It is Wednesday and you are having a pretty good day. Then, Mrs. Smith calls —hysterically in tears. Your crew just destroyed Mrs. Smith’s prized camellia. She entered the camellia in three state fairs and won. You warned your crew verbally and in writing, but now it is completely ruined.
You open the mail and find that the big check you were promised didn’t show. Payroll is due tomorrow. How are you going to make it?
You’re driving home late again. Your spouse had prepared your favorite meal, but by now your little boy will have eaten and your spouse will be angry.
Current economic news is not good. You wonder how it can get worse and what you are going to do. You are working as hard as you can now and struggling to make ends meet. If you weren’t 38 years old, you would sit down and cry.
Welcome to owning your own business. Your dream of financial and personal independence is either coming true or has gone sour and seems more like day-to-day slavery.
Maybe it is not as bad as predicted above, but owning a business can be pretty tough and lonely. Even if you are a good businessperson, there are days where you are overwhelmed and it all gets the best of you. When you are knee deep in alligators, it can be tough to remember you came to drain the swamp.
When I first started our networking groups for contractors from diverse geographic areas, I had no idea how isolated contractors were and some of the issues that they face. It can all be overwhelming and difficult to deal with but what can you do? The first thing you have to do is change. Change. It really is that simple. Look in the mirror and make the decision to change. If your business and life are a mess, it is you that must control your destiny.
Monroe Porter and PROOF Management’s Five Ideas for Changing Your Life1. No New Ideas: Every day I meet contractors who like the idea part or entrepreneurial part of self-employment but not the self-discipline that is required. Great athletes have talent but they also practice and use self-discipline. Potential is a great thing but no one is in the hall of fame on potential alone. Hall of fame participants are there because of their performance, not potential.
Too many contractors are unfocused and go from one thing to another, really never being successful at the basics. Stop! No new ideas. You don’t have to be smart to be successful at contracting but you have get the basics right. Slow down and finish what you are doing now before starting a new project.
2. Determine the profitable versus unprofitable work. Look at your job records and see where you consistently make money and where you lose money. Know what you are good at. Don’t try to be everything to everybody.
3. Figure out what part of your business is price sensitive and what is not. I talk to contractors every day that tell me they are the most expensive in their market, yet they do not make any money.
Let’s review this logic. Do you think it is wise to let your competitors decide what you can or cannot charge? I think not. You need to know what your price should be. I have written about this for years and frankly it is a bigger process than we can cover in this article. (You can buy our Knowing the Numbers tapes at www.proofman.com.)
I have talked about knowing your numbers and charging more until I am blue in the face. Rather than go into all of this, let’s look at some real world, simple answers. Suppose you are awarded jobs on 80 percent of the referrals you quote. Maybe you should just add 5 percent more to those jobs. Many of those people would prefer you to slow down, do a good job and be successful. If that 5 percent takes the pressure and allows you to stay in business, then it is a good thing.
In reality, you may not increase this 5 percent because you do not want to overcharge people. Then sit down and figure out why are you aren’t making any money and charge more on the appropriate jobs.
Ask yourself this: How come you will not charge more to your customers yet you will steal time from yourself, family and friends? You work hard. Don’t you think most of your customers want you to be successful? If not, maybe you should not be working for those people.
3. Take time to sell the job right. Sit down with the customers and explain what they are going to receive. Take time to listen to them. Walk around and go through the job with the customer.
You may wonder how you have time to do this. Start by qualifying people over the phone and not quoting everything. Separate the price shoppers from the real leads.
What if you need a job and have to make a price concession? Don’t quote everything cheaper. Tell the customer that at the moment, you have a break in your schedule and can offer them a small price break if you can start right away.
With economic concerns, the first inclination is to cut price across the board but that might be a foolish approach that quickly creates a mathematically equation that is tough to reach. Look at the math: If you have sales of $500,000 and your gross profit is 25 percent, you have $125,000 in gross profit but if you have sales of $400,000 at 35 percent, your gross profit would be $140,000. However, if you have no sales for next week, it might make sense to take a lower price.
4. Get the numbers right. I saved the best for last. Track some basic facts and hold yourself accountable.
How many jobs do you quote a week?
What percentage of your jobs do you close?
What gross profit did you quote on the job?
What did you actually achieve in the field when you did the job?
What was your total overhead for the year, how much does that equate per week, and did you reach that goal?
OK, let’s play this game by just looking at your own efficiency. Last week you quoted eight jobs; each quote took three hours of your time. You worked 24 hours selling. Of those jobs, three were referrals; five were from advertising, yellow pages, etc.
Of those jobs, you received three contracts, two of which were referrals. So in reality, you closed 66 percent or two out of three of your referrals and received one out of five for the non-referred work, or 20 percent. So what does this tell you?
Several things. First, you had a lot of down time last week. You only spent 24 hours or three days selling. That gave you two days to do other things. What were you doing? At the supplier picking up material? Playing on the Internet? Micro-managing your jobs? What does this say about your efficiency and systems? Maybe your time would be better spent on the job working and having a supplier deliver the material.
What about your sales skills? Sounds like you do well with qualified leads but poorly with random leads. Maybe you need to work on your sales skills. Sounds like you may be just getting the “gimmes.” At least one those referrals probably did not even get a competing bid.
Some contractors are going to go out of business in 2002. Most of those who fail are the folks who have not been doing the basics right. Nine years of good economic times has created some pretty sloppy contractors. Weeding a few out this winter will not necessarily be a bad thing. Just make sure you are not one of those who get weeded out.
Know your numbers, get the structure right, and sell jobs at decent margins. We have contractors in our networking groups who make $100,000 with three field employees. Don’t convince yourself that you cannot make money in a smaller organization. For several years, contractors have consistently complained about poor employees. Well, take what is left and make some money. You don’t have to be big to be successful but to succeed you have to be a businessperson who gets the basics right.