When selling, are youhere to find out how much money you can make, or to provide a service and help?
When you calculate your cost per lead, you’ll know what you need to spend on marketing to meet your sales goals.
A subcontractor causes a problem on a construction job, the general contractor needs to make it right. It happens a lot, this time with a twist.
Michael shares a valuable tool that will improve both your sales and your relationships.
It’s painful to see people who don’t know better get taken advantage of by those who do or should know better.
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.
Doing work without a permit is a mistake. Pulling permits protects the homeowner; when a contractor doesn’t want to pull a permit, there’s always a reason.
Should you change your markup method if you aren’t making sales? Don’t spend hours fiddling with numbers; invest the time in your sales skills.
Can delayed job starts impact material prices and profitability? Not if you gain a commitment first. It’s all about the sales process.
This one-hour presentation by Contractor Staffing Source explains how to find and hire employees for your construction business.
When customers start talking about liquidated damages in construction, it’s time to ask why.
When you provide a dishonest client a cost breakdown of their job, things can go wrong.
It’s easy to fool yourself into believing it’s better to do it yourself, until you realize the things you’re supposed to do aren’t getting done.
You can’t always determine if the person you are about to do business with is ethical, but you do know your own behavior. Choosing to operate your business with integrity is within your control.
Construction can be a tough business, dealing with clients who don’t realize what we’re worth, while our bodies take a beating to make their homes better.
Owning and operating a construction business requires a strong will and self-direction, but those qualities can also lead you to hold on to beliefs that limit your profit.
What does a general contractor do? What is a specialty contractor? How do remodeling and new construction differ?
Our goal is to help contractors build more profitable businesses, but how do you measure success? How do you know your pricing will result in a profit?
If you employ a salesperson to help you sell something, you need to pay them for their services. I am a firm believer in paying sales people by commission
Purchasing commercial insurance can be a frustrating experience for many construction businesses.
Unit cost estimating is breaking down a project to simple assemblies. It’s the best way to consistently acquire accurate estimates.
No matter how careful you are, you, your crew, or one of your subcontractors will upset a client. How you handle customer complaints says a lot about your business and your character.
All price proposals need a deadline because you never know when material and labor costs will increase rapidly.
Construction sales take time and your time is valuable. Avoid these common time-wasters when selling construction services.
Construction cash flow is like every other business; there must be more cash flowing in than flowing out or the business won’t survive.
Quoting a firm fixed price is riskier when material costs are increasing rapidly, which is why your contract needs to address unexpected material cost increases.
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?
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.
It can a challenge to finish a project, especially when it was priced too low for a difficult client and with a weak contract.
Are your habits helping your company grow, or are they holding you back?
If you thought you were the captain of your ship, 2020 taught otherwise.
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.
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.
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.
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 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.
Our goal is to help you benefit your clients, while providing enough income to support yourself and your family, and enable you plan to for the future.
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.
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.
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 them 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.
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.
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.
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.
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?
“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.
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.
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.
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.
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.
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.
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.
A construction allowance is a dollar amount included in the contract for a particular item. There are two types of construction allowances: material and installed.
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.
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.
I’m a strong proponent of thank you notes. We received a creative note from a contractor the other day.
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.
If you’re trying to make a living in residential remodeling or specialty work, it’s important to know what the general public is being told about you.
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.
How much should you spend on advertising? How much is too much?
Should you let a client furnish their own materials?
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.
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.
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.
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.
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.
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.
There are lots of opinions on how to pay a salesperson. Your salespeople have to be able to make a good living and provide for their family.
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.
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.
What is the most profitable construction business model? Do you need employees? /p>
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 employee, or take on any overhead increase? (video)
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.”
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.
I have an audacious goal. I’d like to see a shift in the public perception of the construction industry.
If you missed our webinar earlier this week with Brian Javeline of MyOnlineToolbox.com, 15 Website Lead Ideas in 20 Minutes, the recording is available here.
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 construction isn’t easy. When profits are down, missing the estimate on jobs is almost always part of the reason.
