Tom Rosendahl, President of Dakota Supply Group (DSG) wrote the following in a recent issue of their Connections magazine.

“All of the industries that we work with share one thing in common: they employ tradespeople, whether they are plumbers, HVAC technicians, electricians, utility workers, etc. In fact, if you’re reading this magazine, there’s a good chance that you’re one of these skilled men or women. You are the engine that drives the industries that DSG serves. But there’s a problem: there’s not enough of you to go around.

Until then, it’s time to start raising awareness of this shortage of tradespeople.”

Tom makes valuable points about the future of our industry. I believe one reason young people don’t head into construction is because they don’t respect the profession - they hear about the flakes in the business, not about the majority of contractors who are hardworking serious businesspeople who want to succeed. One of our goals is to raise the image of the construction industry, and the fastest way to do that is to teach and encourage every contractor to behave like a businessman.

Thank you, Tom, for allowing us to reprint this article, we’ll run Part 2 tomorrow.

Do you find yourself giving away your design services in hopes of closing the contract? We have a better idea. Join Dan Baumann and Michael Stone on Thursday, May 8, in this complimentary webinar on the subject of design and how it can make money for your business.

They will address your questions regarding how much to charge for design services, what method to use to determine your fee. They’ll also talk about the importance and benefits of charging for your design and where you fit in the world of design.

Dan will lead the discussion on:

• The sales process
• Client’s buying decisions & motives
• Where do you fit into the world of design?
• Sell the benefits of a good design
• Importance and benefits of charging for your design
• How much to charge for design services?
• What method to use to determine your fee
• Using a sales portofolio
• Design contracts
• Your earning potential
• Questions on insurance and licenses

Thursday, May 8, 2008
Pacific 8:00 AM
Mountain 9:00 AM
Central 10:00 AM
Eastern 11:00 AM

Register Today - the webinar is free, all you need is an Internet connection and a telephone.

Here in the beautiful Pacific Northwest, it appears the rain will never stop. Enough already! I have work to do, fence lines to clean and build, a machine shed that needs to be built, my tractor to drive.

Ever had that feeling? You want to be outside doing something creative and you are stuck inside doing paperwork. Hang in their pilgrim - you aren’t alone. My frustration is the weather - your frustration might be a lack of sales.

Stay focused on what needs to get done. In today’s economy, sales should be your focus. Nothing happens until someone sells something, for a profit. Too many contractors are focused on things that are not a priority. They are working on jobs, delivering materials to job sites, going to association meetings, lots of activity but little getting accomplished.

Stay focused on sales, my friends, and you will get through this crunch. Get distracted and you will pay dearly.

Prior to a recent webinar, Dan Baumann and I conducted a brief survey.

One of the questions we asked was whether participants had cut their markup / margin to try and attract more work. About 74% of the respondents said they had not cut their prices, 26% said they had. Oh my!

We assume that the contractors who attend our webinars are those who want to continue in business and make a profit, so why would they cut their price to get a job?

There are two things causing most of the problems contractors now have: 1) Contractors are not doing a good job of advertising and promoting their business and 2) they are cutting their prices to get jobs.

Cutting your price to get work is a step toward the demise of your business. It is financial suicide. If you are cutting your prices, let me ask - have you noticed other contractors around you going broke?

This has been and will continue to be a very lucrative business if you run your business like a business and not like a hobby. If you are not making money, that is a warning sign that you need to make changes.

If you want your business to do better, give us a call. We want to see you become profitable.

Listen to the experience of one of our long-time coaching clients.

One of our coaching clients recently asked how much lag time others are experiencing between the start of a marketing campaign and leads coming in the door.

As best I can tell, when you start some serious advertising, it takes three to five weeks for the phone to start ringing. There are exceptions of course, both slower and faster. But generally three to five weeks seems to be the norm. The calls will come in ones and twos.

If you stay with the advertising program, it can takes four to six months for your lead count to reach three or four new leads a week. We have coaching clients that started a good advertising program about a year ago. They are now getting from one to three new leads each day.

What I have found interesting is that a variety of advertising methods seem to work best in today’s market. A combination of handing out business cards each day, your web site, participating in two or three home and garden shows (or a parade of homes, show of remodeled homes, whatever is available in your area), vehicle and job signs, and ads in a local magazine focused on new homes and/or remodeling.

