Many contractors who start their own companies
realize that while they might be experts at installing roof systems, they
aren’t experts at running a business.
Many contractors who start their own companies
realize that while they might be experts at installing roof systems, they
aren’t experts at running a business. Before Aaron Santas, the owner of
Guardian Roofing and Windows in Tacoma,
Wash., partnered in the formation
of his own company, he worked as a branch manager for a major construction
materials distributor.
His background in distribution and supply exposed Santas to a lot of
contractors, and he found out that the successful ones had something in common.
“Successful contractors watch their numbers, and they know them intimately,” he
said.
Business training is essential, asserted Santas, who shared his financial
statements and pricing formulas with attendees in a session titled “Business
Training, Balance Sheets and Gross Profit.”
Many contractors were never trained to read financial statements and compile a
budget - and the result can be catastrophic for a company. “Not knowing the
numbers is like going through the wilderness without a map,” he said. “You
might make it, but you’ll have some hardship along the
way.”
“What’s killing business is people don’t know how to price their jobs
properly,” he said.
The key to budgeting is to understand the financials and use them to set
expectations, said Santas. Those who ignore the numbers because they find them
stressful aren’t doing themselves any good. “You can’t expect to lose weight
without looking at the scale,” he said. Continuing with the weight loss
analogy, he noted if the goal is to hit a certain number, looking at the scale
might initially be painful. But it should also be motivational and help you
determine what works and what doesn’t.
Santas used his own company’s budgeting process as an example. “We started our
business in 2005,” he remembered. “We saw the impending recession, and we knew
everything would come to a screeching halt.” Despite the tough economy, Santas
on his co-owners knew they would have to set aside more money for marketing,
raise prices, improve their value propositions and improve service.
They used their detailed financial reports and profit and loss statements to
determine what they could survive on and set the budget for the coming year.
“Your P & L can be used to plan where you are going,” he said.
Santas noted his company sets aside 7 percent of its budget for marketing.
“Living by the Yellow Pages and referrals - you’re not going to live by that,
you’re going to die by that,” he said.
The key is to business success is to understand the numbers and make decisions
accordingly. “Making emotional decisions with your money leads to what?
Failures,” he said. “That’s why they call it a good business decision.”