Almost all conflicts contractors face could be avoided or quickly resolved if there is a clear, detailed construction contract between the parties.
You can be the most ethical person in the world and if you aren’t charging enough for your work, you stand a good chance of cheating someone else.
It’s not unusual to find a contractor who sells by deliberately underpricing or underbidding jobs and making up the difference with change work orders.
Should specialty contractors require down payments even when working through a General Contractor?
A business owner in the UK asked a question that illustrates that remodeling sales challenges are the same regardless of your location.
A compendium on change work orders on a new home, remodeling or renovation project; why they matter, how to price them, what to include, and more.
I take many calls from contractors whose business is more like a low-paying job than a successful construction business. Some ask, “Is it even possible in today’s economic climate? Can my business make money?”
Our goal is to help construction-related business owners build a better business. We receive many phone calls and notes from our clients, and most of the time we hear good things. Sometimes we hear another side of the story.
Getting a commitment from potential clients is critical if you want to save yourself a ton of time and work putting together an estimate that won’t go anywhere. You have better things to do with your time.
One of the concerns a homeowner has when they’ve hired a contractor is whether they’ll do what they said they’ll do. It is a legitimate concern. They don’t know what’s going on in your head, only what’s happening with their job.
Training in construction is important, especially with a shortage of employees. A general contractor asked about a subcontractor who is training an apprentice.
Budget doesn’t need to be a major worry during the design and build of a project if you handle it properly during the sales call.
Why cost plus and time & material contracts should be avoided, for both contractors and building owners.
If you’re doing residential construction, you’ve met all kinds of people. There are also all kinds of contractors, and some of them don’t operate ethically.
Our last newsletter triggered a question on estimating labor.
Estimating the cost of a remodeling, renovation or specialty project accurately is critical if you want to be profitable.
At some point this health crisis will slow down and go away. When it does, there’s a good chance we’ll be doing some things differently. But some things won’t change.
If sales have dropped off significantly or you’re under a stay-at-home order, here are 3 things that you need to do now for both your business and your family.
Sales is about communicating and interacting positively with others. Those skills make life easier in any delicate conversation.
Michael Stone offers suggestions on how to keep your construction business strong during this Coronavirus emergency.
Michael Stone shares about a note from a contractor who initially found the Markup & Profit Revisited book “too extreme” and “not for us” – but now realizes it makes sense.
Pricing changes for a change work order isn’t easy when the scope of work isn’t clear.
Time and Material contracts are full of risk, especially on larger jobs.
Constant input from others is necessary if you want to stay on top of both your business and your personal life.
If you’re a business owner and take on a project out of the goodness of your heart, recognize you might not get paid and will be funding the project.
I recently had to face what I thought would be an uncomfortable personal conversation. I fussed all morning, then went to visit the person involved.
I don’t think writing a check is old fashioned, but there are so many advantages to using a credit or debit card that it’s become the preferred payment method for many.
If you were a mouse in my pocket, you’d hear the complaints I hear about both general and specialty contractors who don’t answer the phone or return phone calls.
Some people are used to snapping their fingers and having others jump. It’s irritating, but you have to remember that they’re writing the checks.
I want to share a recent phone conversation with a contractor concerning a problem they were having with a client.
I’m a firm believer in treating salespeople well. When they’re treated well, they’ll sell. When they sell, you win.
This note is a painfully perfect example of why you shouldn’t provide details on your pricing.
From a contractor: “I am definitely going to do a better job in pre-selecting my clients after this one.”
We want to see contractors build stronger businesses and in the process improve the reputation of our industry.
Business planning isn’t exciting. But the effort you put into it has much to do with the results you’ll see next year and in years to come.
This is part two of our year-end planning paper. We’re going to pick this up by continuing an indepth look at your overhead budget for the coming year.
A contractor sent us an online article written by a real estate investor with the purpose of educating you on “how to develop a fair relationship with your contractor.”
I’m not a fan of working with government agencies, but some situations are unique.
When clients try to change the terms of the contract, you don’t have to go along.
Insurance work can be good business, but it can also waste your time if the insurance company is playing the three bids game.
A guest article: How do you avoid going out on sales calls to look at jobs for folks who obviously do not qualify to purchase from your company?
Is there anything you can do about the sales you miss?
It’s the last Wednesday of the summer, which is a great time to look back and see how your business fared.
If you own a business, your illness or death will create business problems for your families and your employees.
Don’t confuse profit with salary or hourly wages. Making a profit isn’t optional: Your business needs profit to survive.
It’s summer, and that means community gatherings for people wanting to have fun. In our area, the main event is the county fair. I’m confident there is a similar event in your area.
I am not opposed to the use of cell phones on the jobsite as long as the phone is used solely to communicate information about the job, and the calls are direct and to the point.