One idea that works well no matter where it is tried is to take some doughnuts or cookies to your suppliers, or, if you are a specialty contractor, to general contractors you want to be involved with. Deliver them first thing in the morning for their sales or production meetings. Show up at the start; leave business cards and a request for any leads they might pass along, along with the doughnuts or cookies.

Stay focused on sales. Advertise to your target market and schmooze. The leads will come.

Advertising is key to getting your phone to ring - if you don’t advertise, they won’t know you are able and willing to do their work.

But how can you know where to spend your advertising dollars, and much should you spend?

Michael and Dan will lead another free webinar this Saturday, April 26 on the subject of advertising. They will:

• Discuss how to calculate how much to spend
• Review the types of advertising that are now working best
• Analyze how to apportion your advertising dollars
• Discuss where to advertise
• Explain what times of year provide the greatest return on your dollar

Join us Saturday, April 26 at:

8:00 - 9:00 am Pacific
9:00 - 10:00 am Mountain
10:00 - 11:00 am Central
11:00 am - 12:00 pm Eastern

The live webinar is free and open to everyone. You will need to make a long-distance call to listen. Register now.

The construction industry lost a great man this week - and I lost a good friend.

Sonny Lykos was an amazing man. He had a great ability to solve problems, an uncanny instinct for finding and solving problems in a business, learned in the school of hard knocks. He wasn’t afraid to take a stand, even if it was unpopular with everyone around him - if he knew he was right, he would hold his ground. And he was usually right. He loved his family and cared for them, his wife Barb was the center of his world. He was as good of a friend as a man could want. I cherish the time we spent together, sitting on the pier watching the sunset in Naples.

Thanks for letting me be a friend, Sonny. You won’t be forgotten.

The ancient Chinese philosopher Confucius said, “The man who chases two rabbits catches neither.”

I hardly rate myself a philosopher, ancient as I am. But I do know that his wisdom applies to contractors that try to do all things for all people.

Pick the top two or three things you do and pass on all the other leads. Figure out your most profitable work and stop trying to do the rest. If you are trying to do all things, check your books and you’ll probably find out you are breaking even or losing money on 50-65% of your jobs you do. You do not need practice losing money.

Your focus should be on making a profit, not building jobs that cost you money. You heard it here first.

We had quite a turnout for our last free webinar. We will hold another one Friday, April 18, focused on marketing techniques, specifically websites.

Your potential clients are on the internet… are you? Times are changing and so are the ways contractors market their services. While traditional marketing methods still work, many contractors are finding new business through their website. Not only does a website bring in sales leads, it provides a comfort level to consumers, letting them know you are legitimate, you are in business to stay.

In this webinar we’ll discuss some of the new and innovative ways you can more effectively get the word out. We’ll talk about what’s important, then we’ll spend time looking at your websites and providing “constructive” feedback. So, whether you have a website that you think is pretty good but could be better, or you’re just planning your website, you can learn a lot from this workshop.

To get your website reviewed - email us ahead of time with the following information:
- How long your site has been active
- Who manages the site
- Do you know if it draws traffic
- Do you know if it has closed sales
- How much it costs
- What you like about your site
- What you think could be improved

If you have other questions you’d like us to cover, email them to dan@chiefexperts.com or michael@markupandprofit.com

Friday, April 18 Webinar Times:
Pacific Time Zone - 8:00 - 9:30 am
Mountain Time Zone - 9:00 - 10:30 am
Central Time Zone - 10:00 - 11:30 am
Eastern Time Zone - 11:00 am - 12:30 pm

The live webinar is free and open to everyone. You will need to make a long-distance call to listen. If you would rather listen over your computer speakers, for a nominal fee you may want to consider the phone service available from Skype. You can learn more about Skype here.

To learn more about how webinars work, click here.

If you haven’t yet, please complete our surveys. This is the second survey on the page, “Survey for the Free Webinar Workshops & Live Training Classes”. The survey provides feedback to us on topics and days for future webinars.

Again, a 90 minute webinar Friday morning, April 18 beginning at:
- 8 am Pacific
- 9 am Mountain
- 10 am Central
- 11 am Eastern

Register now.

