Cash flow in construction is no different than any other business. There must be more cash flowing in than flowing out or the business won’t survive.
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.
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.
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.
Should specialty contractors require down payments even when working through a General Contractor?
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.
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.
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.
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.
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.
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.
This note is a painfully perfect example of why you shouldn’t provide details on your pricing.
From a contractor: “I am definitely going to do a better job in pre-selecting my clients after this one.”
We want to see contractors build stronger businesses and in the process improve the reputation of our industry.
Business planning isn’t exciting. But the effort you put into it has much to do with the results you’ll see next year and in years to come.
This is part two of our year-end planning paper. We’re going to pick this up by continuing an indepth look at your overhead budget for the coming year.
Insurance work can be good business, but it can also waste your time if the insurance company is playing the three bids game.
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.
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?
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.
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.
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.
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.
Some time back we received a well-written letter about liability insurance from a contractor in Washington state.
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 shouldn’t sign a contract that stipulates what you can charge, even if it’s just on the change orders.
As business owners, we need to keep an eye on what’s going on with the economy because it should influence our business decisions.
As we wrap up 2018, we want to share two notes we received this year.
A business plan is different than year-end planning. A business plan looks at the big picture. It’s a roadmap for the whole journey.
Do you ever think about what we do for others? We build homes and we maintain them. We fix problems and if our job is done well, no one ever notices how well it was done.
Without looking, how do you think your business did this year? Are you feeling more profitable or less? Is your business running more smoothly or are the problems overwhelming?
A contractor we’ve known and worked with for many years sent us a note about his experience working with a new architect. Ideally, the architect would have been working with the contractor from the beginning so he could have educated the client as well.
The best way to avoid paying taxes is to not make a profit at all, but it’s a rough way to live.
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.
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.
How should you handle a mistake? What if it’s a mistake you made over a decade ago?
Since the end goal for both the architect and the contractor is a satisfied client, how about working together from the beginning?
If you want to attract the best people, you need to make the a good offer.
There’s a reason that working in the trades isn’t appealing. But if you do the work, you know there are positives that outweigh the negatives.
When your books are set up properly, it’s easy to calculate your markup, and it’s also easy to compare your actual results to your estimates.
Taxes are the price you pay for being profitable. It’s a good thing when your business is in the black and you need to pay taxes on it. It’s not good when you’re taken by surprise.
When everyone but your family benefits from your business, it’s time for a reality check.
Should you take every opportunity to increase exposure for your business?
As we head into Memorial Day weekend, we want to share an upbeat note we received in April from a client.
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?
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.
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.
If your lawyer believes you have to justify your pricing just because someone doesn’t want to pay their bill, it’s time to find another lawyer.
I’m a strong supporter of reviewing where your business has been and where you want it to go. Last week I discussed that subject with a friend I met over seventeen years ago.
I follow Barbara Pachter, a speaker, author, and coach, who writes regularly on business-related topics, especially those related to business etiquette and communication. We requested and received permission to reprint one of her recent blog posts here.
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.
If you’re doing a good job of marketing your company, how do you plan for and manage growth when it shows up?
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.
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.
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.
Construction is a tough industry. For some, the hardest part is making the sale. They’re out of their comfort zone. They don’t want to talk about money or ask for the sale.
It’s important to be focused on profitability. You’re in business because you want to keep a roof over your head and food on your table; you can’t do that when your business is losing money.
You can’t lower your price and expect to make up for it by selling more, because there is a limit to how much you can produce. Every job needs to be profitable.
In the beginning you had ambition and energy. Then reality set in.
When subcontractors or employees are approached, they are obligated to notify the general contractor who brought them there, and let him handle the lead.
These relationships can be profitable for both parties, but they can also quickly become squabbles if the relationships aren’t valued.
We want to share a note we received earlier this month about hard work and gratitude.
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.”
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.
There are business owners who think it’s okay to put the screws to someone else as long as it helps them make more money.
If you’re running your business like a business and not a hobby, you’ll start getting more leads, and it’s exciting to watch your business grow.
In a systems company, the customer is someone you deal with when you run out of other things to do.
It’s hard to remember what you’re worth, especially if you’re spending time on jobs that cost you money.
I’ve written before about middlemen in the construction industry: I’m not fond of them. There is another type of middleman in the construction industry, facility and property management companies.
There isn’t one right way to handle allowance items that works for all contractors and all clients. Plan A may work for most clients, but then you meet Mrs. Oddball who seems to work at being difficult. So you derive Plan B and hope it works.