A construction company building both new homes and remodeling needs to calculate a separate markup for each type of work.
There are always at least two sides to any scenario, but if you want to stay in business, consider this a lesson on how not to treat a subcontractor.
Michael addresses a few different questions we’ve heard recently, primarily dealing with taxes and profit and calculating your markup.
After reading our books and trying to do things right, why is he still not making any money?
“The #1 reason I lose jobs is ‘your price is too high.’ What am I doing wrong?”
It’s time to catch up on some spare topics I have lying around. These aren’t earth shaking but they can and will impact your bottom line.
Give clients options when you quote the work they want done.
Over the years, I’ve seen contract language evolve, shifting more and more responsibility to general and specialty contractors.
A contractor friend called to complain about problems he’s having with specialty contractors in his area. This isn’t a one-time complaint; I’ve heard the same from others around the country.
What do you do when your partner is listening to someone who knows nothing about construction, but still thinks they knows what’s best?
There is a measure you can use to determine how financially solid your company is at any given point in time. It’s called the current ratio, and it’s a good idea to check it regularly.
Is it a good idea to have a service agreement to cover small jobs under a certain amount?
When you own a small business you wear a lot of hats. Understanding the numbers might not be your favorite hat, but numbers are important because they show where you stand financially.
We’re aware that homeowners also visit our website. This letter is from a first-time homeowner who’s ready to buy, but his builder isn’t cooperating.
When I teach a class or webinar, sometimes I wonder if my listeners understand what I’m trying to say. After reading some of the questions that came in during a recent webinar, I realized I missed the mark.
Most home improvement sales copy is filled with nothing but generalities and platitudes. It gives no real reason why a prospect would want to take the next step.
Everyone, and I do mean everyone, who has ever compiled an estimate has made a math error that put knots in their stomach once it was realized.
The last thing I want to do is cause a family problem, but apparently I did with one family.
Flaky contractors make us all look bad. But not all advice given to homeowners to protect themselves from fraud is good advice.
Don’t come up with excuses to not be marketing your business. Eventually you will be in the worst position of all, and that is when you say “I need quick help to get my phone to ring”.
Some time back we received a well-written letter about liability insurance from a contractor in Washington state.
Avoid losing money by recognizing some of the games that building owners play to avoid paying.
Michael discusses a ploy some building owners use to not pay for all of their change work orders. It happens in both residential and commercial projects.
When something seems amiss, don’t stop asking questions. A contractor shares his experience on a recent sales call.
Clients are changing, and if you want to stay in the game and make something more than a living, you’ll need to change with them.
You should stop providing free estimates. It’s called free consulting, and you won’t be successful giving away your time. (Guest Article from David Lupberger, Remodel Force)
You shouldn’t sign a contract that stipulates what you can charge, even if it’s just on the change orders.
As business owners, we need to keep an eye on what’s going on with the economy because it should influence our business decisions.
As we wrap up 2018, we want to share two notes we received this year.
We discussed design agreements last week; today we’re going to look at them from another angle. The first step is setting the budget with the client.
A contractor who has designed projects asked how to protect his design work.
A business plan is different than year-end planning. A business plan looks at the big picture. It’s a roadmap for the whole journey.
Do you ever think about what we do for others? We build homes and we maintain them. We fix problems and if our job is done well, no one ever notices how well it was done.
Without looking, how do you think your business did this year? Are you feeling more profitable or less? Is your business running more smoothly or are the problems overwhelming?
A contractor we’ve known and worked with for many years sent us a note about his experience working with a new architect. Ideally, the architect would have been working with the contractor from the beginning so he could have educated the client as well.
Business cards are a simple, inexpensive way to provide everyone you come in contact with the information they need to reach you.
The best way to avoid paying taxes is to not make a profit at all, but it’s a rough way to live.
A good guy we know was recently working with a potential client when he ran into some concerns.
There are things you can and should do when a client tries to dodge making payments.
It’s the beginning of the fourth quarter and I’d like to address a few different issues that seem pertinent right now. The most important one is to remember that things aren’t always good.
One of the more unpopular things I recommend is canvassing the neighborhood around your jobs. It’s unpopular because it’s misunderstood.
It’s smart to specialize on the work that makes you the most money. It’s even better if you know contractors who can pick up the leads outside your specialty.
A contractor in Hawaii sent in a note asking about a few sales issues.
The job is sold, schedule is set, project gets started, and suddenly it’s behind schedule. When it happens, it eats into your profit and upsets your clients.
If they called you, doesn’t that mean they need or want the work done?
The topic is uncomfortable but if you’re involved in residential sales, you’ll see family disagreements. It helps to know what to do.
Many contractors who write us are having a problem with their business, and in many cases, it’s because the contractor has lost focus on what’s important.
