Archives: Articles

Design Agreements and the Budget

The purpose of a design agreement is to get a commitment from your client to design the project so you don’t have to do the design for free. How do you keep the design within the budget?

The Cost of Callbacks

Having to return to a previous job and fix something that’s wrong costs money. Knowing the cost of a callback helps you or your crew to be more diligent to avoid them in the future.

Wrapping Up a Difficult Project

It can a challenge to finish a project, especially when it was priced too low for a difficult client and with a weak contract.

Habits for Success

Are your habits helping your company grow, or are they holding you back?

Plan for Survival

If you thought you were the captain of your ship, 2020 taught otherwise.

Construction Websites that Generate Leads

A construction website should be a lead generating asset. It doesn’t have to be expensive, but if it doesn’t generate leads it’s a waste of time and effort.

Why Do You Need a Written Construction Contract?

Almost all conflicts contractors face could be avoided or quickly resolved if there is a clear, detailed construction contract between the parties.

Charging a Fair Price

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.

Lowball Pricing in Construction

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.

Specialty Contractors and Down Payments

Should specialty contractors require down payments even when working through a General Contractor?

Remodeling Sales: Setting the Budget

A business owner in the UK asked a question that illustrates that remodeling sales challenges are the same regardless of your location.

The Skinny on Change Work Orders

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.

Building a Successful Construction Business

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?”

Family Matters More Than Business

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.

You Have Better Things to Do than Estimate

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.

Clients and Your Job Schedule

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.

Who Pays for On-the-Job Training?

Training in construction is important, especially with a shortage of employees. A general contractor asked about a subcontractor who is training an apprentice.

The Sales Call: Budget and Design

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.

Cost Plus Contract, Time and Material Contract

Why cost plus and time & material contracts should be avoided, for both contractors and building owners.

Shady Contractors

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.

Estimating Labor in Construction

Our last newsletter triggered a question on estimating labor.

Estimating Errors Cost Money

Estimating the cost of a remodeling, renovation or specialty project accurately is critical if you want to be profitable.

When Business Returns

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.

When Business Dries Up

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.

Four Diamonds of Communication

Sales is about communicating and interacting positively with others. Those skills make life easier in any delicate conversation.

Hang On – Getting Through These Times

Michael Stone offers suggestions on how to keep your construction business strong during this Coronavirus emergency.

It’s Not For Us

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.

Unclear Change Work Orders

Pricing changes for a change work order isn’t easy when the scope of work isn’t clear.

Time and Material Woes

Time and Material contracts are full of risk, especially on larger jobs.

Investing in Your Business

Constant input from others is necessary if you want to stay on top of both your business and your personal life.

Business or Charity?

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.

Borrowing Jacks

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.

Payment Methods

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.

What the Future Holds

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.

Protect Your Time

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.

Clear Sales Communication; It’s Your Responsibility

I want to share a recent phone conversation with a contractor concerning a problem they were having with a client.

Hiring a Salesperson

I’m a firm believer in treating salespeople well. When they’re treated well, they’ll sell. When they sell, you win.

Let’s Discuss an Acceptable Hourly Rate . . .

This note is a painfully perfect example of why you shouldn’t provide details on your pricing.

About Your Exorbitant Markup . . .

From a contractor: “I am definitely going to do a better job in pre-selecting my clients after this one.”

What You Do in Practice

We want to see contractors build stronger businesses and in the process improve the reputation of our industry.

Year-End Planning, Part 1

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.

Year-End Planning, Part 2

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.

Words from an Expert on Hiring Contractors

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.”

Protecting Yourself from the Protector

I’m not a fan of working with government agencies, but some situations are unique.

Final Payments and Guarantees

When clients try to change the terms of the contract, you don’t have to go along.

Insurance Quotes – Getting Paid

Insurance work can be good business, but it can also waste your time if the insurance company is playing the three bids game.

On Politely & Confidently Qualifying Leads

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?

Missing the Sale

Is there anything you can do about the sales you miss?

A Yardstick for Success

It’s the last Wednesday of the summer, which is a great time to look back and see how your business fared.

What Happens To Your Business If You Can’t Be There?

If you own a business, your illness or death will create business problems for your families and your employees.

Why Do You Need To Make A Profit?

Don’t confuse profit with salary or hourly wages. Making a profit isn’t optional: Your business needs profit to survive.

