***Editors Note*** Please read this article carefully. I have said many of the same things over the years regarding contracting but I’ve never been able to articulate it quite as well. This is how most people start their contracting firms regardless of the trade. Randal is not exaggerating in the least. If you have a business plan that you implement from the beginning there is no room for the “Bobs” in the business plan. In fact you’ll find that once you have a business plan it gives you more freedom because you never sweat the “sharpen your pencil” or the “how come you charge so much” customer ever again. You may run into them from time to time but they quickly understand that if they want a handyman job they can hire the unemployed tradesman down the block. There is a funny thing that happens though, some customers that tried to push you around end up being your best clients. I think most people try to take what they can and as soon they figure out it can’t be taken they just want good service and they will pay to get it. Thanks again Randal.
This Article Will Focus On why crafting a business strategy is so important for all contractors
Two Areas For a Contractor In The River Of Construction Commerce
The White Water Foaming Rapids Area – Is where Plumbing and Mechanical contractors without a Clear Business Strategy
operate their contracting companies in a frantic attempt to earn a living. Inside the frothing rapids is shallow water, constrained within narrow passageways of limited cash flow, with large unpaid bills the size of massive boulders. It is an area littered with the remains of wrecked Plumbing and Mechanical contracting companies. Inside the Plumbing and Mechanical contractors office is a constant loud, rushing, roaring, churning morass of chaos and despair which exacts a toll from the strongest most determined Plumbing and Mechanical contractors. In time wears them down to where they are dispirited and heartbroken or perhaps heart-stopped and bankrupt. Then things turn real ugly.
The Deep Water Area – Is wide and has a sandy bottom. This part of The River Of Construction Commerce wanders quiet and calm as if the Plumbing and Mechanical Contractor is riding a peaceful Merry-Go-Round that generates enough passive income for them to become very wealthy.
This Is Frank’s* Story – It started one day when he got the bright idea that owning his own contracting company would be his ticket to fame and fortune. Frank declared to himself in a loud booming voice “Let’s do this!” It turned out to be a “Deep Noises From The Chest That Sounded Like Important Messages From The Brain” – Randalism.
That Fateful Friday – In December Frank’s boss, “The Overbearing Jerk Who Did Not Know How To Run Contracting Company”, had just told Frank that he needed work faster, do more and produce more results or risk being fired. The very idea his boss would suggest such a thing made Frank’s blood pressure skyrocket and Frank chose to be upset and angry about it the rest of the day!
The Next Day – Frank’s close friend Bob stopped by Frank’s house for a quick visit and Frank mentioned his boss’s remarks. Bob had been strongly encouraging Frank start a contracting company for many years. Before anyone could say “Do we have a plan” Frank The Hot Dog Remodeler, Inc.** company was born.
With A Box Full Of Eagerness – And a pocket full of “Can-Do-Attitude” Frank launched his new contracting company into what he must have thought was the “Deep Water Area” of The River of Commerce. For a short while everything was just fine. Frank didn’t have an old dinosaur ignoramus boss passing out orders, No pain in the rump customers to keep happy, no lazy overpaid undertrained employees with ridiculous pay and benefit demands, no quarterly payroll or sales tax reports to fill out and pay, nobody to give Frank any guff at all. He was a free man and life and his future was bright and shiny!
Then It Occurred – Like a bad omen Frank’s phone rang and it was Bob on the other end of the line inviting Frank to be the first customer by coming over and building a deck on the back side of his two story house. Note: Bob was a “customer” not a “client”; because a client expects a contractor, including Plumbing and Mechanical contractors, to charge enough so they can earn a living and make a profit.
And So The Nightmare Began – Frank had his first “customer”, and did not understand the true meaning the word. Bob was going to help launch Frank down the river, and not the good part.
Bob Said Knowingly – “Hey Frank since you don’t have any [overhead] you could do the job at a really, really low price. And in return I will have lots of parties to show off my new deck to all my friends and neighbors which will send lots of business to you!” Frank would get the business alright, just not the business he was expecting.
Frank Spent Many Hours Drawing Blueprints – For Bob’s grand new deck. Bob had another idea to save himself a lot of
money. Bob said he would pay for the material direct and by using Frank’s account at the local lumber yard Bob would get everything “wholesale”. What a friend Bob is too Frank!
Frank Paid For The Building Permit – And got right to work. Two weeks had passed and the deck was done and it looked great!
Frank Was Uncomfortable – About asking his good friend Bob for any money for his labor so he asked Bob what would be a fair price. Bob mentioned that Frank had been working for $20.00 an hour at his old job and thought that would be a fair price, as long as Frank was only paid for the time he was actually working on the jobsite. Bob said that would be great for both of them since Frank would get to keep the entire $20.00 an hour and Bob there would not be any payroll taxes taken out of Frank’s check…wow, what a deal that would be for everybody!