Should you let a client work on the job they’ve hired you and your company to build?
How should you handle a mistake? What if it’s a mistake you made over a decade ago?
Since the end goal for both the architect and the contractor is a satisfied client, how about working together from the beginning?
If you want to attract the best people, you need to make the a good offer.
There’s a reason that working in the trades isn’t appealing. But if you do the work, you know there are positives that outweigh the negatives.
When your books are set up properly, it’s easy to calculate your markup, and it’s also easy to compare your actual results to your estimates.
Taxes are the price you pay for being profitable. It’s a good thing when your business is in the black and you need to pay taxes on it. It’s not good when you’re taken by surprise.
When everyone but your family benefits from your business, it’s time for a reality check.
Should you take every opportunity to increase exposure for your business?
If you’re a dependable, responsible construction-business owner, do potential clients in your area know you exist?
As we head into Memorial Day weekend, we want to share an upbeat note we received in April from a client.
It’s amazing the things a potential client can think of to get you to lower your price.
Is there a common ground or way that the designer and contractor can do business together, each make the money they need to, and not overcharge the customer?
Finding good employees is difficult, and you want to keep the ones you find. Sadly, I’ve spoken with a few contractors who’ve had their lead person, the one running their jobs, quit in frustration.
We hear many stories from business owners who have had to recover from the theft of funds by their own employees. Today we’re sharing a list of things you can do to protect yourself and your business.
When you own a small business you’re often asked to hire family or friends. Sometimes it works out great, but not always.
There are two schools of thought on pricing handyman projects and service work: T&M or flat rate pricing. They both have advantages and disadvantages.
We received a note from a contractor asking if what we talk about applies to his business.
The note stated, “Because I’m the middle man, my subcontractor loses out a potential project.” That’s true, and it’s one reason you shouldn’t get into the position of being a middle man.
“Let’s see what the contract says about that.”
For the past few years I’ve had general contractors tell me that they can’t get specialty contractors to return their calls, show up on time or show up at all for a job. Now I’m hearing from generals who are getting calls from subs, looking for work.
We often hear from contractors dealing with a client who, for whatever reason, has decided to change the terms of their contract. Other professionals have the same problem.
The one question too many salespeople stumble over is the budget for the job. They are worried that it looks bad to ask.
If your lawyer believes you have to justify your pricing just because someone doesn’t want to pay their bill, it’s time to find another lawyer.
I’m a strong supporter of reviewing where your business has been and where you want it to go. Last week I discussed that subject with a friend I met over seventeen years ago.
I follow Barbara Pachter, a speaker, author, and coach, who writes regularly on business-related topics, especially those related to business etiquette and communication. We requested and received permission to reprint one of her recent blog posts here.
As you add employees to a growing company, you’ll both increase production and decrease productivity. You need to account for it when you’re estimating and pricing your jobs.
Is transparency the way to go when selling? Be careful who you listen to.
We recommend setting goals every year, beginning the process about now. If making a profit is one of your goals, Michael outlines practices that will help.
An Operating Capital Reserve Account helps keep you and your family free from financial worries, which helps you sleep better.
If you’re doing a good job of marketing your company, how do you plan for and manage growth when it shows up?
We were recently asked about an online service designed to make it easier to handle sales calls.
It’s interesting how friends, relatives, and other contractors try to rope you into their schemes by asking to borrow your license to build their jobs.
Payment schedules need to be in writing, that includes between a general and specialty contractor.
Not all of your clients are honest. There are even a few who have no intention of paying you for the work you do.
He’d signed an agreement with a client six months earlier for a bathroom remodel. Now the client wanted to cancel the job.
If they tell you the formula to use will make you more profit, that’s baloney. It’s the numbers you use that determines your profit.
Is it appropriate to build the job a homeowner wants and is ready to pay for, if the home value doesn’t support the project?
These aren’t earthshaking topics, but they are the things that cause problems on jobs, leading to disgruntled clients, lost referrals, and lower profit margins.
Every day we drive by a new home under construction. I don’t know how many people pass this new home every day but I would guess it’s in the thousands; the road is always busy.
A survey outlines the challenges homeowners say they’re facing when they remodel or renovate their home. It’s valuable info, because it tells you what they need help with. It’s your job to show them you can provide that help.
A recent Houzz survey confirmed what you need to know if you’re in sales; it’s not all about price.
What do you do when a potential client waits until the proposal is together to request itemization on the project?
Getting a commitment from your potential client is a critical step to making the sale.
“We don’t advertise” is well meaning mischief at its worst. It cuts your company off from a large pool of potential clients who are looking for a contractor to help them get their job built.
If you’re considering purchasing a franchise, or if you’ve been contacted by a franchisor because of your success, put your emotions on hold and evaluate it carefully.