Promoting Your Business: The County Fair

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.

Cell Phones on the Jobsite

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.

Overhead Differences: New Homes and Remodeling

A construction company building both new homes and remodeling needs to calculate a separate markup for each type of work.

Honest Relationships

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.

Taxes and Profit and Markup

Michael addresses a few different questions we’ve heard recently, primarily dealing with taxes and profit and calculating your markup.

When Success Looks Impossible

After reading our books and trying to do things right, why is he still not making any money?

Focusing On Price

“The #1 reason I lose jobs is ‘your price is too high.’ What am I doing wrong?”

Spare Topics

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.

Sales: Have Options Ready

Give clients options when you quote the work they want done.

Contract Language That Puts You at Risk

Over the years, I’ve seen contract language evolve, shifting more and more responsibility to general and specialty contractors.

Subs: Take Care of Business

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.

Transparency and Partnerships

What do you do when your partner is listening to someone who knows nothing about construction, but still thinks they knows what’s best?

Know Your Numbers: Current Ratio

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.

Handyman vs Service Agreement

Is it a good idea to have a service agreement to cover small jobs under a certain amount?

Estimating, Labor Burden, and Cost of Goods Sold

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.

First Time Homeowner, Uncommunicative Builder

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.

Calculating Your Markup

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.

3 Sales Copy Habits You Have To Stop Doing Today

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.

Pricing Mistakes

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.

Design Agreement Fees

The last thing I want to do is cause a family problem, but apparently I did with one family.

Homeowner Advice: Some Misguided, Some Correct

Flaky contractors make us all look bad. But not all advice given to homeowners to protect themselves from fraud is good advice.

Marketing Your Business

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”.

Liability Insurance Tangle

Some time back we received a well-written letter about liability insurance from a contractor in Washington state.

Protect Your Business – Get Paid

Avoid losing money by recognizing some of the games that building owners play to avoid paying.

Protect Your Business – Change Work Orders

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.

You Can’t Ask Too Many Questions

When something seems amiss, don’t stop asking questions. A contractor shares his experience on a recent sales call.

Give Them What They Need to Make a Decision

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.

Stop Giving Free Estimates

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)

Overhead and Profit on Change Orders

You shouldn’t sign a contract that stipulates what you can charge, even if it’s just on the change orders.

The Economy and Your Business

As business owners, we need to keep an eye on what’s going on with the economy because it should influence our business decisions.

Watch Improvement Happen

As we wrap up 2018, we want to share two notes we received this year.

Design Agreements Gone Awry

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.

Protecting Design Work

A contractor who has designed projects asked how to protect his design work.

Writing a Business Plan for a Construction Business

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.

Your Contribution to Society

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.

Make Things Happen

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?

Training an Architect

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.

Share Your Cards

Business cards are a simple, inexpensive way to provide everyone you come in contact with the information they need to reach you.

What Should You Do With Your Profit?

The best way to avoid paying taxes is to not make a profit at all, but it’s a rough way to live. 

Avoiding a Potential Pain in the Assets

A good guy we know was recently working with a potential client when he ran into some concerns.

Dodging Payment

There are things you can and should do when a client tries to dodge making payments.

Canvassing: Connect with the Neighborhood

One of the more unpopular things I recommend is canvassing the neighborhood around your jobs. It’s unpopular because it’s misunderstood.

Avoiding Jobs That Don’t Fit

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.

Getting the Commitment

A contractor in Hawaii sent in a note asking about a few sales issues.

Setting and Keeping a Schedule

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.

Unrealistic Price Expectations

If they called you, doesn’t that mean they need or want the work done?

Family Fights

The topic is uncomfortable but if you’re involved in residential sales, you’ll see family disagreements. It helps to know what to do.

Make Every Possession Count

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.

Clients Working on Their Job

Should you let a client work on the job they’ve hired you and your company to build?

Doing What’s Right

How should you handle a mistake? What if it’s a mistake you made over a decade ago?

Breaking Down Price Detail

Since the end goal for both the architect and the contractor is a satisfied client, how about working together from the beginning?

Making The Trades More Attractive

If you want to attract the best people, you need to make the a good offer.

Share The Satisfaction of Working in the Trades

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.

Profit and Loss and Markup

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.

Calculating for Taxes

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.

Making Money or Keeping Busy?

When everyone but your family benefits from your business, it’s time for a reality check.