Soon Afterwards – Frank’s cell phone was going crazy because lots of people liked Frank and his $20.00 an hour rate was a fraction of what the other “Greedy Contractors” where charging. Since Frank was such a nice guy and didn’t want to be labeled “Greedy” he never marked up any of the material like his old boss, “The Greedy, No-Good and Mean Remodel Contractor”.
Frank’s Generosity – Soon became legendary because he would provide the little bits and pieces of hardware like a few nails, screws, caulk, glue, tape, shims, wire-nuts, bolts, nuts and washers for FREE! What a guy! No wonder everybody liked him.
Frank Was Entering – The dreaded white water rapids of The River Of Construction Commerce and was completely unaware of it!
Frank Suddenly Found – He needed to bring in other specialty contractors like plumbers, mechanical contractors and electricians and others to do was not skilled or licensed to do.
The “Customers” Told Frank – He was being “Greedy” when they scrutinized his invoice and discovered he was charging them his $20.00 an hour rate for the time he spent calling trade contractors, scheduling jobsite visits to review the scope of work, gathering bids, reviewing them with the customer, scheduling the trade contractors and overseeing their work. The customers told Frank he wasn’t doing any real work; it was a mini-vacation from swinging a hammer; they said with a grin and a smile and asked Frank to “Sharpen His Pencil” and “Trim The Fat” from his bloated invoice.
When Frank Figured Out – His work truck was included in the $20.00 an hour he was charging including the fuel, oil changes, tires, tune-ups and other maintenance issues that arose and that didn’t even take into consideration the fact that it was old and worn out and needed to be replaced.
Frank Had An Blinding Flash Of The Obvious – His $20.00 an hour was paying for his truck expenses, cell phone, hand tools, equipment, maintenance, repairs, small supplies like a few nails, screws, caulk, glue, tape, shims, wire-nuts, bolts, nuts and washers and his time to schedule trade contractors. All those things that seemed unfair when his old boss charged his customers for them began to make sense in Frank’s Mind and he began to understand why Randal DeHart kept saying he needed a Business Strategy.
Things Got Ugly And The River Got Angry – Rough, loud and mean and the white caps were tossing his little construction company around like a rag doll caught in the mouth of a large mean, angry dog that had not been feed in three days!
In Order To Make Enough Money – To stay in business he decided it was time to hire some skilled labor and that is when he was started rounding the corner to the bad part of rapids onto the worse part of The River Of Construction Commerce.
Frank Learned Real Fast – Skilled construction workers don’t work for 20.00 an hour unless he offered some substantial benefits, vacation, retirement, health insurance, bonuses and everything else he used to ask his boss for back in the bad old days of being an employee.
Things Needed To Change Fast – Frank raised his hourly rate and lost all of his price conscious customers. Now Frank was in trouble and going over one of the many waterfalls in bad part of The River Of Construction Commerce.
Fortunately For Frank – Had a friend who was a trade contractor and referred him to someone who he knows, likes and trusts; The Contractors Accountant and Construction Business Coach who can help him develop his personalized Business Strategy.
Frank Became A client – And in time he changed how he saw the world and understood there is a Hall of Justice but there is no Hall of Fairness. And that it is up to every contractor to put as much thought and planning into their Business Strategy as they do into developing a set of drawings for a construction project if they want to have something more than owning a job that nobody wants to buy when they are ready to retire.
Frank’s Construction Business Coach – Helped him understand he had to choose between being RICH or RIGHT. Frank chose RICH and as a result his construction Company **Frank The Hot Dog Remodeler, Inc. made him a very wealthy man.
*Frank is not the contractors real name; it was changed to protect his privacy.
**Frank The Hot Dog Remodeler, Inc. was used to protect the identity of the firm.
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About The Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington, www.FastEasyAccounting.Com He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Plumbing Contractor, General Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Contractor Accounting Specialist, Bill.Com Guru and Tsheets ProAdvisor. Follow Randal on Google+
I leave you with this heartfelt blessing – “May you always know that no matter where you are, what you have done or you have failed to do the Universe loves you unconditionally, It is always looking out for you and It is supporting you in your endeavors. After your journey has ended everything will be made clear to you. So as far as possible, without surrender, be on good terms with everyone and do as much good as you can for everyone you come in contact without sacrificing yourself or your financial well-being. Wealthy contractors like you can do a lot more good than poor ones”
Randal L. DeHart, PMP, QPA
http://www.fasteasyaccounting.com/contractors-success-map/ Contractor Success M.A.P.