Review past recorded webinars here.

I am reading a book titled “Never Give In” by Stephen Mansfield about Sir Winston Churchill, one of my heroes.

On page 118 he says, “But life is change, and true success in any field is largely a matter of learning how to anticipate change, how to harness it, and how to ride its power into the future.”

So what does that have to do with your construction business?

Our world, our country and our businesses are changing. We have long entered the computer age, but not all contractors own or use a computer. Those that use a computer use it primarily for word processing and maybe accounting. The last survey I saw said that of those contractors who did use a computer in their business, less than 25% of them could do a good job of estimating using the computer.

Web sites are one of the best mediums of advertising available to contractors. The construction businesses with a quality web site are getting 40% to 60% of their leads from it. We reported earlier about one young contractor in Toronto, Canada, who is getting 100% of his leads from his web site. Yet many contractors refuse to spend the time or money to get a web site built and online, working for them.

If you want to build a profitable business, if you want to do something other than work for a living the rest of your life, you must make the changes needed to sell and promote your business. You are capable of making those changes, it is simply a matter of making up your mind that you want and can do it. Trust old dad here. It is a whole lot easier than waiting for your thumb to mend after hitting it with your hammer or slicing it up with your utility knife.

A few weeks ago, Michael was at the JLC Live Conference in Providence, RI, and demonstrated for a class the latest tool - a Flip Video.

This video camera is awesome. It costs less than $150, weighs 5 ounces and fits in your pocket. This is a short list of possible uses:

• Record the job site on your first call - the video will be valuable when building your estimates to remind you of details you might forget.
• With a design agreement in place, use the camcorder to tape while the homeowners describe what they want. You can show portions of the home while they describe what they want to see.
• During construction, use the camera to record difficult situations that you might want the homeowner to observe later. For instance, tear out of dry rot, or termite infestations.
• After the job (our favorite), ask the owner to make a video referral for use on your website.

The camera connects to any computer through a USB port - plug the camera into your computer and the video is available to save on your computer.

We are sending the camera to coaching clients to tape a testimonial - Dave Stretch’s testimonial was made on our Flip Video.

Downsides -

• First time installation on your computer is incredibly slow while software is installed.
• The editing function is difficult to understand, we used Camtasia Studio to edit some videos, but it costs $299. Other video editing software is available but we can’t make recommendations (although we have used Pinnacle in the past and wouldn’t recommend it). But you’ll only need editing software if you plan to post video to your website.
• You need to make sure the hardware is ejected from your computer (i.e., use the Safely Remove Hardware icon) before pulling the camera out of the USB port, or you can damage the camera.
• The Flip Video Ultra has a date function - the “regular” Flip Video doesn’t.

Possible Other Uses:

• Record your child’s piano recital or solo, upload it to YouTube or another video sharing site and send the link to all your relatives (the examples weren’t made with a Flip Video).
• Loan it to your kids for YouTube or MySpace videos.
• Record your crazy neighbor (or your customer’s crazy neighbor) haranguing you.

For those of you at JLC Live - the video Michael promised to post is here -

A contractor in Canada send me links to these articles published last weekend in The Star, a Toronto newspaper.

http://www.thestar.com/article/409398
http://www.thestar.com/article/409400

You will note comments both good and bad about contractors. (Good job, Paul Mior with Abbotsford Group!) You will also note the reference to www.renocontractors.com, a web site where consumers can find information about contractors in the Toronto area and three other provinces.

This is a sign of things to come. We have all read articles (mostly negative) about construction contractors. We are starting to see more websites where home or building owners can find a contractor that has been interviewed, reviewed and branded, such as Angie’s List. This is the future, my friends, and you would be well advised to present yourself in a manner that gets 5 star reviews.

Make sure all disputes are resolved. Address any negative references from Angie’s List, the Chamber of Commerce, the Better Business Bureau and any State Licensing Agencies that handle consumer complaints. If you can, get them deleted.