Building trust always starts when you are first contacted by a potential client. Michael discusses how to do it right, and how to do it wrong.
It’s true that employees are important, to your business and/or to your subs who get your jobs built. But they aren’t the reason you’re in business.
An objections book is a history of your sales calls. It includes everything you said and did, right or wrong. I have only met two or three others in my thirty-plus years of direct selling who took the time to compile a book, but each one became outstanding in their profession.
A building owner challenges our statement that contractors shouldn’t itemize their estimates.
We’re looking at three scenarios that require a quick judgment call when you’re in front of a client. Handling these scenarios correctly protects your time and lets your client know how you do business.
Being profitable doesn’t mean getting rich off your clients.
I’ve seen contractors try to apportion overhead on a daily, weekly, monthly or per job basis when compiling their estimates. I don’t recommend any of those approaches.
A contractor asked for my opinion on a request he recently received. It’s not a win-win proposition.
In our book, Profitable Sales, A Contractor’s Guide, we discuss the need to set the client’s budget for a project. One of our clients sent a note recently that explains why setting the budget up front is important.
I’ve been around the construction industry long enough to know that it isn’t always rosy. When a recession hits, construction is one of the early victims.
If you’re doing service work, make sure your client knows what to expect before you start.
A call came in from a friend recently. It seems that a client of his wants to cancel a signed design agreement.
How well you manage your money when business is good impacts how easily you’ll survive when business is tough.
To be blunt: projects like this are a waste of time. I’ve rarely if ever seen a request like this turn into a contract
I’ve written before about clients who decide to make changes to a contract. Last week I heard from two different contractors who had to deal with this, and I want to share their stories.
I received a note from Michael Stone. He said, “You wouldn’t believe some of the stories I hear from contractors being approached by people claiming they can help with SEO or getting leads. I want to cover this in a newsletter.”
Construction is a tough industry. For some, the hardest part is making the sale. They’re out of their comfort zone. They don’t want to talk about money or ask for the sale.
It’s important to be focused on profitability. You’re in business because you want to keep a roof over your head and food on your table; you can’t do that when your business is losing money.
You can’t lower your price and expect to make up for it by selling more, because there is a limit to how much you can produce. Every job needs to be profitable.
In the beginning you had ambition and energy. Then reality set in.
I’ve been reading advice in a few construction magazines on how to sell to millennials, and I don’t understand the fuss.
When subcontractors or employees are approached, they are obligated to notify the general contractor who brought them there, and let him handle the lead.
Your contract should call for arbitration, not mediation, to settle disputes.
If I had a nickel for every time I’ve heard that it’s difficult to find employees, I’d buy an island in the South Pacific.
These relationships can be profitable for both parties, but they can also quickly become squabbles if the relationships aren’t valued.
Potential clients always have a budget for their job. They have at least a rough idea of what they can afford or expect to spend on a project.
We want to share a note we received earlier this month about hard work and gratitude.
When things are good, it’s easy to get lackadaisical about marketing because finding new clients is so easy.
It’s important to remember you aren’t in business to drive around and give out numbers. If you’re a specialty contractor, you also aren’t in business to provide numbers to architects or general contractors.
“I have more work than I can do. I tell new leads to call me after the first of the year.”
If you want to lose money on a job, agree to let your client do part of the job or provide their own materials without setting clear boundaries.
Ever heard the old saying that something “pushed your buttons”? It’s an emotional reaction, usually not positive. Well, Devon took a phone call last week that pushed my buttons.
When I’m working with a group of contractors, I often ask how many are providing a Right of Rescission form with their contracts. Many contractors aren’t even aware of the document or realize its importance.
Some business relationships turn out badly; with experience, you can identify and avoid them.
There are business owners who think it’s okay to put the screws to someone else as long as it helps them make more money.
If you’re running your business like a business and not a hobby, you’ll start getting more leads, and it’s exciting to watch your business grow.
In a systems company, the customer is someone you deal with when you run out of other things to do.
It’s always appropriate to ask a potential client where they will be getting the funds to pay for their project.
It’s hard to remember what you’re worth, especially if you’re spending time on jobs that cost you money.
Estimating is necessary, but it isn’t easy; it’s hard, tedious work. There are four basic things you need before you begin your estimate.
I’ve written before about middlemen in the construction industry: I’m not fond of them. There is another type of middleman in the construction industry, facility and property management companies.
There isn’t one right way to handle allowance items that works for all contractors and all clients. Plan A may work for most clients, but then you meet Mrs. Oddball who seems to work at being difficult. So you derive Plan B and hope it works.
A young guy asked if signing on with one of the big box stores was a good idea. He hasn’t discovered yet that getting a lot of work doesn’t mean you’ll make lots of money.
Generally speaking, when potential clients don’t want to make a commitment but want to keep your paperwork, they intend to shop it around.
