A contractor reached out to me recently. Here is some of what he wrote, with comments from me added. The contractor has been working with a coach/consultant.
“His emphasis is marketing,” the contractor said of the coach/consultant. “I get that marketing is important, but I also need help with financials, estimating, sales and production.”
Great to read that the contractor knows he needs the help with these matters. One can only take a business so far if it is based on what follows.
“I am a very skilled carpenter, one of the best I know. I am 56, so I feel the need to get out of the field.”
I, too, was a very skilled carpenter. Over time I realized my craft skills and knowledge sometimes got in the way of me being the businessman the company needed me to be. It was tough coming to terms with that. Fortunately, that insight came to me relatively early in the life of the company.
56 years old is not too late to become a businessman. I do think the transition from craftsman to businessman takes several years. It entails learning a lot one typically doesn’t know much about, like all the items the writer mentioned in his email—financials, estimating, sales, production. Doing all that work can be hard and it takes commitment.
“So four years ago I hired a few lead carpenters and some midlevels, sold some jobs and managed them. Added a part time office person.”
Good moves—but only IF the contractor learns how to delegate effectively instead of falling into the habit of abdicating. Using the concept of Trust and Verify, with the delegator still being responsible for the success of the delegatee, is a difficult skill to master. Our company went through many good employees until I finally got how to do that.
“Things went pretty well until one $500K job that I underbid by 10% or so. Now I am robbing Peter to pay Paul, except Paul doesn't have any money, either. I guess in my eagerness to get some other work going, I underbid those jobs too. Now I have lost confidence in my estimating and sales ability.”
This is a classic downward spiral, which many contractors have experienced as they progressed through the School of Hard Knocks. How do you overcome losing money and not accurately estimating projects? That is a very tough question to answer.
“I dropped the office help and laid off most of the crew. We still have work to bid on in the pipeline from architects, but I keep getting turned down when I price based on my actual subs and labor costs.”
Cutting expenses and running lean for a while are good steps to take. I would also suggest the contractor look at how he is establishing relationships with architects, who appear to be his primary source of work. I came to believe there are many architects who feel they have a fiduciary responsibility to their clients to put contractors out of business! One can only be successful working for architects who think the contractor is special. Working to create those relationships takes time. There is no substitute.
“Part of the issue is that I am very productive and skilled, so I assume my employees can get the work done as fast as I did.”
Been there, done that. This is a hard lesson to learn. Learn it and move on.
“But when I raise my prices to reflect actual productivity, I don't get the work. It is frustrating to keep hearing that I charge too much when in fact I am not making much money. The subs and suppliers all get paid in full, why does the contractor end up holding the bag?”
My heart goes out to the contractor. I have lived this. How did I get out of this dilemma? I did these things:
- Learned to estimate accurately, particularly by including the company’s needed overhead and net profit. If you don’t do either or both of these you are just going to be busy, with little or no chance of surviving.
- Stopped bidding for a chance of getting the job. We sold proposal preparation agreements, which put us in a negotiated relationship with the client. Even when there was NO work, we did not bid for free, as here is what happened to us: Our actual costs of doing the project, without any overhead or net profit included, were higher than some of the other bids!
- Developed better sales skills. The reality is that being an effective salesperson will make one’s company more likely to be successful than any other step one could take. I hated having to come to terms with that, as I was a very good craftsperson who expected the market place to “get” that. However, I did the work on sales skills that were needed and it paid off.
- Became better at delegating and helping other people in the company become successful. This, too, was something I did not embrace for a long time. You can’t have a company with employees be successful without doing this.
My hope is the contractor who sent me this email will feel inspired to take on some of the work needed to become more effective businessperson. Doing so takes time and discipline, as all the daily emergencies and problems get in the way if you don’t watch out.
However, as you evolve further lessons become a bit easier. Stay focused. Appreciate the small changes. They add up.