But the best protection is to conduct your business like a business, and treat every customer honestly and fairly. Devon spoke with a woman last weekend who told her about hiring a roofing contractor to fix a leak in their home. The woman lives in a nice home in an upscale neighborhood, and was obviously born and raised in another country. She and her husband are both professionals working in the community, but know little about home repair. She agreed to a quote of $700 to replace broken roof tiles, assuming it was a significant job - when the worker arrived, he replaced 2 roof tiles and spent less than 1/2 hour at her home. She might be from a foreign country, but she has friends around here, and that’s no way to build a positive reputation.

I glanced at the headline of our local weekly newspaper the other night. It read, “Washougal puts school bond on ballot”. Right next to the headline was a quote from a school board member. They said, “We can get historically low bond rates. And we might even get a better price on construction due to the fact that people are in need of work.”

With the tighter market, are you seeing lower material prices? Lower gas prices? What is the only thing that can be reduced to lower the price on a construction job? That’s right. Labor and profit. Do you think that school board member has agreed to take a lower salary at his job because of the current economy?

Because there is so much doom and gloom from the media about the housing market decline, he believes he can demand that contractors lower their prices. Does that tell you what he thinks of us in construction? Dumb. Even dumber, my friends, are the companies that will flock to enter bids on these proposed jobs. They might even travel across the state, paying $3.50 a gallon to travel here so they work for less money.

Just for clarification, nowhere in the article did he mention that he was going to suggest the architects lower their rates for designing the work, or because things were slow in construction, the city should lower their permit fees. And, let us not forget the engineering that will be required by the building departments to aid the architects in getting the plans drawn. What have I forgot? Oh yes, is he going to tell the city they must lower the salaries of the building inspectors they will send out to inspect all this work that the contractor (whoever is dumb enough to secure these jobs) will do. After all, if you ask them, they will tell you they are involved in construction as well. If contractors can work for less when the market is tight, why doesn’t everyone else involved in construction?

Folks, having a tighter market doesn’t mean you can or should be working for less. You still have families to feed, mortgages to pay, and business expenses that don’t let up. If you lower your price, what doesn’t get paid? If you haven’t developed the sales skills to market your business based on what you do, not on how low your price is, you won’t survive.

This is a classic example of what you need to watch out for. This school board member obviously cares little about the construction community, and I’m sure construction-employed families send their kids to that school. He will vote on how the contracts are let for the work on the new schools. I don’t even live in that town and I let myself get upset over the stupidity of this remark.

Chris Widener sent out an E-mail this morning:

“The first quarter of 2008 is gone . . . And my question to you is: Are You On Track To Achieve the Goals You’ve Set for 2008? Right now is the perfect time to assess the first quarter and either get back on track or set new goals for 2008… But how many times have you set goals only to find yourself 1/2 or even 3/4 of the way through the year with little or no progress toward those goals?”

Time to check on how we are doing gang. Like Chris says, it is time to review your performance for the first quarter of 2008.

Read our blog posts whenever you can. Devon is getting several new posts up each week and many of you are adding comments and suggestions on new and better ways to run your business.

For those of you who believe it isn’t possible in today’s climate to turn your business around, watch this video from a coaching client. He’s been working with us for about 4 months now. You can learn more about our coaching service here.

An earlier blog post, reminding contractors to get their ducks in a row before starting a job, elicited the following comment.

” . . . I would never give a downpayment to somebody working on my house.”

Because there are other homeowners (and contractors) with that opinion, I need to respond.

First, as Greg reminded us with his comment, “Money changing hands means a commitment has been made.” A contract happens when an offer is made, the offer is accepted, an agreement that outlines the offer is signed, and a down payment is made. Now, it is possible to complete a job without a written agreement or a down payment, but doing that leaves somebody (guess who) wide open to being used or screwed out of their money rightfully due. At least once a week we talk to contractors losing money because of the lack of a written contract or a down payment. It’s not pleasant for anyone.

As a homeowner, it’s easy to talk to someone about making changes on your home. It’s easy to have them start work. It’s tough to write a check. As a contractor, you need to know that the homeowner is both able and willing to pay for the work being done.

In my experience, there are four kinds of contractors.

“A” contractors run their business like a business and make good money.

“B” contractors run their business like a business most of the time and make a living most of the time.

“C” contractors run their business like a hobby, make a living some of the time, but often (like today’s market) take a second job so they can keep their bills paid. If they are married, their wife’s income is usually the primary means of support.

