Why Roofers Fail: Dreams vs. Fantasies
One of our colleagues, Russ Hahn, expressed some interesting comments about entrepreneurs at a recent network meeting. Russ outlined some of the pitfalls entrepreneurs face, including denial, boredom, loss of focus, oversimplifying leadership and omnipotence (I thought Viagra could fix this but he insists it is an “I-can do-anything” attitude.)
I agree with all of these comments and would like to add a few of my own. I meet many contractors who are quite bright, have great ideas and are very interesting people — and they fail. In fact, one might call them dreamers. Dreamers are exciting people and fun to be around. One might also say that dreamers settled America, invented new technology, founded the New World and made our country what it is today. However, it is important to note that there is a big difference between dreaming and fantasizing.
A dream is a hope that one day something will happen and has a real chance of happening. A fantasy is something that will never happen; yet you cling to it and develop unrealistic expectations. When you make decisions based on this false emotion rather than facing up to the reality that it will probably never happen, fantasies develop. Throw in a little ego and you have a real problem.
I hear contractors every day talk about how they are “building the best company in the area” and that they do “the best work.” They say that they are the only “true professionals.” It’s nice to believe these things, but how often do we lose sight of reality? It reminds me of my friend who went to VMI. He came back and took his old girlfriend to the prom in his cadet dress uniform. Boy, he thought he was big stuff until we got to the fancy hotel for dinner and someone coming out asked him to park his car. Then there was the time someone told me I looked like Christopher Reeves and it was at the height of the superman movies. I was so proud that I went home and told my family — and they roared with laughter. A couple of weeks later, superman was on TV and my eight-year-old daughter turned and exclaimed, “Dad you do look like superman. You look like him when he is Clark Kent and all yucky.”
So without the customer asking you to park a car or a child being painfully honest, how do you avoid the issue of being a giant in your own mind and turning your dream into a fantasy you will never achieve? Here are some rules I have found that work.
Monroe Porter and PROOF Management’s Rules for Making Your Dream a Reality1. Make a budget. Sit down with a piece of paper and estimate all your expenses for the year. It really is not that hard. If you do not know, make an educated guess. Figure out your overhead. Make sure that you include as downtime or overhead any of the time that you pay employees when they are not billed to the customer. Add it all up. If you still work in the field, make sure you budget your salary for the field as if you were a good worker and for the office as an owner who runs the company. This is important because you may be earning much of your income as a worker and when you put down the tools, the volume may not support a non-working owner.
2. Use the budget to figure out a structure. Keep it simple. I suggest you follow a pattern that looks something like this:
Professional Trades Person: That is you and a couple of employees, and you work in the field.
Home Alone Contractor: That is where you start to put the tools down and get a part-time office secretary and bookkeeper. You work out of your home or a small office.
Owner-driven Organization: That is you as the owner driving sales with a very powerful office manager and good foremen to run jobs.
Professional Management Team: That is you managing managers under you, a full-time office manager and maybe a production manager.
Too many contractors are losing money, stretched beyond their resources and they simply start looking for management bodies to help. Rarely does adding extra bodies make companies profitable.
3. Identify your customer base and for whom you want to work. Focus on those customers. Use direct mail, referrals, job signs, etc. Don’t stray. One of our contractors makes over $500,000 a year in profit and only does residential work in 13 neighborhoods. If you do not live in those areas, he will not work for you. He does no new construction. He did not perform subcontracting on his own house. He decided it was cheaper to have someone else do the basics and he would add to the job later.
4. Identify what type of work you want and where you make and lose money. Don’t try to be everything to everybody. This seems to be a particular problem for some roofers. Since their customers have a lot of needs, they decide to do it all. Some roofers do metal, commercial, repair, residential, windows, vinyl siding and the list goes on. Too many different kinds of jobs can cause a lot of distractions, particularly if your sales are only a couple of thousand a year. In Texas, they call this having a “big hat and no cattle.” If you try to be everything to everybody, you will be nothing to nobody.
5. Stop blaming your employees and customers. If you are losing money, it is your fault. No one else’s. You hire the people. You fire the people. You price the jobs. You market to certain neighborhoods.
6. Don’t look to buy anything to make you successful. This includes trucks, specialty machines, fancy software, etc. Don’t look for a new type of work to save you. Rarely does expansion produce an instant profit. What it produces is more debt and aggravation of the problems your business already has. Every little boy wants a dump truck. I want a Ferrari but that does not mean I can afford it or I will make more money with it. I am not against software and equipment. Make a budget, buy what you can afford and build a business dream, not a fantasy. Keep it simple: You are not McDonalds, you are a roofer.
7. Raise your price. Did you hear me? Raise your price. Maybe you misunderstood me: I said raise your price! If you are doing $300,000 a year, make money at that. Don’t look to grow to become profitable. I have contractors who do $300,000 in sales that make $100,000; others do $300,000 and make $30,000. I have contractors who do a million in sales and make $30,000 and others who do a million and make $300,000. I talk to roofers everyday that are absolutely convinced that they cannot not raise their prices. Why do you want to fix rich people’s roofs and cheat your own spouse and kids? This does not make sense to me. If people are willing to pay you $3,000 to roof their house, they will pay you $3,300.
It takes focus to be successful. Anyone can get lucky. Anyone can hit one home run, make one lucky kick or pick a stock that hits. If you want to play lotto, play lotto. If you want to run a business, sit down and make a budget, decide who your customers should be, focus on work where you will make money, and do it.