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.
Marketing is necessary but it doesn’t have to be challenging. (video)
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.
A new business wants to market your construction business and provide leads. It'll also give homeowners ammunition making it harder to sell jobs. There’s an alternative.
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.
Many of our website visitors aren’t contractors, they’re clients looking for help with a Cost Plus project gone wrong, or wondering if their contractor is overcharging.
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.
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.
General contractor licensing and surety bond requirements by state to help prepare for running a sound business.
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.
Our newest six-hour class, based on the book “Markup & Profit, A Contractor’s Guide Revisited”, second hour, on markup and margin calculations.
Our newest six-hour class, based on the book “Markup & Profit, A Contractor’s Guide Revisited”, is now available. This clip is from the first part on financial requirements.
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.
Estimating errors cost money. Lower your error factor by considering these common mistakes.
From time to time, you will go out to see a potential client about doing work for them and they’ll ask if they can choose their own subs for their job.
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.
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.
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 & Profit newsletter is published every two weeks. 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.
If you're an employer, these are things you should watch for and be prepared to deal with. If you're an employee, check to see how you're doing.
A construction magazine said half of their subscribers were in the path of a hurricane. How many of those contractors are taking advantage of the potential new business?
Don’t take any job where the client tells you how much you can charge for your work.
The basics of construction estimating, so you can create more accurate estimates in a shorter time.
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.
How do you define quality? Who sets the standard?
Employees, properly motivated, can generate a lot of new business for you.
As you’re walking out the door on a finished project, you want your clients to remember you as the company that went the extra step for them.
One of my coaching clients told me recently about a client who is quite affluent and apparently has been taken advantage of by several contractors over the years.
Do you have a potty-mouthed employee who is offending your clients, subs, suppliers and maybe even your other employees?
Cancellations happen, even with the best of salespeople. Clients have all kinds of reasons to cancel an agreement, and you need to be prepared.
Overhead creep is one of those subtle things that business owners often don’t notice. It leads to cash flow problems real quick.
You might not think of watermelons, but one of our clever coaching clients shared a method he’s used to attract new leads for his business.
A good payment schedule keeps you paid for the work you are doing. If you're using a 1/3, 1/3 and 1/3 schedule, you are financing most of the job out of your pocket.
All too often in construction sales, the focus is on selling a job. Let's rethink that; sell the design agreement so you can do the work needed before the job starts.
Why would any serious construction-related business owner want to be the lowest bidder on a project? Let’s look at what that means.
When we talk about making money, it's rarely about big chunks of change. One overlooked item that costs money is rounding numbers. For instance, your markup.
In our book we talk about the ratio of employees to dollar volume of business. Many contractors ignore this ratio and get caught up in the urgency of building a job.
Contractors have cash flow problems for two major reasons: poor money management, and poor payment schedules.
A very nice gentleman called me last Friday. He related a story about his home remodeling project. It was done a Cost Plus job, the "plus" was negotiated at 18%.
For those who don’t understand the need for an ongoing marketing and advertising program for your business, let me try this analogy:
We’ve noticed the same problem that we’ve seen with other specialties. They believe that because their work is focused on one thing, their business operates differently.
A friend called today with a problem. He subbed his work to a general contractor from the east coast to do a job here on the west coast at a government facility.
Transparency, as I understand it, is opening your books to your potential clients and showing them all the numbers pertaining to a job you are quoting.
If you aren’t getting a response to your advertising, either printed or on the web, you aren’t connecting with your potential clients. You must connect with them.
We are approaching the time of year when the subject of bonuses comes up. Your employees might be saying, “Do you suppose they will pay us a Christmas Bonus this year?”
I talk with contractors all the time who miss one opportunity after another and never seem to connect the cost of this miss.
Now, if you are a subcontractor, it doesn't matter what trade, if a general contractor has hired you to work on a job your obligation is to that general contractor only.
The final item on our list of things you can do to assure positive cash flow is to avoid debt. If you are in debt, set the goal of becoming debt-free.