Lower Your Price, Gain Exposure

Should you take every opportunity to increase exposure for your business? 

Can They Find You?

If you’re a dependable, responsible construction-business owner, do potential clients in your area know you exist?

Getting Ahead

As we head into Memorial Day weekend, we want to share an upbeat note we received in April from a client.

Looking for a Deal

It’s amazing the things a potential client can think of to get you to lower your price.

Working With a Designer

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?

Job Superintendent / Leadman

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.

Construction Business Safeguards: Fraud and Embezzlement

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.

Hiring Friends and Family

When you own a small business you’re often asked to hire family or friends. Sometimes it works out great, but not always.

Pricing Handyman and Service Work

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.

Does This Apply to My Business?

We received a note from a contractor asking if what we talk about applies to his business.

Single Discipline Leads, Referral Fees

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.

Quality Standards

“Let’s see what the contract says about that.”

Do Your Work

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.

Dishonest Clients

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.

Sales: Ask Questions and Get Answers

The one question too many salespeople stumble over is the budget for the job. They are worried that it looks bad to ask.

Justifying Your Price

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.

Successful Business Growth

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.

Share Kindness

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.

How Productive Are Your Employees?

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.

Transparency – Or Maybe Not

Is transparency the way to go when selling? Be careful who you listen to.

Planning for Profit

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.  

Managing Growth

If you’re doing a good job of marketing your company, how do you plan for and manage growth when it shows up?

Selling Your Services Online

We were recently asked about an online service designed to make it easier to handle sales calls.

Loaning Your License

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.

Subcontractor Payment Schedules

Payment schedules need to be in writing, that includes between a general and specialty contractor.

Collecting Payment from a Dishonest Homeowner – Updated

Not all of your clients are honest. There are even a few who have no intention of paying you for the work you do.

Cancelling a Contract, Six Months Later

He’d signed an agreement with a client six months earlier for a bathroom remodel. Now the client wanted to cancel the job.

Markup or Margin: Be Logical

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.

Investing in a Low-Value Home

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?

Profit Leaks

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.

A Reputation for Cleanliness

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.

Resolve Their Challenges, Make The Sale

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.

Pricing Fears

A recent Houzz survey confirmed what you need to know if you’re in sales; it’s not all about price.

Last Minute Requests Before Closing the Sale

What do you do when a potential client waits until the proposal is together to request itemization on the project?

Get a Commitment, Make the Sale

Getting a commitment from your potential client is a critical step to making the sale.

We Don’t Advertise

“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.

Should You Purchase a Construction-Related Franchise?

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.

Making a Positive First Impression

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.

Employees Are Important

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.

Objections Book

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.

An Opinion on Itemized Estimates

A building owner challenges our statement that contractors shouldn’t itemize their estimates.

Value Your Time

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.

A Minimum Price

Being profitable doesn’t mean getting rich off your clients.

Job Costs and Overhead

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.

Cost Plus with a “Not to Exceed”

A contractor asked for my opinion on a request he recently received. It’s not a win-win proposition.

Setting the Budget First

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.

Strengthening Your Business

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.

Let Them Know What to Expect

If you’re doing service work, make sure your client knows what to expect before you start.

Cancelled Design Agreements

A call came in from a friend recently. It seems that a client of his wants to cancel a signed design agreement.

Estimating Incomplete or Conceptual Plans

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

Clients Changing the 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.

Website SEO Scams

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.”

Are You Worth It?

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.

How to Be Profitable

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.

Can You Be Both Competitive and Profitable?

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.

The Path to Success

In the beginning you had ambition and energy. Then reality set in.

Generational Differences

I’ve been reading advice in a few construction magazines on how to sell to millennials, and I don’t understand the fuss.

Who Generated The Lead?

When subcontractors or employees are approached, they are obligated to notify the general contractor who brought them there, and let him handle the lead.

Mediation or Arbitration?

Your contract should call for arbitration, not mediation, to settle disputes.

Finding Construction Employees

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.

Contractor Issues with Architects & Designers

These relationships can be profitable for both parties, but they can also quickly become squabbles if the relationships aren’t valued.

Sticking to the Budget

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.

Getting It Done

We want to share a note we received earlier this month about hard work and gratitude.

Working by Referral

When things are good, it’s easy to get lackadaisical about marketing because finding new clients is so easy.