Too many homeowners believe they need three bids for their project. The intent, of course, is to compare proposals so they can make the best decision.
Some clients want the lowest bid for their project, and nothing else matters. It’s your job to try to educate them.
The first step toward making a sale is making a good first impression. That happens when you return your phone calls and show up to your appointments on time.
Remember, you’re in business to provide a service and make a profit doing it.
Does subcontracting raise the price of the project?
Please don’t be this contractor. Please don’t be that homeowner.
Using the wrong labor rate, or using someone else’s markup when you don’t know their assumptions, is one of the biggest mistakes we see and the difference can be thousands of dollars.
In Markup & Profit Revisited, we explain how to calculate your markup. We’re often asked if you can adjust your markup based on the length of the job.
Some advice on hiring a contractor is just plain wrong.
One-legged sales calls. Frankly, this is much to do over a problem with a fairly simple solution.
I recently read an article reviewing a new lead-generating service, and it stated, “Our contractors only pay us a 5% referral fee, once they win the job.”
Are you bidding on jobs, or are you selling them? There’s a difference.
When it comes to pricing your jobs, you need to keep it simple, especially if you want to make the sale.
Another day, another service that helps homeowners find a contractor.
What you do has value. Respect your time and your knowledge.
Sometimes a potential client expects you to work for free. That’s not a smart route to take unless you have a lot of money in the bank and time on your hands.
When things are good, it’s smart to ask yourself a critical question: Are you prepared for the next downturn?
Business needs to be win-win. If the services of the contractor are needed and provide value, the contractor needs to be paid accordingly
There are two steps to attracting leads. The first step is being known; the second step is making them interested enough to contact you.
On a sales call, if you’re speaking and your potential client is thinking “so what?”, you’ve lost them.
A coaching client shared two recent experiences while doing insurance repair projects. One was positive, one wasn’t.
Many building owners want a Cost Plus contract because they believe they’ll have more control over the total cost of the project. It’s your job to educate them on the downside.
When your client wants a lower price, something has to change. It shouldn’t be just your price.
At least once a week I hear from someone who can’t get paid for work they’ve done.
Without a paid design agreement from the client, you aren’t sure you’ll get the job. Your subs are even less sure they’ll get the job.
Goals are a target, and if I start falling short, I either figure out why and fix it, or adjust the target to match reality.
At a restaurant with family recently, the waitress agreed to let me take a photo of the back of her shirt. It’s exactly how Devon and I feel about the work we do.
Delegating is a scary word for most of us. We don’t believe that anyone can do a job as well as we can.
It’s important to stay focused on the little things that can make a difference in your bottom line. Let’s start with the cost of leads. Do you know what your leads cost you?
It’s the beginning of the holiday season, and I’d like to talk about a topic that can change both your sales ratio and your family relationships.
There are two benefits to documenting your jobs. One is protecting yourself in case there is a disagreement about the project. The other is providing information that will help you when you’re promoting your business.
We’d like to share an email received from an anonymous homeowner. If you believe that it’s smart to provide an itemized invoice, this will make you reconsider.
It’s the time of year when you should be planning for the coming year. Once you set your plans for the year, how much of those plans should you share with your employees?
Make sure your new hire is compatible with your business, in both personality and skills.
One of the pitfalls of graduating from high school and/or college is the belief that you’ve finished your education. I close my classes with a slide that says, “To Keep Your Money In Your Company,” with an arrow pointing to “Education.”
Given how valuable leads are, once you get one, you need a sales procedure to help make the sale.
I can’t tell you how many times in the past few weeks I’ve had contractors tell me they are cutting their prices to get work. I even took a call from a contractor who told me we should come to his town “because all the NARI members are busy cutting their prices.”
Issues that eat into profitability: It’s easy to hire someone who looks good on paper. If the resume is terrific and their references are glowing, they get hired.
Ever had a day, maybe a week, where you said, “That’s it, I’m done. Enough already.” You wanted to put a sign in the front window: “FOR SALE: One Construction Company, CHEAP! (I’ll pay you to take this stupid thing off my hands.)”
It is a fact of life that when you sell construction-related services, you’ll have clients tell you that your price is too high. Bless their hearts. They have no idea what would be a fair price for the work they want done, they just know that your price is too high.
I read many articles on the construction industry looking for, among other things, information on how the construction industry is doing and what we can expect in the immediate and near future. One statistic that always interests me is the size of the average remodeling job.
In every business, some things we do eat into our profitability. Do you run your business or does your business run you?
A lot of contractors don’t believe they need to use their full markup on subcontractor quotes. Let me explain why that can be a mistake.
An architect he knew asked him to meet with the owners of a proposed new home. As they were discussing the project, the architect asked our friend, in front of the clients, “What’s your overhead and profit percentage?”
