Many people stereotype contractors as hell-raising free spirits who live by their own set of rules. Maybe so, but I meet and work with far more contractors who are anxious types and worriers. I looked online for a definition of anxious and found this one: “experiencing worry, unease, or nervousness, typically about an imminent event or something with an uncertain outcome.” One of my favorite quotes is from Mark Twain, who said, “I have been through some terrible things in my life, some of which actually happened.” Hopefully, the following suggestions can make your business endeavors less stressful.
Remember it’s the nature of the beast. You did not choose to be a government worker or employee of a large corporation. You are an important cog in a small business. Small businesses are rewarding in that you get to make things happen. You can control your own destiny, but with that reality comes the need to stay focused — and stay on top of the trends and financial data that impact your business.
Know your numbers. Know what it takes to break even. Identify what you need to charge per hour and per job. Understand that cutting your price just to get a job might make your breakeven point impossible to meet. Suppose you did $2 million in sales and your gross gross profit was $600,000, or 30 percent of the total. If your average job size was $10,000, that means you would need 200 jobs to break even ($2,000,000 in sales divided $10,000 equals 200 jobs). If we apply the 30 percent gross profit to the $10,000 job, your gross profit on that job was $3,000 and your hard cost was $7,000.
Let’s suppose you cut your price 10 percent, which would reduce the job size to $9,000. Your hard cost would still be $7,000, leaving your gross profit at $2,000. You would now need 300 jobs (or 50 percent more jobs) to recover your $600,000 in gross profit ($600,000 divided by $2,000 per job). Such an increase in sales would be impossible to reach.
Set some yearly financial goals. Look at how many roofs and repairs you did the year before. How many more do you have to do this year to reach your financial goals? If you are a small contractor who needs another $100,000 in sales and your average job size is $10,000, all you need is 10 more roofs. That is less than one a month.
Have monthly financial meetings. Living in the dark makes anyone anxious. Review your profit and loss, balance sheet, backlog and closing ratio each and every month. Compare them to the year before and see where you are. Establish yearly trends. Make a chart that shows your profit and cash for each month of the year. You may be surprised as to how similar the data is from year to year.
Learn how to sell. The reality is that you must present jobs to customers. Learning how to sell and communicate with the customer will reduce your stress level because you will know what to say and how to respond to customer objections and inquiries. And by the way, much of this stress about sales is self-imposed. When is the last time a customer told you no to your face? It’s rare, for most contractor salespeople. The customer merely says they will think about it or talk to their spouse and you say OK. So in reality, it is the fear of objection that may be stopping you. Closing more sales with better communication is one of the only things you can do as a contractor that takes no more effort or time (once you know how to do it). If you are going to visit with the customer, you might as well be good at it.
Take action. Worried about things? Stop staring at four walls or sheets of paper. Get out of the office and do something. Don’t know what to do? Go through your old job files and visit past customers. Just drop by and look at their job. The worst thing that will happen is that you will get more referrals.
Activity breeds activity. Knock on doors in the area and offer to give the owner a quote for a new roof. This works for both commercial and residential markets. For residential homes, pick out the roofs that need to be replaced. You can also offer to clean gutters and do a roof inspection. For commercial jobs, go to Google Earth and look at roofs. Commercial roofers can go visit past customers to inspect their jobs as part of their warranty. This almost always brings some repair work.
Drive by the jobs you estimated that you did not get. See if their roof has been done. If not, stop and see them. All the hard work has already been done. Too chicken to drop in? Then just send them a letter or call them on the phone. Don’t be shy. Remember, they stole a couple of hours of your life when you gave them an estimate.
In summary, don’t sit around and worry about things. Set financial goals and work toward activities that will help you reach them. Make something happen — don’t wait and worry about what might happen.