Michael Stone - When Business Returns

As I write this, we’re deep in a crisis that’s impacting almost every country. What started as a health crisis is now a serious economic crisis, and as time goes on it will only get worse.

None of us know what things will look like in three weeks or three months, but it’s reasonable to expect that at some point the health crisis will slow down and go away. When it does we’re going to be doing business in a changed climate. In construction, there’s a good chance we’ll be doing some things differently.

For those doing residential work, sales calls might change. Homeowners might not be in a hurry to invite you into their home or building to talk about a construction project. You can always video chat, but that raises questions. Will an online chat allow you to take their measure so you can decide if you want to do business with them? How difficult will it be to work through the four basic questions online? How will you deal with requests to send your quote by email? How will you gather the information you need about the project?

It’s possible production will change as well. Will masks and booties become mandatory? How will you keep your tools and equipment clean and sanitized if needed? Some of you are already dealing with that on jobs today. These new practices will increase the cost of the job, both in time and materials.

Maybe more homeowners will choose to move out of their home or building while you’re working. They’d rather stay with friends, family, or in a hotel than deal with a parade of workers coming through the home where they’re living. Or maybe they’ll move out at your request. If that happens, you’ll need a system to show them your ongoing progress, ask and answer questions, and work through changes and issues when they aren’t at the job site.

What about inspections? Will you set up cameras at each job site so that you can provide a video feed to the building inspector as the job goes along? When we come out of this, everyone will be behind on projects and as a result, the building departments are going to get a flood of inspection requests. There are only so many inspectors to go around.

These are just a few of the changes we might see. But there are some things that will never change.

Math won’t change. No matter what adjustments are made in the way jobs are built, you’ll still have to charge enough to cover all your job costs, your overhead expenses, and make a reasonable profit so your business can survive long term.

I’m reminding you of that because you’re about to start hearing that contractors are desperate for work and will lower their price. It could get ugly because there will be contractors willing to cut their price to get the job. Those contractors will continue to underprice their work until they run out of money, and their last client will be the big loser.

We’ll also see new contractors who were laid off from their previous job and decide to go into business for themselves. Chuck and his truck will come in with a bid that’s half what they need to build the job because they don’t know better. Gang, if you run into someone like this, tell them to read Markup and Profit; Revisited. We might be able to rescue them from themselves and the bad advice they’re hearing. Contractors like that make everyone look bad, especially when they fail.

This is the time to know your numbers. Review your markup. It’s might be smart to tighten your belt by lowering your salary and reviewing your overhead to eliminate unnecessary expenses. Keep your books up to date so you can keep an eye on your markup and adjust as needed. But once you’ve calculated your markup and you know it’s right, don’t lower it for any job.

The reality is that you’re better off taking a job at the local grocery store than building someone else’s job for less than what you need to pay all job costs, your overhead expenses (which includes your salary), and make a reasonable profit.

It’s basic math. When you go to work for someone else, you’re guaranteed to be paid. When you take a job for less than it costs you, you’ll be paying someone else so you can work. Don’t do it.

The other thing that doesn’t change is human nature. Sales calls might take place online, but your clients will still have the same basic fears when it comes to choosing a contractor. You’ll need to address those fears and get the answers to the four basic questions.

You’ll continue to need solid contracts that protect both you and your client. You’ll need clear payment schedules. You’ll need to have written, signed change work orders with a payment before a change is made.

When we come out of this, you’ll still need to run your business as a business and not as a hobby. If you don’t, you and your business will go away. The economy we’ll see when we recover from this pandemic will take a lot of hobbyists out of business. If you want your business to survive, you need to keep good, sound business principles in mind and practice them on every job.

We want you to make money so your business can succeed and you can take care of your family. That will never change.


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Dan Ryan
April 15, 2020 6:30 am

Looking very distinguished sir.
Thank you for your timeless advise and wisdom.

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