Having a lot of work but not enough people to get it done creates mixed emotions. It’s a bit like watching your ex-wife or ex-husband total your favorite car that you had to give up during the divorce. To succeed, you have to rethink your strategy and adapt to the marketplace.
First, calculate how much work you can get done per day or week with your current crew and work backward. Determine how much a crew can bill per day, multiply it by the number of crews and then see how much income you can produce.
There’s an old joke about the two butcher shops on the same street. One butcher shop has hamburger for $1.99 per pound, but it’s out of hamburger. Needing hamburger, a buyer walks into the other butcher shop to buy hamburger, but notes that it’s $2.99 per pound. The buyer complains about it being more expensive. The butcher replies, “Well, my hamburger is also $1.99 when I don’t have any.”
Supply and demand drives capitalism. If you can’t get the work done because there’s a shortage of good craftsmen, it’s time to rethink prices.
This brings up the whole concept of when a contractor should reevaluate prices and pricing strategy. The honest truth is that too many contractors are so busy working that they don’t take the time to reevaluate pricing. Prices tend to be low in the spring when many contractors are starving from a slow winter. As the cheap springers fill their bellies with work, you should begin to get work and adjust prices accordingly. Prices should also be adjusted to reflect the complexity of work, the overall risk, proximity to your shop, experience in the area of work and other production factors. Prices should never be a factor of simple, broad square-footage average. If I had one foot on a hot stove and one foot in a bucket of ice water, on average I would feel OK. When your backlog reaches a certain point, you should raise prices. Remember, production will drop as you add more and more people who are less qualified than your current workforce. You will probably find it necessary to have gross profit in the job to offset production decreases.
Next, rethink your concept of training and developing people. All contractors want to hire readymade employees that are plug-and-play, but that’s unrealistic in today’s economy. Most good employees are employed by someone else and aren’t looking for jobs. If they are, they probably won’t be loyal employees and will leave when offered more money.
Understand that much of contracting is repetitive. Yes, to be a master craftsperson or foreman, you have to know a lot of complex skills and be good at them. However, if you can’t teach someone in a few hours how to nail a row of shingles or paint a wall with a roller, the person is never going to learn. Hire people who can learn such skills and train them how to fit into your crew. See a guy working hard behind a fast-food restaurant counter? Hire him and put him to work.
Change your employment culture and outlook on recruiting. Do you have an application available on your website? Do you constantly advertise with online services? Is your culture one of hiring people who will work hard and teaching them a trade? Doing the same old, same old is likely to get the same results. Always look for potential employees the same way that you’re always looking for jobs.
Put your production hat on. If you have more work than you can do, maybe it’s time for you, as the owner, salesperson or project manager, to help production. It doesn’t do any good to sell it if you can’t get it done. Work harder at getting jobs set up, minimizing shop, drive time and anything else that will allow you to get more done. Did it rain this week with only one day of production? Maybe you can have one large crew. But unless you’re willing to help manage the job and coordinate the effort, it’s doubtful the job will be productive. Think and be creative. However, remember that some humans can run a four-minute mile, but you can’t ask them to do it over and over or back to back. There’s a limit to how much production you can micro manage and squeeze out of your crews.
Contracting can be a damned if you do, damned if you don’t situation. Without work, you don’t need employees. Without employees, you can’t do the work. Finding balance can be tough, but you have to work harder at creating solutions rather than complaining about the problems.