I also doubt that that many construction businesses died 6 months after they started up either.
Well you missed my point, that the businesses born in a period are not the same businesses that die. The float of existing jobs, as well as companies in existence, ebbs and flows with the work seasons. If you investigate just how many companies are formed or closed during a year, it'll help you understand the birth death model. This is information which is widely available since each business entity has to file IRS forms at some point. Roughly a million people a month are separated from their employment in the US and roughly a million are hired. The difference between those two numbers makes up the stat which tells us if "new" jobs are being added or if employment on the whole is shrinking. It's a two steps forward one step back process. The same is true for individual companies which are frequently one individual!
Are there really that many NEW construction businesses being started.
Consider that virtually all construction work is done with nested sub contractors. NEW businesses are formed constantly and continually in the course of business. This is not to say that some don't last for years and years, they do. Others are formed as a way to move business from one sub to another, to reduce liability, etc. and are dissolved as the work is finished. I have one friend in the biz who forms a new corp every time they take on a new project in order to limit the liability to one large project. When the project is finally over he dissolves the corp.
Just the other day an old employee of John's came by to run numbers by him for doing a sub contracting job for another company, a sub working for a big residential builder. The problem he needed help with was what he'd have to charge per sheet to the sub contractor if he had twenty or so subs working for him and how much liability insurance he'd need etc. If he went ahead as planned, each person working under him would, in essence, be a separate company or, as is done in drywall, a partnership of two, since they work in two man teams.
So if he got the bid, our friend would be a new company and then there would be 5-10 separate companies working under him, all with one or two people in them. If those partnerships were successful they might then take on a helper who was an employee. This is essentially how my biz works as well, very few employees, we're all sub contractors, all in biz for ourselves. We all either do biz as a sole proprietor,partnership, LLC or an S corp. You only hire fulltime office help as employees or skilled workers when labor is tight and you can't risk not being able to get a sub contractor to do your work.
Who wants the nightmare of employees if you don't need them over long periods of time? I've worked this way for some of the largest corporations in America. They get the work they want and need without ever having to have me on their rolls as an employee and I get paid more than an employee ever would for taking on the risk of bidding the job correctly. It works out for both of us. I've managed to out last virtually all my big company contacts this way.
The simplest form, if the company isn't permanent, is a sole proprietorship since all you need to file is a schedule C. A partnership is the next easiest. It is not unusual for construction contractors to work for more than one type of entity, sometimes as an outside contractor and sometimes as an employee. My husband has been all three at once, a sole proprietor, an employee and a partnership. Once he got an offer he couldn't refuse he gave them all up to be an employee but if that went away for some reason, he'd dig out the old business cards and form another company. With his contacts he'd have jobs, suppliers, financing and employees right away. He could lose his job on a Friday and be up and running on a Monday.
It is this reality which gives him leverage with his current employer, mainly because that is how they started their company, from a fall out with their previous employer. They walked off with half the guy's clients. If you have your shit together as far as bonding, insurance and an employer ID number you make a whole lot more money as an outside contractor than you do as an employee but you carry the risk, which in commercial construction is considerable. Companies are constantly being formed and split in construction. The general contractors, the ones you see on the signs at the site, are just shell companies that have good access to capital and an ever changing rolodex full of subs. |
