From idea to replacing full-time salary in 4 months • Hacker News Board

Re: From idea to replacing full-time salary in 4 months

#121

Post by bhousel » Mon, Apr 16, 2012, 4:43 PM UTC

_sentient wrote: post #117

bhousel wrote: post #97

Earlier quoted context omitted.

You are correct that the maids are employees, but since he only just started this business, it seems like a very fixable problem to convert them to employees. I ran some numbers on a free paycheck calculator site (paycheckcity.com) and assuming the following: Washington DC, wage of $20/hr, 30 hrs/week, married (2 exemptions), the numbers come out to: Weekly Gross Pay $600.00 Federal Withholding $29.81 Social Security…

You're forgetting workers' comp, which can be very expensive for this particular type of business. I'm in the industry, and can tell you from experience that it can cost between 20 - 25% of a workers' gross pay. There goes his profit margin.

How can it cost that much? I pay something like $500 a year for my own workers compensation insurance, because it is required by New Jersey. $10/week is peanuts.

Edit: I'm not calling you a liar, just genuinely curious.

Re: From idea to replacing full-time salary in 4 months

#122

Post by _sentient » Mon, Apr 16, 2012, 4:48 PM UTC

patio11 wrote: post #104

rsynnott wrote: post #63

Earlier quoted context omitted.

I'm not sure about America, but in most countries I'm familiar with, it is ultimately the decision of the tax authorities whether people who work for a company are employees or contractors. There's generally a well-specified test for this. Certainly, in this country, the maids would be unambiguously employees.

The US regulations are terribly vague, depend heavily on facts-on-the-ground, and can turn on minutiea like who gets cake on their birthday ( so not making that up). That said, even for a law which has more edge cases than a course on graph theory, this case is not a close call.

It largely comes down to whether or not you direct and control the manner with which these maids work, which he certainly does. He has his maids wear branded uniforms, gives them a set checklist to follow, and has them bring a bottle of wine to each first-time customer. The fact that his maids have their own clients and use their own cleaning supplies does work in his favor, but overall he's still on the wrong side of the divide.

I'm not an employment lawyer, but I have been through a state employment classification audit, and I am pretty confident his maids would be reclassified if he came under scrutiny.

The IRS has a 20 point "Independent Contractor vs Employee" checklist, and he falls on the wrong side of a number of these items: http://www.webster.edu/about/policy/independent_contractor_c...

Re: From idea to replacing full-time salary in 4 months

#123

Post by tptacek » Mon, Apr 16, 2012, 4:48 PM UTC

bhousel wrote: post #121

_sentient wrote: post #117

Earlier quoted context omitted.

You're forgetting workers' comp, which can be very expensive for this particular type of business. I'm in the industry, and can tell you from experience that it can cost between 20 - 25% of a workers' gross pay. There goes his profit margin.

How can it cost that much? I pay something like $500 a year for my own workers compensation insurance, because it is required by New Jersey. $10/week is peanuts. Edit: I'm not calling you a liar, just genuinely curious.

Do you work for a cleaning service? Cleaning services pay anomalously high worker's comp insurance rates (though I too was surprised to hear that it might be 20%).

Re: From idea to replacing full-time salary in 4 months

#124

Post by _sentient » Mon, Apr 16, 2012, 4:53 PM UTC

bhousel wrote: post #121

_sentient wrote: post #117

Earlier quoted context omitted.

You're forgetting workers' comp, which can be very expensive for this particular type of business. I'm in the industry, and can tell you from experience that it can cost between 20 - 25% of a workers' gross pay. There goes his profit margin.

How can it cost that much? I pay something like $500 a year for my own workers compensation insurance, because it is required by New Jersey. $10/week is peanuts. Edit: I'm not calling you a liar, just genuinely curious.

The cost of workers comp is determined by the type of labor involved. Maids work with potentially hazardous chemicals, are doing physical labor all day long, and also drive a lot from job to job. This makes them substantially more expensive to cover, compared to a clerical employee.

Re: From idea to replacing full-time salary in 4 months

#125

Post by pier0 » Mon, Apr 16, 2012, 4:53 PM UTC

It looks to me the idea may not be the best one and his success will not be easy to replicate (for those that are thinking to do the same in their cities), but the discussion the story generated is very interesting in two ways:

1)there are bits of localcasestudy's experience that can be used by other businesses irregardless of what sector they are

2)the moral of the story is that if you want to run your own business you can do it. And it doesn't necessarily have to be a tech startup looking to raise funds.

