Throughout the year, contractors call and want to talk to me about joining our PROSULT™ networking groups or call to obtain consulting information. I try to take a few minutes and offer some free consulting over the phone. Starting with a simple statement such as "Tell me a little bit about your business" can generate some interesting conversations. I would like to share some of these conversations in the hopes that I can help you think through some of your business issues.
The 72-Year-Old Looking for WorkIt was winter and things were slow. He wanted some ideas on finding work. I asked how did he get work now, and his reply was by word of mouth. He went on to tell me about some of the jobs the company did and clients he had worked for through the years. He was quite proud of his work, and I bet they were good contractors.
He loved to talk about finishes, the type of jobs he had worked on, etc. As I asked more questions, more information began to unfold. I asked about his name on trucks and job signs, and he said he didn't want to be bothered by nuisance calls. I asked about advertising, and he said he never had to advertise before. I curiously asked about his succession plan, and he said he had hoped his son would take over the business. But the son, now a 50-year-old field painter, just did not seem interested. The more I talked, the sadder he seemed that his business would not be taken over by his son.
The moral of this story is quite simple: If you want your business to carry on after you, you have to give up control to others, try some new things, and let it evolve. If not, it will just die over time.
My Partner Will Do What I Don't Do WellPartnerships, just like marriages, are hard to make work. I have talked to three or four contractors during the past year who felt bringing a corporate friend into the business was the way to go. All scared me with their plans.
Why? The partnership idea was built on the premise that having a college educated, experienced manager work in their business would solve many of the company's problems. Frequently, this just does not work. All of these businesses had $2 million or less in sales. That meant the owner spent much of his or her time selling and driving the work. The owner was the chief manager and salesperson. Hiring a partner to run the business and not sell or manage may not be realistic. In a business this size, the partner is going to have to generate income and revenue, not just run the business.
I have no problem with the plan being to make less money and have the partner relieve some the stress of the business and grow over time. The scary issue is bringing on this partner in the hopes to develop an instant growth strategy. Growth requires more people in the field, more leads, more capital, more middle managers, and more salespeople. Where are these resources going to instantly come from?
Partnerships in which both partners do not bring equal value to the business are potentially doomed. Over time, one partner becomes less valuable than the other. I have seen failed partnerships where one partner runs the office and becomes an overpaid office manager-bookkeeper, and other businesses where one partner is the field guy and becomes an overpaid superintendent or foreman.
The moral of this story is quite simple: If you are going to form a partnership, work hard to make sure everyone is bringing the same value to the picture. If not, one of you will end up being an overpaid participant.
Yes, But the Big Job Will Save MeThis type of contractor comes in many forms, but most are folks who are not good businesspeople and let the glitter of one big project build a false hope that it will solve their problems. I recently talked to a contractor who is really a good guy, and I wished I could help him, but our conversation ended with little hope. By his own admission, he was not good with paperwork and got in trouble with workers' compensation and payroll taxes. Rather than hire a bookkeeper to do it for him, he tried to save money by doing it himself.
He was upbeat about a pending $30,000 job, which he planned to complete and use the money to pay back taxes. I asked how he bid the job and he said unit prices, and he would make $40 an hour. This sent a shiver up my back, so I had him tell me how many people including himself would be on the job and for how long. When I ran the math based on the hours he provided, I estimated he would make $19 per hour. So, how will this story end up - with this guy working Saturdays and Sundays and working free to make the job come in? He will still owe workers' compensation and the IRS. Eventually, he will be shut down as penalties and interest force him out of denial and into bankruptcy.
The moral of this story is: If you don't have a bookkeeper and don't know your numbers, you are doomed for failure. Looking at realistic numbers each month keeps you out of denial.
There is No Money in ItI will frequently get contractors on the phone, and why they called me I am not sure. They really don't want advice, but rather someone to validate their way of thinking. I recently had such a contractor on the phone. He was a nice enough guy, but one who had worked by himself so long that he had created his own myths. He said he had been in business for 20 years and had evolved to the point where he just worked for a few select customers because residential people did not want to pay for his work. I have a guy in my networking group in his market who makes 400K a year net doing residential work.
The moral of this story is: Be careful how often you tell yourself the same old wives' tales. You might actually begin to believe them. Outside advice and opinions can be invaluable in keeping your perceptions in line.