Far too often when contractors come to us for help they are behind paying one or more of their taxes. Don’t let this happen to you.
It's important to set goals for your business. It's also important to track, on a month by month basis, how close your actual finances are to those goals.
In order to have a positive cash flow, it helps to know what your cash needs are today, in six months, and a year from now.
If you find yourself struggling to make payroll, there could be a lot of things wrong and one of them might be that you have too many people on that payroll.
If you want positive cash flow in your construction business, make sure you're using the right payment schedule on your contracts.
If you forget to include the cost of insulation, you’ll be paying for it out of your own pocket.
Are you getting the most out of your day? Are you taking advantage of your time here, to do your best, both for yourself and your family?
Last weekend I passed a billboard on the side of the road. It loudly declared, "We will build your new home for $32 a square foot."
I read an article where the author talked about passing savings on to clients. This sounds well and good, but place it low on your priorities when putting a job together.
If you’ve raised kids in the past 20-30 years, you know the new rules – no one loses, everyone gets a prize. Don’t keep score because it hurts their feelings.
Construction (with the exception of new homes) is a service business. Your focus can't be on putting pieces together to build a job, it has to be on your clients.
Invoicing is one way clients delay paying. "Thanks for doing that work, send me an invoice, okay?" Why do contractors agree? Maybe they believe everyone does it.
A reader recently sent in a note asking for my input on this statement that a government agency attached to a "bid package" for work they want done.
A specialty contractor said, "A general contractor called and asked me to send a lien release. If I do that, he will send a check for what he owes me."
Often when I talk with contractors, I hear, "I want to grow my company so I can make more money." Consider this, if size mattered, dinosaurs would still be here.
I wrote a Blog post for another company recently stating that I didn't think it very smart to negotiate the price of your work. A reader agreed with me and said:
Someone asked the other day about sending cards or notes to old clients. They wanted to know what could be said that would be of interest to the client.
This potential client had a house built using the “lowest bid” contractor. The builder cut corners, leaving out little details like collar ties on the roof rafters.
The next time anyone, including yourself, wants to complain about how much money you make, think about this quote from Henry Ford.
We are rapidly approaching the time of year when you should review and update your employee manual.
On a personal note, I received an email Tuesday morning from the wife of my high school coach.
I heard about a scam a local building owner is pulling on his subs. He has several properties and is apparently worth a considerable sum.
There are four basic ways to charge for construction services. These are fixed fee or lump sum pricing, Time & Material pricing, Cost Plus, and using an hourly rate.
Someone asked me recently if I thought a salesperson for a construction-related company should help provide leads, and how many. Yes, they should help provide leads.
Most contractors I talk to believe their neck of the woods is different. They believe their clients are more difficult to sell to than anywhere else in the country.
The old law said that the owner could recover 100% of the money they had paid a contractor if it was found that the contractor did not have a valid license.
A contractor friend just went through an IRS audit. After going through all his records and asking a ton of questions, they said, "In my opinion, you owe us $22,000."
A homeowner commented on a forum. He’d been told to add $3 – $5K to a job just to cover the extras that will come up. He was under the impression this is normal.
A friend was doing an insurance job, repairs to an exterior wall. The siding had been improperly installed, and around here, if you don't keep water out you'll see rot.
We receive newsletters every week from construction-related companies around the US and Canada. We applaud all of you using a newsletter as a communication tool.
I was working as a salesperson for a fairly well run remodeling company. I went on a sales call to the home of a CPA that I’d know for some years.
He expected to make "millions". He wanted me to teach him how to do estimating "easily". That, he claimed was the only thing that he didn't know about this business.
One of the topics was business cards, we spent several minutes reviewing the value of a business card and how it can help promote your company.
We had a question come in this week from a contractor asking about how to calculate the volume of business a company needs to support the owner’s salary.
Does a job have a “life expectancy”? I believe it does and you should be aware of the warning signs.
Do you wonder if the book, Markup & Profit; A Contractor’s Guide can help your business, even in today’s economy? Check out a note we received earlier this month.