One problem contractors run into is dealing with clients who want to change the scope of the project after signing the design agreement, and not realizing how it might impact their budget.
It’s cheaper to ask questions than pay for mistakes. A coaching client is trying to fix the problem created by an former salesperson’s expensive omission.
This week I want to catch up on a few things that have been bothering me.
Can you be too professional? A contractor shares the story of a sale that he was told he lost because he was dressed too professionally and responded to questions too confidently.
Sometimes a client requests an emailed proposal, and we’re sharing one possible response to that request. But when it’s physically impossible to present a proposal in person, there are ways to increase your chances of closing the sale from a distance.
How much should you spend on advertising? How much is too much?
Our goal is to help construction business owners build successful, profitable businesses. We want them to succeed, but we want them to do it right. A recent note from a homeowner is a shocking example of a business we’d like to see fail.
When I think about major influences on my sales training, I think of Tom Hopkins. He was an outstanding salesman who become a gifted sales trainer, and I still receive and read his newsletters.
How do you deal with a dishonest client? I recently corresponded with a contractor concerning this issue.
A design agreement is nothing more than an agreement to work with the client to design their project. That’s not the final goal of a remodeling contractor; your business is about building projects.
A young fellow recently asked about his hourly wage.
We’re a third of the way through the year. It’s a good time to review some of the basic things you need to do to run a financially successful construction-related business.
I’m not convinced that Porch is interested in helping our industry. From what I’ve seen, I think they’re only positioning themselves to make money off contractors.
How to Turn More Leads into Paying Proje …
Mark Buckshon writes a construction marketing blog and a few months ago he told the story of a commercial contractor who was dealing with a bully.
A referral fee is what you pay to the person who provides you a lead. A sales commission is what you pay a salesperson to close a sale.
Use Lead Gen tactics to your advantage B …
A potential client wanted to get a bid on some work at her home. Our coaching client was pretty sure the lead was dead, and wanted to know if she should have done anything differently to have made the sale.
“How do you hold a positive frame of mind when you’re constantly made to feel unworthy of a decent living by your customers, attacking your already low prices? I have tendonitis, carpal tunnel, cartilage deterioration in both knees, a bad back, and I still bust my a** pouring sweat and blood into every job.”
I was asked recently by an electrical supplier, “Why do general contractors often not want their subcontractors to have any communication with the home owner?”
“I am working on designing a few jobs with the job costs starting around $125,000 and up. What is your opinion on markup when the job costs are getting bigger? I want to make sure I am staying competitive.”
I applaud this person’s efforts, helping someone else with the business side of business so the craftsman can continue being a craftsman. But this craftsman is going to have to either learn how to run a business or start charging enough for his work to both feed himself and pay an office manager.
Last week’s article discussed the pros and cons of using employees or subcontractors to get jobs built. This week, Myles Corcoran of Myles F. Corcoran Construction Consulting Inc., presents another point of view.
Recently I’ve had a number of discussions with company owners about how to get their jobs built. It all comes down to using subs or employees, or as some like to say, “Should I be a paper contractor or a real contractor?”
It’s important to manage the payment schedule on your jobs, but not all jobs are the same.
If salespeople know the business owner will back them up and pay them fairly, they’re motivated to produce profitable sales. If they aren’t motivated to make sales, the business is in trouble.
One of our coaching clients was telling me about his problems finding a subcontractor for a job. If you’re a general contractor, this might sound all too familiar.
Real or fake outrage can be a client’s attempt to elicit an emotional response from you to get what they want. It often puts you in the position of questioning yourself and your company, not dealing with the subject at hand.
I’ve long been an advocate for paying salespeople on straight commission. Not everyone agrees, not even all the experts, but in my experience straight commission is the best way to go.
Sometimes a prospective client wants you to fix the work done by another contractor. That was the situation a friend of ours ended up in recently.
I’m hopeful our industry will continue to improve as owners do the remodeling, repairing or building they’ve delayed. When you sell those jobs, will you use employees or subcontractors to get them built?
It’s important to define the ground rules of your relationship.
We have a major problem in our industry: we’re getting old. There aren’t enough young people getting into construction.
A design agreement allows you to get paid for your work. Don’t waste your effort or your time.
Retainage clauses, removing the finance charge clause on the last payment, “we’ll pay you when we get paid”.
What do you do when a client calls about a problem they created? Preventative measures make the difference between a profitable job and losses.
Every once in a while, your phone will ring and the potential client on the other end will tell you they want a bid today. What should you do?
The popular belief is that contractors are the villains and homeowners are the victims. But if you’ve worked with the public for very long you know there are also dishonest clients.
Never let your final payment exceed 2% of the sales price. And your contract should include a finance charge clause for payments not made on time.
