I never delt with any of them!)

Now I accept credit card payments, and it's not as expensive as I thought it would be. Essentially $9 a month and $30 a year is what I'm paying at this point. It's really $25 a month, but minus $16 a month that I was paying for my business checking account, which is now free but I was paying for anyway. The setup I have is really neat too. I just phone in the credit info at the point of sale, on my cell phone, wherever I'm at. It confirms the credit card has money, authorizes the sale, and the money is dropped into my checking account that evening with zero chance for chargeback. You've probably read my views about accepting all payment types on another thread, and this certainly applies to a primarily lockout business model like yours.

Keep up the good work man and share some juicy customer stories.

[Raccoon]

Oh yeah, and do find a bank you're comfortable with, and ask to sit down with their business banker. They are chalk FULL of useful informaton, and I must have racked up 30 hours with my banker since I opened the account. They also set me up with a great credit card with both my and my business name on it, and a system for depositing money and linking with my personal checking. It's definitely important to deposit all your earnings into one account before you start paying it to yourself and putting away a chunk in the business savings for taxes (again, something I've neglected). They also have connections with other lenders and accountants, and know what their successful customers are doing to succeed.

[vector40]

Now I accept credit card payments, and it's not as expensive as I thought it would be. Essentially $9 a month and $30 a year is what I'm paying at this point. It's really $25 a month, but minus $16 a month that I was paying for my business checking account, which is now free but I was paying for anyway. The setup I have is really neat too. I just phone in the credit info at the point of sale, on my cell phone, wherever I'm at. It confirms the credit card has money, authorizes the sale, and the money is dropped into my checking account that evening with zero chance for chargeback. You've probably read my views about accepting all payment types on another thread, and this certainly applies to a primarily lockout business model like yours.

Actually I haven't; could you rehash? It'd be nice to turn this thread into a general resource for people seriously trying to enter the business. Do you find that you often encounter lockout customers who don't have the cash or any checks on-hand to pay you? What credit service do you use?

Oh yeah, and do find a bank you're comfortable with, and ask to sit down with their business banker. They are chalk FULL of useful informaton, and I must have racked up 30 hours with my banker since I opened the account.

What sort of stuff do you mean?

[digital_blue]

Any objections to this being relocated to the Locksmith Business Info forum?

db

[Bud Wiser]

Raccoon, you better hurry up and get yourself an accountant! I don't care what business your in, you won't know all the legal crap or tricks of the trade to manage your taxes no matter how good you think you are! I don't know about your state, but mine is darn right vicious! The Federal government is more then willing to work with you in unexhaustable patience! NOT my State!!! I'd rather deal with a organized crime boss then NYS! So it really is important to have some one who keeps up with all the latest and greatest things in taxes and business expenses!

Just my taxable 2 cents

and btw, what's with the Mastercard? I thought you were a check man

[vector40]

Any objections to this being relocated to the Locksmith Business Info forum?

db

Go for it.

[Raccoon]

The MC logo in my signature is an inside joke. Well, anyone who read Schyler's Name thread would get it.

Vector: On a thread by LockNewbie21 regarding a lockout call he assisted with, where noone would accept check or invoice them, I opened a discussion about how a locksmith should accept every payment method under the son.

I accept Cash, Check, Visa/MC, and I'm willing to invoice and accept payment in the mail.

I estimate the average american only carries a maximum of $40 cash in their wallet, and many people have done away with their check books in favor of their debit or credit cards. So by accepting cash only, you are limiting yourself and harassing your customers.

Presently, I don't get an aweful lot of CC transactions. Only 3 in the last 30 days; one was a customer, one was the post office I rekeyed their locks, and the other was AAA (tripple a) who called me in a pinch to unlock someone's car and since I don't have a contract (yet) with AAA, they simply paid me by credit card over the phone.

I really can't describe everything my business banker has taught me or brought to my attention. Just consider that they handle hundreds of small business accounts and know the ropes. I personally use Wells Fargo for all of my checking and savings accounts, and my merchant credit processing. If you have a Cost Co membership, though, you might be able to get merchant credit card processing for free.

[Bud Wiser]

The MC logo in my signature is an inside joke. Well, anyone who read Schyler's Name thread would get it.

ok, got it now!

[vector40]

Thanks Raccoon.

What's your situation with AAA? How did they get your name?