“D” contractors are the ones we hear the most about even though I believe they are the smallest group. They are either con artists or complete flakes, the guys that cause over 90 percent of all the problems in this business.

“A” contractors will not work without a well-written signed contract, will not make changes without a change work order written and signed up front and will not start any job without a down payment. There are exceptions of course, but not many. They start and finish jobs as promised, communicate with customers in good times and bad, and pay their bills on time so their customers don’t have to worry about liens or any other problems. They will not be the lowest price contractor, but if your contractor is an “A” contractor, you can sleep at night and not worry about the investment you are making in your home.

“B” contractors do most things right, but still fall into the trap of “trusting” customers to “do the right thing” and often don’t get change work orders signed, have poor payment schedules on their contracts, let owners dictate payment schedules, and suffer the results more often than not. Here again, there are exceptions, but not many. Many “B” contractors, when they get tired of losing money or they get taken one too many times, tighten up their business practices and become “A” contractors. Most “B” contractors start and finish jobs as promised and communicate with their customers well, but if they are getting taken by a customer on one job, the financial problems it can cause in their business might impact other jobs. The price from a “B” contractor will probably be fair, but might be too low for them to survive financially. If your contractor is a “B” contractor, your job will probably proceed well but problems with another customer can put your investment at risk.

“C” and “D” contractors almost always will quote you the lowest price. Most “C” contractors are honest people who mean well, but they haven’t yet educated themselves well enough in their business to be successful. They often do outstanding work, but if they are losing money they get tired of doing outstanding work for no return. Who wouldn’t? Some “C” contractors find help and become “A” or “B” contractors - the rest go out of business, usually deep in debt. Although they have no intention of hurting any customers, if you are one of the last customers, you can lose.

I won’t waste your time describing what “D” contractors do or don’t do to cause themselves and their customers problems. You can watch it on the news.

Where I am going with all this is that when an owner refuses to give the contractor a down payment, they eliminate their ability to hire an “A” contractor. They might get a “B” contractor, but more likely they will have to hire a “C” or “D” contractor. I personally don’t know a single “A” contractor who will start a job without a down payment of some kind, and strict payment schedule language in the contract that gets them paid promptly for work done. I don’t mean payment in 30 days or whenever the owner gets around to it, I mean within a few days.

Many who read this will not believe getting paid upfront is possible, that you don’t have to wait 30 or 45 or 90 days to be paid. Beliefs are based on our own experience and the experience of those around us that we know and trust. If you are a contractor and you are not getting paid on time for your work, if you are not getting down and progress payments for the work you are doing, then maybe it is time to educate yourself on how “A” contractors get this done.

If you are the homeowner, what’s your criteria for picking a contractor?

I talked with Tom Lykos this morning to see how the C. O. F. is doing.

Sonny is recovering but has a long way to go. (He had heart surgery March 5 and then two days later had a major stroke that has paralyzed his entire left side. For more, see this blog post.)

Sonny is not a quitter, he is a fighter and I’m betting he’ll get through this. He may never get back to 100% but when one considers the alternative, he is doing great.

He is sitting up in a chair now for short periods of time, his body is mending. His family makes sure he has everything that he needs. He can answer yes or no and can communicate but is not up to full sentences yet. He is fussing around with his computer some but still has trouble with the energy level and some focus issues, as one would expect after a stroke.

That is the latest. Please say a prayer for Sonny, he needs all the help we can give him.

Got a phone call recently from a contractor doing a job in the $150K range. Everything is fine, contract signed, and the job is going great.

Problem was he asked for his down payment (after the job started) and the owner said, “Well, ummm, the bank hasn’t approved the loan yet.”

I told him to shut that job down right away. Or sooner. The longer he works, the more money he has to lose if he isn’t paid. He can explain to the owner the job will start again when the financing is approved and the down payment made.

Yes he has a contract, yes the people are happy. But tell me what happens if the bank calls the owner and tells them they only qualify for 65% of the contract price?

Don’t start a job without a down payment AND the customer’s financing completely approved. If you cut corners, it can cost you.