We used to get three payments on jobs. 1/3, 1/3, 1/3. That’s not a smart business practice.
It's easy to ask someone to do something; it's harder to hand over money. Your client isn't committed until they've written the first check.
It’s easy to know if you’ve made a profit when every transaction is complete in a day. It isn’t as easy in construction, where a job might take a week, a month, or even more than a year to complete.
It can help to separate yourself by doing things right. But you're a business owner. It's what's expected. The flakes are the ones who are different.
Too many contractors care only about getting leads. They believe that if they get enough leads and can bid on enough jobs, they’ll be successful. That’s not the case.
I recently had the opportunity to visit with some construction employees and it struck me that they didn’t know much about the company they worked for.
How do you pay a salesperson? If you were to work for yourself, would you be okay with the rules you’ve established for paying your salespeople?
If you're one of the many contractors who start an advertising message with, "We specialize in . . . ", good for you. But if you follow that statement with a long laundry list of things you do, you're hurting your business.
The services offered by construction businesses are in high demand right now. Can we look at this industry from another viewpoint?
Why would a developer ask for a cost plus quote to replace a fixed price quote? Because he wants the very same work done at a lower price.
Three approaches to managing jobs. Also, paying production employees and making sure the work gets done.
If I were to catalog incoming phone calls by topic, I’d guess at least half of them have to do with collecting payment on jobs. What do you do when they won’t pay?
Last week, a contractor called to ask my opinion on getting involved with storm chasers that were in his area.
If the payment schedule is adjusted after you’ve started a job and they aren’t willing to pay what’s owed, file liens. You must protect your right to be paid.
One of the questions we’re asked most often is how a subcontractor can get jobs. How do you go about meeting general contractors and letting them know you’re available to build their jobs?
Stay ahead of your clients. Write a detailed contract that protects you from as many unpleasant scenarios as possible, and work from written agreements with both your subcontractors and your employees.
This contractor will build between one and two million in sales this year, and was told that he needs to revert to an all employee model if he wants to make this happen profitably.
“My spouse is too busy so I’m handling all the details. When I get all the info I need, we’ll talk about it and select the contractor we want.”
Sometimes they request you use employees instead of subs, or work on a T&M basis. Clients don’t understand how the construction world works. It’s your job to educate them.
As the economy slowly improves, we are being asked to revisit issues we haven’t discussed for many years.
Estimate your jobs properly so surprises don’t happen.
Can you afford to hire a new office empl …
Without hesitation, a large majority of cases I’ve worked on could have been prevented, and should have been prevented, with a well written contract.
Seven issues that upset clients. And when clients are upset, either you won’t make the sale or you might not get paid.
Last week we discussed knowing where you stand financially, whether you are making money, losing money, or breaking even. What now?
This is the criteria I use to tell if a company is making money. It isn’t the only measure, but it’ll give you an idea of how your business is doing.
A selection of issues that should be written into every contract to protect your profitability.
A major mistake contractors make is to tell a client they can’t start the job for 3-4-5 months. “We are backlogged, can’t possibly start your job before then.”
Lead Generation Companies don’t want you …
In a perfect world, estimated costs will match actual job costs. At the end of a perfect year, total job costs will equal projected job costs. It’s not a perfect world.
If you are going to deviate from a standard fixed price contract, look at your approach from your client’s point of view. Make sure they know what to expect and what you’ll do.
Commitment language in your contracts, payment schedules that help cash flow, right of rescission language. With a few extra comments.
Many construction-related disputes can be avoided with a well written contract. Here are a few of the things that need to be included.
When a job goes bad, the contract is front and center. If you don't have a dispute resolution procedure defined, you're probably looking at a lawsuit.
I have an audacious goal. I’d like to see a shift in the public perception of the construction industry.
If you want to make the best use of your time and not allow others to waste your time, don’t estimate major projects without a design agreement.
When profits are down, missing the estimate on jobs is almost always part of the reason.
It’s the season to go shopping, and some lower life forms (also known as scumbags) are doing their shopping on jobsites when no one else is around. Protect your business.
Today we’re going to talk about succeeding. We’re big football fans. Our local high school football team is 8-0 this year. Our favorite college team is 7-0
Error factors, Superman complex, Demolition and Discovery agreements, hauling out the trash.
Know the inspectors required in your area and add an “inspector factor” to your estimates.
You have a choice in how you do your estimating. Some methods work well, but unfortunately, many don't.
The purpose of an estimate is to price the job. If you want to be profitable, accuracy matters.
What if you agreed on a price, now customer wants all receipts for material? Without a clearly written fixed price contract, it's a problem waiting to happen.
Any job today can EASILY get you FREE le …
Cutting your price to get a job is a money losing approach. Over time, you won’t be making a profit and you’re only working yourself into debt.