Re: From idea to replacing full-time salary in 4 months

#126

Post by infinite8s » Mon, Apr 16, 2012, 5:11 PM UTC

edw519 wrote: post #53

This time next year on reddit: "From working my ass off 90 hours per week running a business that wouldn't scale to nice salary/benefits for 40 hours. I'm taking home the same net and I feel like I'm on vacation." I don't want to sound too snarky and I really admire OP's initiative and ability to make things happen, but this just doesn't smell right. It's easy to get excited by nice revenue in the beginning (as he sh…

Based on the labor discussions here and on reddit, next time this year might be more like:

"I thought I had a good thing going paying my workers as 1099s, but then I was audited and all my workers were reclassified, the IRS went after back taxes and my workers sued for benefits, and the fact that I incorporated as an LLC didn't matter (since an LLC offers no protection against IRS recovery of back-taxes due to reclassification)."

I strongly recommend he seek out the services of an employment lawyer.

Re: From idea to replacing full-time salary in 4 months

#127

Post by bhousel » Mon, Apr 16, 2012, 5:23 PM UTC

tptacek wrote: post #123

bhousel wrote: post #121

Earlier quoted context omitted.

How can it cost that much? I pay something like $500 a year for my own workers compensation insurance, because it is required by New Jersey. $10/week is peanuts. Edit: I'm not calling you a liar, just genuinely curious.

Do you work for a cleaning service? Cleaning services pay anomalously high worker's comp insurance rates (though I too was surprised to hear that it might be 20%).

I did about 10 minutes of googling since it is my lunch break, and I'm now convinced that your risk rate will only be 20% if you are something like a logger or speedboat racer.

Re: From idea to replacing full-time salary in 4 months

#128

Post by achompas » Mon, Apr 16, 2012, 5:25 PM UTC

asmithmd1 wrote: post #105

achompas wrote: post #95

Earlier quoted context omitted.

You're right about DC having a regional effect, but wrong about "cash being artificially injected," especially since deficit spending has very little impact on DC's economy (think lobbying and consulting). I lived in DC for a few years and there's a strong work + happy hour culture for young professionals. It's pretty standard to hit the bar after work and get home at 9-10pm on any weeknight. The result: a group of t…

Government spending IS spent in the DC area. Every government contractor has major offices if not outright headquartered in DC area. For example: Northrop Grumman, CSC, Lockheed Martin, and General Dynamics are all headquartered there. Any new bureaucracy finds offices in the region - TSA's 4000+ headquarters employees are in Northern VA. I know I am going off on a tangent but since 2008 the US government has been sp…

I don't want to follow this tangent further, but you're right about the headquartering of consultancies in the DMV area. Booz Allen is there too. Still:

Instead of spending that in the DC area why not just send a check for $10,000 to each and every household in the US.

Because that money is funding a decade-long war overseas and a series of tax cuts enacted several years ago that were recently extended.

Of course these numbers do not include the TARP cash that is deluging Wall St.

Almost all of the TARP money has been paid back. [0]

[0] https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#...

Re: From idea to replacing full-time salary in 4 months

#129

Post by tptacek » Mon, Apr 16, 2012, 5:28 PM UTC

bhousel wrote: post #127

tptacek wrote: post #123

Earlier quoted context omitted.

Do you work for a cleaning service? Cleaning services pay anomalously high worker's comp insurance rates (though I too was surprised to hear that it might be 20%).

I did about 10 minutes of googling since it is my lunch break, and I'm now convinced that your risk rate will only be 20% if you are something like a logger or speedboat racer.

From '_sentient: Car accidents. If you get in a terrible accident on your way from one job to another, that's coverable, and exposes the worker's comp insurer to potentially unbounded liability. It makes more sense now.

Re: From idea to replacing full-time salary in 4 months

#130

Post by LyleK » Mon, Apr 16, 2012, 5:38 PM UTC

redfalcon6 wrote: post #78

ricardobeat wrote: post #7

It's a nice personal achievement, but I can't help myself cringing at business models of this kind. It's plain old extraction of surplus-value, adding very little to the economy as a whole. The workers would be better off operating as a cooperative, I wish they had the education to know that from the outset, and the means to implement it.

I think this shows a confusion about what part of the problem he is solving: He is solving a MARKETING problem not a DELIVERY problem. Yes the cleaners are probably not doing anything differently than they normally did. BUT: -the cleaners had problems finding clients -clients had trouble finding good cleaners If you've ever tried to find one of these folks, it's a total PIA. Basically it involves asking your friends…

Why is it a PIA to ask your friends? And why would you trust a web site more than your friends' recommendations?