Earlier this month, I taught a few classes at the Deck Expo 2008 Convention in Orlando, Florida. A great group of contractors from all over the country showed up, about eighty contractors attended the Markup and Profit class. The picture below was taken during our discussion of payment schedules. Yes, I hound the folks in our classes about their payment schedules just as I hound readers of our blog. Cash flow matters.

One contractor who attended our class lives less than 30 miles west of us here in Washington state. Long way to go to make an acquaintance, but since we need a new deck on our home, I will be giving him a call soon. That is also one of the reasons you should attend every class, seminar or convention that you can get to, and always carry your business cards. You never know where new business will come from.

In the last few days, I have had a number of new homebuilders call and ask about switching their business to remodeling. “Can we do it?”

If you know me, you know I am normally not in favor of new homebuilders trying to get into remodeling. They are two very different enterprises. New homes are a product, new homebuilders operate a “factory in a field”. Remodeling is a service business, relationships take center stage when you are working in someone’s home. Remodeling requires handholding.

But the reality is that we have wives/husbands to take care of, kids and grandkids to feed; the world isn’t all black and white. What can guys and gals do that have run into a declining market for new homes and need some work to keep the bills paid? If they are willing to make changes, what changes are necessary?

Here are some suggestions.

• Read both Markup & Profit; A Contractor’s Guide and Profitable Sales, A Contractor’s Guide. If you have time, watch the 6-hour class (Markup & Profit Class, Sales Class).
  NHC and remodeling are as different as daylight and dark. These books will help you distinguish the differences, especially what you should charge for your work. You simply can’t use the same markup for remodeling that you have been using for NHC and the sales process is decidedly different.
• Stay away from Cost Plus or T & M jobs (other than for service work under $2,500). Cost Plus and Time and Material jobs are a disaster waiting to happen, especially for companies new to remodeling, renovation or repair work.
• You must increase, not decrease your advertising. Schmooze, get out and press the flesh. Hand out one new business card to someone you don’t know each day. Let folks know you are available to help them with remodeling, renovations or repairs on their homes.
• If things are a bit slow, don’t keep employees on the payroll. We are in construction and we have down times. Employees know that and it is a risk one takes when you hire on in this business. If things are slow, send the employees home.
• Apportion a certain amount of time each day to cleaning up all your tools and equipment. Contrary to what the media would have you believe, this housing downturn will end and it won’t be long before you will be up to your derriere in more work than you can handle. Be ready.
• Watch the recording “It’s Not All Doom & Gloom In Construction, Part 1” that Dan Baumann and I made of our webinar on March 15. We will be doing Part 2 this coming Saturday, March 29, at 8 am Pacific (11 am Eastern, etc.) Register to attend, we’d love to have you join us. If you aren’t sure how a webinar works, watch this video Dan put together.

Last, but not least, if you are really down and need someone to talk to, give us a call or send us a note. I’m on my way to Providence, Rhode Island tomorrow for the JLC Live conference, but Devon can take a message and we will get back to you as soon as possible. We are always willing to help as best we can. Take care of yourself and your family, and stay focused on sales.

Last Saturday morning, Dan Baumann and I hosted a free online discussion on the topic of “It’s Not All Doom and Gloom”, looking at what is actually occurring in the construction industry and what you can do to help your business survive. We had over 80 contractors attend.

Next Saturday, March 29, we will be hosting a follow-up discussion. Topics include:

• Overview of construction industry trends
• Polling questions & discussion
• Cost cutting measures you can make right now
• Some hot marketing tips you can use in your company
• Interview with a company that came out of troubled times and is now prospering
• Question and Answer

The webinar is free of charge, all you need is a phone and an internet connection. You’ll also need to register first. We start at 8 am Pacific time (11 am Eastern). Join us!

May we ask a kindness? Would you give us your opinion? We have 3 very short surveys for you. The first is specifically for Dan Baumann’s Chief Experts site for those of you are familiar with Chief Experts - the other 2 surveys tell us more about where you are and what you need. We’d really appreciate hearing from you - there are no more than 10 questions on each survey, it won’t take much time at all. Thank you!

Mike Davis, who comments here from time to time, sent in the following note.

