Contractors are risk takers by nature. Most contractors are good people who want to do well, are independent minded and have goals they want to accomplish in their life. Of these, many are impatient and are struggling to make a living. Others seem to easily lose focus. When drowning in a sea of stress, it can be tempting to reach out for a straw or miracle to save you. Rarely do such miracles work. I wanted to take time in this article to address some of the common miracle cures and traps I see contractors struggling with and how to avoid these situations.
The Magic EmployeeThere is no question that it is difficult to find the right people. Throw in a good dose of stress, a little bit of control freak, some uncertainty about who to hire, and you have set the stage for hiring a magic bullet. You meet a supplier sales rep, a person at the bank, someone at church, a friend or family member and they are hired to help you. Frequently, these types of hires do not workout.
Not only did you hire an acquaintance, but also you probably did an inadequate interview. You did not advertise the position and may have hired someone who is not suited for the job. You took the easy way out and frequently this comes back to haunt you.
How should you have hired someone?
- Write a job description of what you want the person to do.
- Advertise that position and your acquaintance is welcome to apply.
- Pick three or four of the best from all the applicants and interview candidates.
- When hiring a management person, consider having all the candidates go through a personality testing process.
Now you have intelligently pursued the position and improved the odds of hiring the right person.
The Magic Bonus or Incentive SystemThe management of people is a pain in the neck. There is always a temptation to develop a magic bonus or incentive scheme and piecework or sub system to control this aggravation. Unfortunately, my experience has been that gimmicks cannot take the place of good management. To have a good organization, you need to hire good people and hold them accountable for doing their job.
Such pay schemes fail because they assume the employee performs poorly because he or she will do better if they are paid more. If paying more would help productivity, you could simply double all your employees’ pay and the problems would go away. Leadership, not money, drives performance. Having an incentive program that is not tied to company goals and performance is like giving a tip to the deck hand that is aligning the deck chairs on the Titanic. At the time it seems really important but in the big picture it will have no impact.
Leadership is a pretty simple process. Hire good people. Develop a vision or plan for what they need to do and hold them accountable. If you pay people well, tell them what their job needs to be and them hold them accountable to get it done, then why do you need a fancy bonus scheme? The greatest benefit of such schemes is the measurement required to give the bonus. If you simply measured performance and paid people well, you would probably end up with the same result. Creating gimmicks for pay systems causes a false sense of management and frequently is used as a substitute for good people and good leadership. They actually can hurt your company and limit its potential. I could offer you $100,000 for every brain surgery you performed but that does not mean you would know how or be capable of doing it.
Magic SoftwareI know lots of contractors who have great software systems and lots of information and still do not make any money. Software is a tool used to provide information and discipline in your company. Software offers answers, not action. Good record keeping can reduce overhead, allow office people to get more done and can be a great tool to the business for pointing you in the right direction as to what needs to be addressed.
If software could provide leadership and coaching, then computers, not coaches, would run all the great sports teams. Don’t get me wrong. You need a computer and information but software is not a magic bullet. It is a tool you can use. Also remember that the cost of developing software is a fixed cost and companies must resell the software to recoup development costs. This means that if the software company builds a lot of bells and whistles into the software, they can charge more for it. However it does not mean you need or will use all those bells and whistles. For every software package I use, I probably only know how to use 10 percent of its capacity. It does not mean it is bad software, it just means that is all of the software I need to use to accomplish the tasks I am working on.
Don’t let a fancy software system over-complicate your business. I meet contractors every day who have lots of information but use it poorly. Information points you in the right direction but you still must analyze that information and make the appropriate decisions.
The Magic Office or WarehouseContracting is not a retail business. Rarely do your customers come to your shop. Having a fancy desk, office or shop will not normally increase profits. Contractors need to build offices as a real estate investment where the company pays rent and one day the asset will be valuable. Contractors should not see building offices and warehouses as a profit center.
If you are going to build an office or warehouse, don’t spend too much of your time in the process. It is too great of a distraction. Instead, move into something as quickly as possible and avoid the distraction. You already have a busy job. Don’t kid yourself that you can fool around building a new facility for three months and it will not impact your business.
The Magic Brochure or Marketing PieceCustomers rarely read your marketing materials. Too many contractors never have good marketing info because they cannot decide what they want and try to make it too perfect. Others have too many brochures and other materials that only confuse customers. Keep it simple. They want to know who you are, some references and the kind of things you do. They focus on what is in it for them. Don’t print literature for your ego but instead build information your customer will find useful. The same thing goes for your Web page. A $5,000 Web page probably won’t sell more than the $500 one.
The Magic Division or ServiceIf I just did retail, started another type of work, or expanded what I do, I would make money. Why? Whatever the fundamental problems you have at your current level will only heighten as you grow. If there is a crack in the foundation of a building, building a taller building does not cure the crack. Eventually the building will fall over. Fix what is broken; don’t try to make your company bigger. You can do it; just focus on the basics. Super bowls are won with blocking and tackling, not fancy reverses and Hail Mary passes.
The Magic Piece of Equipment or ToolIf I only owned such and such, I would make a lot of money. Really? Funny in 27 years of management consulting, I have never seen a collation between the equipment and tools you own and profit. Now I have seen lots of contractors who make money that have good stuff. I also see lots of contractors who own a lot of good stuff that go broke. Having a lot of “boy toys” is not going to make you profitable. Selling and performing profitable jobs is what will drive your business success.
Does this mean you should not own good tools and equipment? Heck no, just be sure to buy tools as part of a controlled plan, not a magic answer. Replace equipment when and if maintenance costs grow too high. Buying your spouse flowers or taking a romantic trip can help your marriage but this does not mean you love each other and have a happy marriage. If you hate each other and fight all the time, the flowers are a brief moment of calm in a nasty storm. Focus on the basics, not on a quick fix.
ConclusionIn summary, there just is no magic business bullet you can bite, fire or even just carry in your holster. If there were, everyone would have it and everyone would make money. Sure, you can get lucky and a good idea can work but having a successful business is about having a good foundation, practicing good business principles and having a company that does the basics well. Looking for the magic bullet probably says more about you as a person than it does you as a businessperson. Maybe you are disorganized, maybe you are too impatient and want to get rich quick, or maybe you want to show people your big office and shiny equipment and toys. Suck it up and build a business, not a shell game. Ask yourself what your lack of focus is about and get the basics right. Slow down, make a budget, regroup.
Successful people do one thing; they get down what is important. Your success can be limited by your focus on gimmicks, software and lots of information. In contracting you make money by selling jobs at a premium, convincing the customer you are the company of choice, doing a good job and getting the job done in the amount of time allotted.