Have you ever had a client go behind your back and ask your employees and/or subcontractors to work for them outside your company?
My clients are constantly chiseling me down, everyone makes money on the jobs except me.
It's time to discuss production issues on construction projects that are often overlooked. Because time wasted on a job comes right out of profit.
There are lots of get rich quick schemes there. Spend $2 and get rich beyond your dreams. What are the odds? The same as making money in business without being focused.
When I was selling, I always sold on straight commission only. Pay should be based on performance. When you hire a salesperson, set ground rules that you both work under.
You’re in business to provide a service and make a profit doing it. Three employee issues that cost your construction company money.
Many contractors use a variable markup or margin to price jobs. They believe that in the construction industry you have to reduce the price to get the job.
Too many contractors use a poorly-written construction contract, or no contract at all, leading to different interpretations of an issue.
If you're a remodeling or new home contractor, how can you get clients to make their selections before you write the contract? Make it easy for your client.
If you’re a contractor, how much should you be paid to own and run your own construction company? How much should a construction company owner be paid as salary?
What’s the average cost per square foot for a remodel? Average contractor markup? Average contractor fee? There is no average anything in construction, and here’s why.
Why clients request itemized estimates, and how you should respond.
We use Google Analytics on our website. It tells us how many visitors we’ve had and what brought them to our website.
You don’t want to lose business because of a comment that you post or email. Even if you think it’s hidden in a dark corner, it can cause a problem
When you go on a sales call, are you there to see how much money you’ll make on the job, or to help them get the remodel or new home/building or specialty work they want done?
Winning the SEO battle for contractor websites. Brian Javeline of MyOnlineToolbox, is joined by contractors telling what they’ve learned to now generate their own leads.
Address their fears so they feel safe purchasing from you.
Not charging enough for your work is the major reason construction companies fail. Here are some of the mistakes contractors make when pricing their jobs.
Michael Stone discusses why contractors go out of business, the correct formula for markup, charging for change orders, employees and cash flow, and payment schedules.
You’re on a scheduled sales call when the doorbell rings and in walks another contractor. Or you’re in the yard talking to the Owner and up walks another contractor.
Estimating errors cost money. Lower your error factor but considering these common mistakes.
Last week we discussed having signed Change Work Orders (or Additional Work Orders). Today we’ll discuss 4 mistakes often made when writing Change Work Orders.
Some states established funds for homeowners who’ve been wronged by a contractor. These are funded by a fee (tax) charged to all contractors in the state.
If your construction business isn’t profitable, it won’t survive. You have an option of being competitive in construction. You don’t have the option of being profitable.
I’ve long suspected that commercial and residential contractors look at the construction industry differently, and this thread confirmed that suspicion.
Brainstorm business opportunities that your construction company could do, profitably, over the next twelve months.
If you have employees, changing laws can impact your business. Two states recently legalized recreational marijuana. Another 15 states allow medical marijuana.
We heard recently from a friend in Canada, and I’d like to share part of his note with you. Sometimes it’s encouraging to hear how someone else is making business work.
4 short videos by Michael Stone, “The reason you are in business” “Using an Accurate Markup” ”Accurate Estimates” and “Getting Paid on Time”.
A note that came in a few weeks ago: “We have a very competitive market here . . . My husband and I both agree a lot of our problem is not charging enough for our work.”
Ten Cardinal Rules for residential construction sales.
An example of what transparency does for your business. If clients want the details (i.e., itemization), then provide those details but charge for them.
By providing background, Michael Beck helps us understand how the relationship between architects and contractors has developed over the years.
A contractor on the east coast was frustrated with how he was being treated by architects. For starters, they were requesting a list of all his subcontractors.
You don’t have to be competitive. You have to be profitable. If you aren’t profitable, your business won’t last.
Claim your business in local search sites and social media. Almost always free, only takes a minute, might bring in leads, and it will protect your name.
The Markup and Profit newsletter is published weekly. It provides valuable, pertinent information for any construction-related business owner.
Is buying a construction business franchise a smart idea? The sales pitch is good, promising a proven method to run your business and a proven path to wealth.
You’re in business to provide a service and make a profit doing it. Having the financial info you need to make decisions is critical for your business success.
Don’t take any job where the client tells you how much you can charge for your work.
Estimating basics, with the goal of getting you back to the potential client quicker with a more accurate estimates.
Don’t worry about what “the other guy” is charging.
“Your price is too high” means you haven’t done your job as a salesperson.
Building a website for your small business doesn’t have to be expensive, and it isn’t that complicated when you understand how it works..
Guidelines to a more successful construction-related business.
Ten Cardinal Rules for a successful construction-related business.
Many contractors believing building “quality” helps them sell jobs and make more money. But how do you define quality? Who sets the standard?