Michael,

My insurance agent met with Tammy and I last week and made a proposal to sell us an installation floater with our insurance policy. I have never heard of it before. What is covered is machinery, materials, equipment, supplies and fixtures that are destined to be used in or are incidental to the installation, completion, or repair of the projects. It covers a direct loss involving a “collapse” of all or part of the building caused by fire, lightning, windstorm, hail, explosion, smoke, aircraft, vehicles, riot, civil commotion, vandalism, breakage of glass, falling objects, weight of snow, ice or sleet, water damage, hidden decay, hidden insect or vermin damage, weight of people or personal property, weight of rain that collects on a roof, or use of defective materials or methods of construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation. They will not pay for loss caused by governmental action, nuclear hazard, war and military action, building ordinance, water that comes from a ground source, or earth movement i.e.. earthquake.

I have no idea if this is a good idea or not. Have you heard of this? Or is it just another way for the insurance company to take money and the agent to get a commission? Does that sound untrusting of insurance companies?

What do you think?

Mike Davis, CGR, CAPS
TMT Home Remodelers

OK, gang, any comments? Anyone been approached by their agent or broker with this type of policy, or experienced a claim related to it?

We recently received the following note:

Hi, Michael. We’ve written each other a few times over the past year and I wanted to run something by you. I’m not asking for any kind of free consulting, I was just curious as to what you think of my response to a potential customer who was not willing to pay for a design/estimate.

I met with the couple for about an hour the other day and we went over what they wanted done (increase the size of their 2nd floor master bedroom, add a master bath and a large walk-in closet). I asked what their budget was and they really did not have one…and they had no idea what the addition would cost (of course they didn’t!!!) and they had just started to receive quotes. Eventually they came up with a very “loose” budget of $75,000. With that number I explained to them that we could probably convert the home from a 4 bedroom to a 3 bedroom by converting two of the smaller bedrooms into one large master bedroom/suite. They did not want to go that route. They wanted to keep it a four bedroom house. I agreed that would be a better idea.

Without going into detail, the project requires quite a bit more than simply ‘bumping’ out a room and adding a bath and closet…there have been other additions on the house that make this a very challenging project. I’m not a big fan of throwing out “rough estimates” or “ball park” estimates as they more often than not are either way too high or way too low. In either case nothing good comes out of ball parking in my experience. . . . .

I am sending you this for two reasons:

1) Your books, advice, and website have helped me become a better builder (business-wise) and I wanted to display to you my approach to this type of situation (one in which you have covered heavily in your literature).

2) Maybe you can use it as an example on your site (either a good one in that I am handling the situation well or one in that I should take a different approach).

The contractor presented a design agreement to his potential client, with a $3,000 fee to design the job, 1/2 of the fee would be credited back when a contract was signed for the final job. The potential client later sent him this email.

Just wanted to give you a heads up. Julie and I had a chance to think things over and we really hadn’t planned on investing $3000 in drawings. I’m sure they are helpful and make it easier to price the job but I don’t see any real value in us paying for drawings. We had hoped that you’d be able to provide us with an estimate that would allow us to make a decision, that along with references and other criteria. I’m typically not interested in paying someone to provide me with an estimate. This is not a criticism of your approach, the sample drawings that you sent look great and under the right circumstances probably provide a great value add. Its just a general philosophy of mine.

It was great meeting and please feel free to stop by anytime for a beer. Hope to see you in neighborhood.

The contractor responded as follows:

I understand how you feel. I remember the feeling I got when an architect I met was charging six figures for plans that I could have done more accurately for a fraction of his price. The problem is, an accurate price can not be given for a project without plans and specifications. I can’t argue with your philosophy Jim, but please consider that in the course of your project, ‘drawings’ will eventually have to be done. If a contractor is willing to do them for free, beware (of hidden costs and/or shoddy work).

I have learned that an estimate is rarely more than a very rough approximation without having the design, precise measurements and material specs on paper. I much prefer to give a true price quotation based on facts and am not one to work on a time-materials basis with only a rough estimate and the hopes that the job does not exceed the budget. My time and skills are not free nor should anyone’s (worth hiring) be. I also realize that you have not asked me to do anything for free . . . you are simply in the process of finding out roughly what a project of this scope will cost. I respect that and completely understand.

What you will get from me is an honest price for your job, a contractor dedicated to your project and your happiness, with the skills and experience to meet or exceed your expectations.

