Every business is different, every situation is different. We've compiled a list of the most common questions we get asked, with either a brief answer or a link to a blog post, an article or a product that can help answer that question.
We wrote a book on the topic - "Markup & Profit; A Contractor's Guide Revisited". And there's a category on our blog dedicated to Pricing Jobs. You might want to start with this blog post - Markup, Margin and Why You Should Care.
We recommend calculating the correct markup for your business, and applying it to your estimated job costs. That will give you a fixed price you can quote your potential client, giving them the security of knowing what the job will cost. (An exception would be handyman jobs, under $2,500, where you would use an hourly rate and a markup on materials.)
A good rule of thumb - leave everything out of your contract that you can afford to pay for yourself - twice.
We receive many calls from contractors who don't have a detailed contract (or any contract) who can't get their clients to pay their bill. Or, they have a contract but didn't get signed Change Work Orders (which, properly written, are a legal extension of your contract), and can't get paid.
By marketing. Continually. You need a website, and if you don't have one already, read our article that outlines how to get started.
But a website is just a start. Your website needs to be optimized and marketed locally, and you need to be networking and advertising.
Mike Jeffries of Rivers of Revenue, LLC, has helped many of our clients market their businesses. He's at Closing Success System. He's also held regular webinars for our clients - if you'd like to be informed on future webinars, be sure to sign up for our newsletter (at the top of the page).
We also suggest checking out MyOnlineToolbox.com. You'll tap into a growing database of contractors, helping you get leads (especially if you're a specialty contractor), and you'll also get practical advice on getting leads using your own website.
If you're finding yourself trying to be the lowest bid on a project in the hope of making the sale, you are headed down the path of going right out of this business. You can't contract for work at less than it costs you to build the job. If you do, you will go broke. A better solution is to work on your sales skills. Our book, "Profitable Sales, A Contractor's Guide" is focused on residential remodeling and specialty sales. Blog articles on sales - Sales.
Estimating the cost of a job is a skill that can be learned. We discuss the basics in our article, Basics in Estimating. We also have a 12 part course that teaches on estimating, available on DVD and online - you can read about it here - "Profitable Estimating Training".
Blog articles on employees are available here - Employees. In all cases, whether you have 1 or 200 employees, you need an employee manual. Our Employee Manual includes policies specific to the construction industry, you can review it here - Employee Manual.
Michael discusses the general/subcontractor relationship often throughout the book, "Markup & Profit; A Contractor's Guide Revisited". Blog articles on the topic are available here - Subcontractor/General Contractor Relationships.
We recommend putting your business relationship down on paper. Check out our Subcontractor Manual.
We list 13 things to consider here — How Do You Select a Coach?
There are a lot of responsibilities that go with owning your own general construction business, whether you specialize in remodeling and renovation, building new homes, or commercial work. To be successful, consider these six:
1. Recognize that nothing happens until someone sells something - for a profit. You have to make the sale.
A sale begins with marketing, letting potential clients know you are available to provide the service they need. Marketing and advertising are a 24/7/365 proposition. The most important form of advertising today? A website. It's also the most cost effective. (If you don't have a website, we explain the process here.)
2. When the phone rings, make sure you know what to do.
Watch Michael's 6-hour DVD on sales and marketing. Watch as Michael walks you through the ins and outs of taking a lead and closing a sale, it will pay for itself on your next sales call.
3. Price your jobs so you can pay your job costs, overhead expenses and make a profit.
Our 6-hour Markup and Profit class is a primer on business management for any construction-related business owner. Read what one contractor said:
"Michael's straight-from-the-hip, no nonsense approach was thorough, effective and easy to understand. I saw how to make more money in this one session than I have in all the years I have been involved in the construction business!
Michael has a passion for what he does, helping people in the building industry look at their field from another perspective and finally be able to make a profit for themselves . . . I urge anyone interested in succeeding at their profession, and not just surviving, to take some time out to pick up a book or watch the tape . . . You will be glad you did!"