Pricing Without Plans

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 Don’t Need Any Leads!

“I have more work than I can do. I tell new leads to call me after the first of the year.”

Client Causing Job Delays

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.

Business Owner, or Hired Labor?

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.

Right of Rescission

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.

Alternatives to a Bad Deal

Some business relationships turn out badly; with experience, you can identify and avoid them.

Play Fair

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.

Growing Pains

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.

Are You a Systems or a Service Business?

In a systems company, the customer is someone you deal with when you run out of other things to do.

Watching Their Budget

It’s always appropriate to ask a potential client where they will be getting the funds to pay for their project.

Pricing Small Jobs

It’s hard to remember what you’re worth, especially if you’re spending time on jobs that cost you money.

Preparing to Estimate

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.

An Unbalanced Partnership

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.

Allowances in Your Pricing

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.

Working for Big Box Stores

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.

Sales Issues: Leaving Your Paperwork

Generally speaking, when potential clients don’t want to make a commitment but want to keep your paperwork, they intend to shop it around.

Sales Issues: We’ll Be Getting Three Bids

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.

Sales Issues: We Want the Lowest Bid

Some clients want the lowest bid for their project, and nothing else matters. It’s your job to try to educate them.

Sales Issues: Make a Good First Impression

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.

Markup Worries

Remember, you’re in business to provide a service and make a profit doing it.

Subs or Employees – Are Subs More Expensive?

Does subcontracting raise the price of the project?

Don’t Be This Contractor

 Please don’t be this contractor. Please don’t be that homeowner. 

Your Labor Rate and Your Markup

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.

Adjusting Your Markup

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.

Hiring A Contractor: Truth vs. Myths

Some advice on hiring a contractor is just plain wrong.

The One-Legged Sales Call: Find Out If They’re Serious

One-legged sales calls. Frankly, this is much to do over a problem with a fairly simple solution.

Careful What You Pay for a Lead

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.”

Bidding or Selling?

Are you bidding on jobs, or are you selling them? There’s a difference.

Keep it Simple

When it comes to pricing your jobs, you need to keep it simple, especially if you want to make the sale.

Matchmaker, Matchmaker

Another day, another service that helps homeowners find a contractor.

Free Estimates

What you do has value. Respect your time and your knowledge.

Keep Your Head, Get Paid, Protect Yourself

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.

Be Prepared

When things are good, it’s smart to ask yourself a critical question: Are you prepared for the next downturn?

Lowering Another Contractor’s Overhead

Business needs to be win-win. If the services of the contractor are needed and provide value, the contractor needs to be paid accordingly

Designing a Magnet

There are two steps to attracting leads. The first step is being known; the second step is making them interested enough to contact you.

Are Your Clients Thinking “So What?”

On a sales call, if you’re speaking and your potential client is thinking “so what?”, you’ve lost them.

Insurance Repair Projects

A coaching client shared two recent experiences while doing insurance repair projects. One was positive, one wasn’t.

Clients Wanting Cost Plus

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 Sets the Price

When your client wants a lower price, something has to change. It shouldn’t be just your price.

Maintaining Your Right to Lien

At least once a week I hear from someone who can’t get paid for work they’ve done.

Getting Quotes from Subs

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.

Making Goals Reality

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.

Our Year-End Review

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.

The Art of Delegating

Delegating is a scary word for most of us. We don’t believe that anyone can do a job as well as we can.

The Cost of Leads

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?

Practice Listening

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.

Documenting Jobs

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.

Itemization Woes

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.

Sharing Company Goals

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?

Hiring Construction Employees

Make sure your new hire is compatible with your business, in both personality and skills.

Continuing Your Education

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.”

Your Sales Presentation

Given how valuable leads are, once you get one, you need a sales procedure to help make the sale.

Cutting Prices

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.”

Hire Slowly, Fire Quickly

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.

Stay the Course

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.)”

Pricing Too Low

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.

Low-Value Jobs

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.

It’s Time to Stop Being Superman

In every business, some things we do eat into our profitability. Do you run your business or does your business run you?

Markup on Subs

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.

Proprietary Business Information

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?”

The Relationship Between Budget and Design

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.

Know Before You Quote

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.

A Collection of Thoughts: Bookkeeping, Markup, Taxes, Advertising . . .

This week I want to catch up on a few things that have been bothering me.

Can You Be Too Professional?

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.

Closing Sales from a Distance

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.