I’ve talked about focusing your attention on the 1, 2, or maybe 3 things you do well and make the most profit on. Doing a good job of advertising and promoting those.
Business Interruption Insurance is among the least understood and often most poorly written coverage.
She got a call from a guy about cleaning 300 feet of his driveway. When she told him her minimum trip charge ($300), she heard the famous, "Your rates are too high!"
A marketing idea for your business: pumpkins.
You need to start planning your advertising to potential clients that you are available to install and take down Christmas lights and decorations.
I was reminded again recently of the need for in-house training on what it takes to pay the bills in a construction related company.
In case you don’t think it’s important to have change work orders signed and paid BEFORE making a change, read this note I received from a homeowner yesterday:
When people lose their jobs, many decide to start their own business
Someone once said, “No man’s business is safe while the legislature is in session.” Here is another example.
Have you thought about the image you project? It's important to create an association between what you provide and what your potential client wants or needs.
Many old timers in this business will tell you to be slow to hire and quick to fire. That is just the opposite of what too many construction-related businesses do.
During a recent survey, comments were made about price fixing. They referenced the Sherman Antitrust Act and association warnings about the appearance of price fixing.
I don’t know much about their company, but I do know they understand communication with their customers and all those they do business with.
Are markup and margin interchangeable? Is a 1.55 markup the same as a 55% gross margin?
Yesterday markup – today gross margin. Let's look at using your gross margin to calculate the correct sales price for your work.
There’s a lot of confusion over using markup vs margin to price jobs.
An association exec said, "Many associations are now struggling to get through the recession, and losing members and sponsorships."
A young couple came to us for coaching in February, just two months ago. While their P & L was not all that bad they could and wanted to do better.
I’ve heard any number of people say they are going to build their business up, then sell it. Let’s talk a bit of reality.
Michael takes a minute to talk about the value of making a profit. (video)
I took a call from a married contractor with four young children. He can’t collect the final funds due from an owner for a large job. They are about to lose everything.
We recently heard from a company that took over a $200,000 hit (spread over several jobs) because of actions the job superintendent took.
The housing economy leaves a little to be desired. Don't count on the government to solve that problem. We have to take responsibility for and solve it ourselves.
This quote from Jim Rohn is particularly true for construction business owners. There are a lot of things that need to be done and we need the discipline to do them.
A question came about moonlighting employees. This is an ongoing issue for construction business owners.
If a company offers no sick pay or vacation pay…but is about to start – which is more important to offer first, anticipating that the next year we can offer the other?
I’m frequently asked for the “industry standard” rate per hour for various types of work. There isn’t an industry standard markup, and there isn’t an industry standard hourly labor rate.
An earlier post of ours is getting a few homeowners riled up. The post discusses homeowners who have contacted us, unhappy about the prices their contractor is charging.
Why would you choose someone that has chosen to work without a business license for 30 years?
Earlier this year I had the opportunity to interview with Brian Javeline for The Contractor Show. Our episode was just posted.
The truth is, no contractor can survive on 10% overhead and 10% profit.
Are you an LLC? S-Corp? C-Corp? Does it matter?
One of our goals is to improve the image …
If being a lawyer is just like any other job, why do so many people regard it as a better career than that of a tradesperson like an electrician, carpenter or plumber?
All of the industries that we work with share one thing in common: they employ tradespeople . . . But there’s a problem: there’s not enough of you to go around.
The ancient Chinese philosopher Confucius said, "The man who chases two rabbits catches neither."
Got a phone call recently from a contractor doing a job in the $150K range. Everything is fine, contract signed, and the job is going great.
The contractor presented a design agreement with a $3,000 fee to design the job, 1/2 of the fee would be credited back when a contract was signed for the final job.
In the last month I’ve heard from more specialty contractors having problems being paid by generals than I’ve heard in years.
I read an article telling general and specialty contractors to give itemized estimates. Oh joy. It talks about goodwill, trust, comparing estimates, and other tripe.