4. Protect yourself and your business - put everything in writing.
If you have employees, make sure you have an employee manual in place that spells out the workplace rules. If you work with subcontractors, clearly define your relationship and your expectations with a sub-contractor agreement. And, of course, every job should have a detailed, written, signed contract in place before the job begins.
5. When the tax man calls, be ready.
The paperwork side of your business can be a royal pain. With The Organized Contractor, discover simple steps to get organized and keep your office running efficiently.
6. Don't wait until it's too late to get professional help.
We've helped many construction business owners get out of debt, some with debts over $800,000. But it's even more satisfying to watch construction-related businesses expand their sales and marketing efforts, resolve employee issues and increase their profits. If you'd like to see your business grow, or need to find your way out of a mountain of debt, give us a call.
As a specialty contractor, your focus might be marketing and selling to homeowners, facing the same issues remodeling and renovation contractors face. Or maybe you work solely as a sub to general contractors with a different set of issues. More likely you do both, with two very different markets and two very different types of customers. Managing your business is a juggling act.
We've worked with a wide variety of specialty and sub-contractors, and in all cases, some things are constant.
You have to price your work to cover all job costs, all overhead expenses and make a profit, or you won't stay in business.
Regardless of your specialty, the book "Markup & Profit; A Contractor's Guide Revisited" applies to your business. Written specifically for the construction industry, it discusses both general and specialty contractors, showing all construction-related business owners how to price their jobs to make sure there is enough money to pay their job costs, overhead expenses and still make a profit. For even more business management information, order the 6-hour class on DVD. Read what one specialty contractor had to say:
". . . thank you for publishing such a great book. I bought Markup and Profit a few months ago and it has helped me understand the business end of electrical contracting. I know what I have learned from the book and the calculator will keep me from ever winding up tired and broke again at the end of the work year, and will help bring in the income I need to support my family and have a good future in this business."
Nothing happens until someone sells something, for a profit.
If you are working directly with homeowners you need "Profitable Sales, A Contractor's Guide". Written primarily for construction-related sales in a residential setting, this book addresses the unique issues faced when sellling to clients in their own home. It's real-life situations and answers will give you confidence in your sales ability.
A few construction-related business specialties we've worked with:
Air Duct Cleaning, Apartment Management, Architecture, Designing, Backhoe and Drilling, Cabinet Door Replacement, Cabinetry, Carpet Installation, Ceilings, Chimney Services, Cleaning Services, Closet Systems, Concrete, Countertops, Crown and Mouldings, Demolition, Disaster Cleanup, Dock Building, Drywall, Electrical, Excavation, Fencing, Finish Carpentry, Flooring, Framing, Garage Doors, Glass, Handyman, Hardwood Floors, Heating and A/C, Home Inspection, Iron Working, Steel Fabrication, Land Development, Landscaping, Lock & Key, Low Voltage Wiring, Marble and Granite, Marine Construction, Masonry, Mechanical Systems, Metal Framing, Painting, Paving, Pest Management, Plumbing, Pool Installation, Maint., Power washing, Property Maintenance, Pump Service, Refrigeration, Roofing, Security Systems, Septic Systems, Sheet Metal, Sheetrock, Siding, Signage, Sprinkler Systems, Tile Installation, Trenching, Wallpapering, Water Testing, Welding, Well Drilling, Pump Installation, Window Coverings, Window Tinting, Windows and Doors
Many contractors start a construction business with all the skills necessary to do the trade. But when you become a building contractor you need more than trade skills - you are responsible for marketing, estimating, pricing, sales, production, customer relations, employee relations and bookkeeping.
The ideal "Small Business Start-Up" kit for contractors would include:
1. The book, "Markup & Profit; A Contractor's Guide Revisited". Many construction business owners consider this book their business bible.
2. The 6-hour class based on the book. The class covers info in the book, but goes much deeper with many business management issues. You can learn more about the class here.
3. If you will be selling your services in the residential market, we strongly suggest "Profitable Sales, A Contractor's Guide".
4. "The Organized New Business". No one likes dealing with the paperwork, but this manual outlines very simply what is required and how to do it efficiently.