What’s a Reasonable Advertising Budget?

How much should you spend on advertising? How much is too much?

A Business That Needs to Fail

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.

The Salesperson’s Real Job

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.

Dishonest Clients; Collecting the Final Payment

How do you deal with a dishonest client? I recently corresponded with a contractor concerning this issue.

Make Sales Happen

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.

Know Your Value

A young fellow recently asked about his hourly wage.

Are They Helping or Hurting?

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.

Remodelers AutoPilot

How to Turn More Leads into Paying Proje …

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Choose Your Clients

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.

Referral Fees and Sales Commissions

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.

Lead Generation Tactics

Use Lead Gen tactics to your advantage B …

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Wasting Time: Red Flags on a Sales Call

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.

Change what can be changed

“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.”

Who should do the talking?

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?”

Another Myth: Lower Your Markup for Larger Jobs

“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.”

Owner Deserves a Salary

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.

Work Product Exclusion, An Unexpected Benefit of Hiring Subcontractors

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.

Subs or Employees, That is the Question

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?”

Payment Schedules on Small Jobs

It’s important to manage the payment schedule on your jobs, but not all jobs are the same.

Penciling a Salesperson

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.

Conduct Business Like a Business Owner

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.

Client Outrage

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.

Commission Sales

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.

You Get What You Pay For

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.

Hiring Employees

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?

Generals and Subs: Working Together

It’s important to define the ground rules of your relationship.

Creating New Employees

We have a major problem in our industry: we’re getting old. There aren’t enough young people getting into construction.

Design Agreements, Letters of Intent

A design agreement allows you to get paid for your work. Don’t waste your effort or your time.

A Few More Contract Issues

Retainage clauses, removing the finance charge clause on the last payment, “we’ll pay you when we get paid”.  

Contract Language for Client-Caused Damage

What do you do when a client calls about a problem they created? Preventative measures make the difference between a profitable job and losses.

They Want a Bid Today

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? 

Business Protection for Contractors

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.

Final Payments, Emailed Quotes

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.

Progress Payments: Keeping a Positive Cash Flow

We used to get three payments on jobs. 1/3, 1/3, 1/3. That’s not a smart business practice.

Money Changing Hands

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.

Accounting – Keeping Track of Your Jobs

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.

What Do You Believe?

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.

Leads are Gold

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.

More than a Paycheck

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.

Paying Others

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?

What’s Your Specialty?

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.

Supply and Demand

The services offered by construction businesses are in high demand right now. Can we look at this industry from another viewpoint?

The Games People Play

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.

Getting Jobs Built

Three approaches to managing jobs. Also, paying production employees and making sure the work gets done. 

Enforcing Your Payment Schedule

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?

Getting Involved with a Storm Chaser

Last week, a contractor called to ask my opinion on getting involved with storm chasers that were in his area.

Getting Paid

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.

Getting Business as a Sub

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?

When Clients Do an End Run

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. 

Do You Need Employees to Grow Your Business?

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

“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.”

Subcontractors or Employees?

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.

When Should You Cut Your Markup?

As the economy slowly improves, we are being asked to revisit issues we haven’t discussed for many years. 

Surprises Aren’t

Estimate your jobs properly so surprises don’t happen.

Can You Afford to Hire?

Can you afford to hire a new office empl …

Can You Afford to Hire? Read More »

Contract or No Contract?

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.

Things That Cause Problems, or, How to Upset Your Clients

Seven issues that upset clients. And when clients are upset, either you won’t make the sale or you might not get paid.

Making Money, Losing Money or Breaking Even? What Now?

Last week we discussed knowing where you stand financially, whether you are making money, losing money, or breaking even.  What now?

Making Money, Breaking Even, Losing Money

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.

Contracts, Change Work Orders, Punch Lists and More

A selection of issues that should be written into every contract to protect your profitability.

Let’s Not Talk About the Backlog

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.”

Show Search Engines Your Site is Alive

Lead Generation Companies don’t want you …

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Markup Materials Only?

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.

Contracts to Avoid

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.

Contract Commitment Language

Commitment language in your contracts, payment schedules that help cash flow, right of rescission language. With a few extra comments.

Contracts – Dates, Times, Conferences

Many construction-related disputes can be avoided with a well written contract. Here are a few of the things that need to be included.

Resolving Disagreements

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.