I have read several posts on forums late …
There is no way on God’s green earth I could pretend there aren’t unethical contractors.
A young lady told me her husband is using a variable markup on jobs. He marks up labor 3 or 3.5 times and materials 1.5 times. He adds 10% to subcontractor quotes …
A client decided to change the rules of their contract. She decided not to pay the full amount or on time as the contract specified.
I was reminded again this week by a dear friend who is an expert in the use of QuickBooks of the necessary care that needs to be taken when you set up your accounting.
“I was wondering if you had any advice for contractors when approached about a franchise opportunity.”
My biggest challenge as a residential remodeler is obtaining and keeping qualified and experienced sub-contractors willing to do smaller type projects.
I was asked for information on the diffe …
If you are in business, you are in sales. No rationalizing, you are in sales. If you don’t sell something at a profit, you are going to go away.
If you’ve been in construction sales very long, you’ve met potential customers who ask for an estimate, but after a lot of work you learn they were just shopping.
At a recent class, I was covering the basics of getting paid for additional work orders. I gave an example to emphasize the necessity of getting paid for your work.
Adding overhead and profit to job costs to calculate sales price is a mistake. Contractors should use a markup calculated for their construction business.
Question came from a friend the other day. He said, "Michael, how do you determine whether someone in construction has a business or a hobby?"
We have had two e-mails in the past week from homeowners asking about the “Industry Standard” for pricing, wondering if their contractor is overcharging them.
A young businessman called. He was in a state of shock after checking his books over the weekend and found over $11,000 in receivables, much of it over 30 days.
If you are tired of starving because you have enough work but don’t have the money to pay your bills, heed these words.
A coaching client was working with a potential customer who wanted a remodeling job on a cost plus basis instead of a fixed fee contract.
At the start of break, the crew jumped in a truck, drove 15 minutes to a doughnut shop, had coffee and a doughnut or two, drove 15 minutes back to the job site.
One of our clients called with cash flow problems. Leads were coming in, sales and production was good, correct number of employees for the volume of work, but no money.
I talked with a young guy the other day who called about our coaching service. His company was upside down and I could tell he was hurting.
If your employees consistently take longer than you estimated, you need to change your method of estimating. The human body can only work so fast.
After working with a few hundred coaching clients, I believe that the key to profitability in construction is staying focused on doing a few things well.
Respect your time – get paid for the work you do.
Design agreements, letters of intent – get paid for written quotes.
In a recent class, I made the statement that referral leads should never account for more than 20% to 25% of your work. Boom, the argument was on.
Time for a quick review of some terms: gross profit, net profit, owner’s salary, owner’s wages. Owner’s salary is overhead, owner’s wages are a job cost.
During a recent class I taught, it was clear many in the audience didn’t understand that their sales volume must be enough to support the salary of the company owner.
We keep hearing complaints about sub-contractors that don't show up on time, if at all. You need to take the time to explain the importance of being on time.
Today websites are becoming a must as the customers who have money to spend are doing so by way of the Internet.
I was recently involved as an expert witness for a contractor who wasn’t getting paid for work completed. The hardest part will be proving actual expenses for the job.
The most profitable construction company today is a husband/wife combination with one other person either supervising the construction or selling for the company.
Do you rent or buy your tools or equipment? Here is a quick and dirty rule to follow. Don’t tie up money in tools and equipment that seldom gets used.
I’ve talked to numerous construction company owners recently who are having problems with scheduling, getting jobs done, getting the right people to the right jobs, etc.
A recent note said, "The client wants to furnish all the materials. They are going to give me the money to go buy the materials, should I add my markup on the materials?"
As a relatively new contractor, how do I win over prospects that are “looking for quotes” – homeowners who are “getting three bids” for their construction project
This morning, on my own home, I remembered what it's like to find surprises on a construction project, like a water line that runs from I don't know where to I don't know where.
“I’m a contractor and underbid a house. I’m almost done and just figured that out. I can’t afford this loss. What can I do besides bankruptcy?”