A young guy asked if signing on with one of the big box stores was a good idea. He hasn’t discovered yet that getting a lot of work doesn’t mean you’ll make lots of money.
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.
When it comes to pricing your jobs, you need to keep it simple, especially if you want to make the sale.
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
A coaching client shared two recent experiences while doing insurance repair projects. One was positive, one wasn’t.
When your client wants a lower price, something has to change. It shouldn’t be just your price.
Without a paid design agreement from the client, you aren’t sure you’ll get the job. Your subs are even less sure they’ll get the job.
Goals are a target, and if I start falling short, I either figure out why and fix it, or adjust the target to match reality.
At a restaurant with family recently, the waitress agreed to let me take a photo of the back of her shirt. It’s exactly how Devon and I feel about the work we do.
Delegating is a scary word for most of us. We don’t believe that anyone can do a job as well as we can.
It’s the beginning of the holiday season, and I’d like to talk about a topic that can change both your sales ratio and your family relationships.
There are two benefits to documenting your jobs. One is protecting yourself in case there is a disagreement about the project. The other is providing information that will help you when you’re promoting your business.
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.”
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.”
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?”
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.
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.
How do you deal with a dishonest client? I recently corresponded with a contractor concerning this issue.
A young fellow recently asked about his hourly wage.
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.
“How do you hold a positive frame of mind when you’re constantly made to feel unworthy of a decent living by your customers, attacking your already low prices? I have tendonitis, carpal tunnel, cartilage deterioration in both knees, a bad back, and I still bust my a** pouring sweat and blood into every job.”
I was asked recently by an electrical supplier, “Why do general contractors often not want their subcontractors to have any communication with the home owner?”
“I am working on designing a few jobs with the job costs starting around $125,000 and up. What is your opinion on markup when the job costs are getting bigger? I want to make sure I am staying competitive.”
I applaud this person’s efforts, helping someone else with the business side of business so the craftsman can continue being a craftsman. But this craftsman is going to have to either learn how to run a business or start charging enough for his work to both feed himself and pay an office manager.
Last week’s article discussed the pros and cons of using employees or subcontractors to get jobs built. This week, Myles Corcoran of Myles F. Corcoran Construction Consulting Inc., presents another point of view.
Recently I’ve had a number of discussions with company owners about how to get their jobs built. It all comes down to using subs or employees, or as some like to say, “Should I be a paper contractor or a real contractor?”
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.
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.
It’s important to define the ground rules of your relationship.
It’s easy to know if you’ve made a profit when every transaction is complete in a day. It isn’t as easy in construction, where a job might take a week, a month, or even more than a year to complete.
It can help to separate yourself by doing things right. But you're a business owner. It's what's expected. The flakes are the ones who are different.
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.
Last week, a contractor called to ask my opinion on getting involved with storm chasers that were in his area.
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.
As the economy slowly improves, we are being asked to revisit issues we haven’t discussed for many years.
Can you afford to hire a new office empl …
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.
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.
I have an audacious goal. I’d like to see a shift in the public perception of the construction industry.
It’s the season to go shopping, and some lower life forms (also known as scumbags) are doing their shopping on jobsites when no one else is around. Protect your business.
Today we’re going to talk about succeeding. We’re big football fans. Our local high school football team is 8-0 this year. Our favorite college team is 7-0
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.
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.
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.
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?
We use Google Analytics on our website. It tells us how many visitors we’ve had and what brought them to our website.
You don’t want to lose business because of a comment that you post or email. Even if you think it’s hidden in a dark corner, it can cause a problem
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.
4 short videos by Michael Stone, “The reason you are in business” “Using an Accurate Markup” ”Accurate Estimates” and “Getting Paid on Time”.
A note that came in a few weeks ago: “We have a very competitive market here . . . My husband and I both agree a lot of our problem is not charging enough for our work.”
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.
Is buying a construction business franchise a smart idea? The sales pitch is good, promising a proven method to run your business and a proven path to wealth.
You’re in business to provide a service and make a profit doing it. Having the financial info you need to make decisions is critical for your business success.
Don’t take any job where the client tells you how much you can charge for your work.
Don’t worry about what “the other guy” is charging.
“Your price is too high” means you haven’t done your job as a salesperson.
Building a website for your small business doesn’t have to be expensive, and it isn’t that complicated when you understand how it works..
Guidelines to a more successful construction-related business.
Ten Cardinal Rules for a successful construction-related business.
Many contractors believing building “quality” helps them sell jobs and make more money. But how do you define quality? Who sets the standard?