It’s Time to Change Our Image

I have an audacious goal. I’d like to see a shift in the public perception of the construction industry.

Get a Commitment Before You Invest

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.

Estimating Basics

When profits are down, missing the estimate on jobs is almost always part of the reason.

Protect Against Theft On A Jobsite

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.

Doing It Right and Reaping the Rewards

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

Estimating Blunders, Part 4

Error factors, Superman complex, Demolition and Discovery agreements, hauling out the trash.

Estimating Blunders, Part 3

Know the inspectors required in your area and add an “inspector factor” to your estimates.

Estimating Blunders, Part 2

You have a choice in how you do your estimating. Some methods work well, but unfortunately, many don't.

Estimating Blunders

The purpose of an estimate is to price the job. If you want to be profitable, accuracy matters.

We Want To See Your Receipts

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.

Promote Your Jobs for Free Leads

Any job today can EASILY get you FREE le …

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Race to the Bottom, or “How Low Can I Price This Job?”

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.

Side Jobs in Construction

Have you ever had a client go behind your back and ask your employees and/or subcontractors to work for them outside your company?

Making it Work, Profitably

My clients are constantly chiseling me down, everyone makes money on the jobs except me.

Keep Production Time Productive

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.

Focus on what’s profitable

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.

Link Salary to Production

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.

Employees – Three Details that Cost Money

You’re in business to provide a service and make a profit doing it. Three employee issues that cost your construction company money.

Adjusting Your Markup Based on the Job

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.

A Poorly Written Contract Will Cost You Money

Too many contractors use a poorly-written construction contract, or no contract at all, leading to different interpretations of an issue.

Making Selections for Their Project

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.

What’s the Right Salary for a Construction Company Owner?

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 Price of . . . ?

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.

Itemized Estimates

Why clients request itemized estimates, and how you should respond.

You Can’t Make This Stuff Up!

We use Google Analytics on our website. It tells us how many visitors we’ve had and what brought them to our website.

As Rude or Opinionated as you can afford to be

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

Everything In Life You Want, If . . .

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

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.

It Isn’t Your Price. It’s You

Address their fears so they feel safe purchasing from you.

Pricing Jobs Right

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.

Markup and Profit Recording

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.

Sharing a Sales Appointment?

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: How to Improve Your Profit Margin

Estimating errors cost money. Lower your error factor but considering these common mistakes.

Specifics on Change Work Orders

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.

Homeowner Protection Funds

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.

Like breathing, being profitable isn’t an option

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.

Residential vs. Commercial Contractors

I’ve long suspected that commercial and residential contractors look at the construction industry differently, and this thread confirmed that suspicion.

Finding Opportunities

Brainstorm business opportunities that your construction company could do, profitably, over the next twelve months.

Employees and Your Business

If you have employees, changing laws can impact your business. Two states recently legalized recreational marijuana. Another 15 states allow medical marijuana.

Making Business Work

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.

Michael’s Comments

4 short videos by Michael Stone, “The reason you are in business” “Using an Accurate Markup” ”Accurate Estimates” and “Getting Paid on Time”.

It’s The Price

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 Sales Rules

Ten Cardinal Rules for residential construction sales.

Every Little item

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.

Letter From an Architect

By providing background, Michael Beck helps us understand how the relationship between architects and contractors has developed over the years.

It’s Your Business

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.

I Have to Be Competitive!

You don’t have to be competitive. You have to be profitable. If you aren’t profitable, your business won’t last.

Take Charge of Your Company Name

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.

What Readers Say

The Markup and Profit newsletter is published weekly. It provides valuable, pertinent information for any construction-related business owner.

All that Glitters . . .

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.

Paying Yourself

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.

There is No Industry Standard

Don’t take any job where the client tells you how much you can charge for your work.

Construction Estimating: The Basics

Estimating basics, with the goal of getting you back to the potential client quicker with a more accurate estimates.

“I Work in a Competitive Market”

Don’t worry about what “the other guy” is charging.

Your Price is Too High

“Your price is too high” means you haven’t done your job as a salesperson.

How to Start Your Website

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 for Success

Guidelines to a more successful construction-related business.

Ten Cardinal Rules for Construction Business Owners

Ten Cardinal Rules for a successful construction-related business.

Building Quality Jobs

Many contractors believing building “quality” helps them sell jobs and make more money. But how do you define quality? Who sets the standard?