Based solely on our conversation and my experience with similar projects, my estimate for your job is between $100,000 and $175,000. With that range in mind, I can build you a very spacious addition and add much value to your home. For considerably less money we could convert your home into a three bedroom (converting two of them into one large one) but I don’t think that is a route you and Julie want to take.

I very much enjoyed meeting you and would be more than happy to discuss your project with you further. Would you like to meet again to continue talking about the project?

And, I may stop by for a coffee…I don’t drink but thank you for the offer!

Suffice is to say that this contractor handled the situation almost 100% correctly. He saved himself a ton of time and work, because the homeowner was not serious about getting a job built. The homeowner was shopping, not buying. The odds of the contractor getting the job after investing time and effort in creating plans for the homeowner were slim to none - the odds of the homeowner looking for someone else to build those same plans for a cheaper price are great.

Sometimes you just have to bite the bullet and say “no”. And spend your time with clients who are interested in getting a job built, not just shopping.

Many of you have read posts from Sonny Lykos of Naples, Florida. Sonny has been around this business almost as long as I have and always seems to have something to say. Hey, his family comes from Sicily.

Sonny has been a good friend of mine for many years, and has been a friend to many of you as well. I wanted to let you know about changes in his life.

Sonny had bypass heart surgery on Wednesday, March 5. He was recovering well until he was hit with a major stroke 2 days later. He went downhill from there until his wife, Barb, sat down to talk. She talked about their life together, preparing to say goodbye, but ended up cussing him out for whatever reason. Sonny opened his eyes and has been steadily improving each day.

I don’t know a lot more than that, but his son Tom, has promised to keep us posted on how the crusty old f**t is doing.

If you can find it in your heart, please say a little prayer for Sonny. You might have never met him, but trust me, his contributions to forums and newsletters, his phone calls, and his willingness to share his knowledge and experience have made the construction industry and all of our businesses a little better.

For basketball fans, it’s March Madness again. But for some in the construction industry, there is a different kind of madness going around, an attitude that says, “It’s no use. The housing market is going to pot, and so will my business.”

It isn’t true. Many contractors are busy and making good money, it’s all in your attitude.

Michael will be leading a free one-hour “attitude adjustment” webinar this Saturday morning specifically for those in the construction industry. If you aren’t familiar with webinars, all you need is a phone and an internet connection. It really is free, but you have to register to attend. The webinar is being hosted by Chief Experts (www.chiefexperts.com).

It’s not all gloom and doom. Join us this Saturday, March 15, at 7 am Pacific (10 am Eastern) and find out.

Once again I feel compelled to share a new, fresh, one of a kind idea with you. Stop working for free. Remember, you heard it here first.

I have heard from many contractors recently who are still working for nothing. They call or send notes telling me how they prepare an itemized list of things they are going to do on the job to be sure the customers know what they are getting. They don’t put prices on the items, but they want to be sure that the customers have all the details.

Hey, I have no problem with that. What I do have a problem with is doing it before you have a commitment from the customers. Do you have so much free time that you can afford to waste it on two of every three sales calls you go on? When they ask for free information or how you are going to do something, tell them, “That will all be spelled out in detail in our agreement with you for the work to be done.” Now you will find out real quick if they are serious about hiring you or if they are just looking for free information.

The people in this world who make the big bucks are the ones that make the best use of their time. Giving out free information is not a good use of your time and it does not feed your family.

When you go to a sales call, get the four basic questions answered then get a commitment for a design agreement or a signed letter of intent before you put all that information together. That is clearly spelled out in our book, “Profitable Sales; A Contractor’s Guide” and covered in our class. It doesn’t take any longer to do it right than it does to do it wrong. The results are amazingly different.

If, on the other hand, you are preparing all that information in the hope that, because you are such a nice guy or gal, they will buy your services, I can guarantee you that you are wasting at least 2/3 of the time you are spending on potential customers.

No, I am not being mean or nasty. No, my old age has not turned me into a Crabby O.F. I want you to make money, lots of it. You can do that by getting commitments before you give the customer lots of information. Try it, gang. The extra money you make by not giving your work away will more than pay for your Profitable Sales book and video.