I?ve been a contractor for the past three years and was thinking about what I would tell myself if I could go back in time, before I started my business, and give myself some tips. This is a list of five things I would do differently. I hope this helps you avoid making some of the mistakes I did.
We?ve all seen that one contractor who claims to be a master of all trades. Their truck isn?t big enough to contain the list of services they offer, so they buy a trailer. Don?t be this contractor. Specialization is more advantageous for numerous reasons, here are a few:
- It makes bidding easier and more accurate
When you specialize in a particular service you will be able to dial in your bidding. If you just do gutters you will probably know your exact price per foot. If you just do kitchens, you can give your customers price ranges based on the size of their kitchens and the type of product they want. If you do everything, you will have a much more difficult time knowing what you have to charge to profit.
- Quality and trust
???? The quality of your work improves the more you and your employees do a particular type of work. If you just provide a few services, you will be certain you can give your customer a great product. Your customers will also be more likely to trust you with a project when they know that is your niche and you are an expert in that field.
- Risk
The risk is greater the more unknowns there are. The more experience you have doing a particular type of work, the less of a liability it is to take on that type of work. When you take on a project that you know less about you run the risk of underbidding, making mistakes, and costing your company money. You may be able to figure it out and provide the customer with a good product, but wouldn?t it just be easier to specialize? Check out my company?s website to see how I specialize and communicate this to my customers: https://wallsremodelingroup.com
You do not have to visit every bid
??? We?ve all had that experience, a potential client reaches out for a quote, we drive over as soon as we can, spend an hour chatting with them, measuring up their project, and petting their dog. After that, we go home and spend another hour putting together a quote, and once you send it over it seems like they?ve gone into witness protection. They won?t respond to your texts, calls, or emails; you end up calling the police just to check in on them to make sure they?re ok. When you finally get in touch with them, they tell you that your bid was way more than they intended to spend. All this could?ve been avoided by just providing them with a price range based on the services they requested. As a contractor, you should have a good idea of what a project might cost. Providing these figures to your potential client before you spend too much time on the bid is always a good idea. This will save you a lot of time running from bid to bid. As a business owner your time is your most valuable commodity, don?t waste it.
Markup your materials to compensate for the risk
I?ve talked to many customers and contractors who have told me about how they think that material markup is unethical. As much as sympathize with this idea, I vehemently disagree. You have to markup your materials to compensate for the risk. Let me illustrate this by presenting the following situation. You?re a remodeling contractor and your rate is $75 an hour. A potential client calls you and asks you to install a steel exterior door that you can buy from one of the big box stores, it costs about $500. Another client calls you and says they want a Copper Double Entry Wrought Iron Door installed that is valued at $12,000. In both situations your employee makes the mistake of swinging their hammer into the glass because they are angry at you for not letting them take off that day, then they tell you it was an innocent mistake. Who?s paying for that door? Not the customer. In the first situation, it?s not as big of a problem because the door was fairly cheap, but what about the second situation? Is your $ 75-an-hour charge enough to cover the liability of installing a $12,000 door? It is not. If you still don?t like the idea of marking up products you can adjust your hourly rate based on the project, but I think material markup is the easiest and most simple way to make up for risk.
Bid Lump-sum rather than T&M whenever possible?
Bidding your jobs based on an hourly rate may seem easy, but there are a few pitfalls that make me lean toward lump-sum contract bids.
- Customer relations
When your customer knows they?re paying you and your employees based on the hours that are put in they are much more likely to look over your shoulder and complain about hours that are billed. When they know that the price is the price no matter the time spent then they don?t have to worry about it. It can take you 60 hours or 100 hours, but it?ll still cost them the same. This is one way lump-sum contracts remove stress from you and the client.
- Peace of mind
When I have worked on a time and material basis in the past, I always get stressed about what the customer is going to think about the bill. I don?t want them to complain about the price or think I?m trying to milk time out of a job. It is much easier to just give them a price and then go with it.
- Profitability
The motivation to get a job done is increased if you know that your profit will go up the quicker it is done. This will be an automatic motivation to work quickly and efficiently. You will think about running your company better and making your employees more efficient because it will make you more profitable.
Don?t let the customer buy materials
Many customers want to try to avoid material markup, so they try to buy the materials themselves. We?ve already discussed how you have to markup materials, to compensate for risk, so if they buy materials, you just have to charge more per hour. Explaining this concept to your customers will make them more likely to let you buy the materials which always works out better in the long run. Let me tell you a story about one of my own experiences to illustrate why. When I was a new contractor, I was eager to get any job I came across. I was contacted by a client, let?s call her Sally. Sally wanted me to install an interior door. Her door was busted and needed to be repaired or replaced. Sally told me she found a door that would work and had purchased it, she just needed someone who would install it. I was eager to please, so I agreed and told her what I usually charge for interior door replacement. When I showed up to her house the door was disassembled and removed from the jamb. Sally thought that I could just install the slab to the existing jamb and repair the jamb. What Sally didn?t realize was that the hinges were placed differently on the new door than the old door, causing me to have to replace all the jambs. This could?ve been avoided by just putting the slab back on the new frame and replacing the whole unit, however, the new frame was sized for 2×4 framing as opposed to 2×6 framing and would need a jamb extension to work, however, the door was right next to another door and if you extended the jamb the header pieces of trim would not line up. Also, the other doors didn?t have a jamb extension so this one would look out of place. All this headache resulted in me explaining to the homeowner that I could custom-mill new jambs and install the door with them on it, but it would cost more. As an inexperienced contractor, I didn?t think ahead about all these factors and assumed the homeowner knew what to order. All this trouble could?ve been avoided by simply ordering the door myself.
These are a few things that I?ve learned over the years of being a contractor and hopefully knowing them will save you trouble and turmoil.
