Have you ever wondered why the failure rate is so high in the contracting business? Well, I have an opinion and it has proven itself many times over. I have seen the best guys open their own business and totally flop. They then give up, and work to make someone else money, because they have lost confidence. So, I can tell you, hard work does not always guarantee success.
Here are some of the many easy ways to fail that I have seen:
Don’t make a business plan
They never work out anyway, right? Wrong. A business plan is needed. You can adjust it from time to time but it should be complete.
Don’t understand billable hours
You only can bill for the hours you work for your Clients. As a new business owner, you need to determine all your fixed and variable costs and apply them to each hour you bill. Get an accountant, pay them to advise you, and take their advice, or just go out of business now and save yourself trouble.
Don’t make a list of your expenses
You should know how much your insurance costs per hour, per employee, and how much you expect it to cost NEXT YEAR. That is what you are saving up for this year. Do the same with all of your expenses.
Don’t know all your fixed costs
Don’t worry about rent, insurance, truck payments, fuel, tools, or any other payments. Certainly, don’t make sure they will be paid on time.
Don’t completely read any lease agreement you sign
If you don’t understand the lease, hire someone who does. I know someone who did not know they had to pay a percentage of sales in addition to the lease amount. I knew another who had to pay more to store hazardous materials and pay extra dumpster fees as well. Another said electrical, gas, and water ended up being twice what they had expected. Ask questions before you sign.
Don’t train your people completely
If they work for you, take the time to make sure they know what they are doing. Training time is another expense we forget. Their lack of training will cost you time and damage your reputation.
Once you have completed a job, cross that Consumer off the list
Don’t send thank-you cards, Christmas or Holiday cards, etc. They bought your labor and you did a great job, why would they want to refer you to their friends and relatives, or even a new job? Someone I know had worked on four different houses for the same Customer, who had moved four times, in ten years. Also, many Consumers own more than one house or residence. So, yes, just ignore them.
Don’t respect your competition
Do not find out what they are offering. If you do the research, you can honestly and authoritatively explain the difference in your offering. Never bad mouth them, remember you will always have a competitor. The more thorough they are, the better off you are.
I once had breakfast with two of my competitors one day each month. They spilled their guts about their business after meeting a few times. Soon, we shared best business practices. In the long run, we all did a better job, worked, and made more money as a result. Again, knowing your competition is very helpful, but be careful with your common sense, it is rarer than business secrets.
Don’t worry about work issues, they will work themselves out
Whether you have no business, too much business, or have a rude office person, take care of it later. The devil is often in the details. Once, one of my coworkers just got tired of an administrative worker with an attitude and pulled her work from a company because the Owner did not respond. A month later, the business closed. I will bet the rude person was the bitterest about the closure. Don’t delay, handle them today. They may have a problem you can help resolve which will make them loyal forever.
Cash flow does not matter
Never mind that you must pay your workers and pay for materials in advance, everyone will pay you in the end, correct? This is one of the top killers for subcontractors. They often end up waiting 60 to 90 days to get paid on a job. This delay in payment must be in your business plan.
I once had a subcontractor who could not take work because he could no longer make payroll. Everyone got paid, but him, the owner. He was such a good Contractor, we decided to pay him quickly on our work and he continued to do it, but he soon found he had to walk away from other work simply because he could not afford to do it. Again, he walked away from work.
I also knew a dentist who retired and turned his accounts over to a collection agency if they were over six months old. He found that people just did not pay because he did not make them pay. He had almost twice the company’s value in collected debts and had scrimped by for years for not being tough. You must be tough and enforce agreements. Remember the business plan, include cash flow. Don’t wait to retire.
Don’t learn how to grow, but grow quickly
You can outgrow your cash flow in no time. Common mistakes are to take on a new geographic area changing drive times and costs, adding new products, or attempting to manage a much larger job that you have normally managed. Grow only as fast as you can manage.
Buy expensive toys
Having more payments are just what you need when starting a business. A boat is a good to have especially when gas is so expensive, and you think using it enough to entertain will offset its cost, it never does.
I don’t need anyone
So many times, one person leaves and the business falls apart. Sometimes there is a lot of turnover, and low bids cause profits to go out the window. Don’t outgrow the people you have, don’t overwork anyone, and know who is going to replace who ahead of time so you can train them before they leave.
We, at Craftsman Republic®, are aware of the struggles of being a normal Contractor, large and small. There is no cost to getting simple, basic, paid installation jobs. At times, we have larger jobs than others, but we target Product installations that take less than a day to complete, and we Pay in a Day. Within one working day, we forward the funds by EFTm or Pay Pal, or if you are not in a big hurry, we will snail mail you a check. Most of what is described above are simply not issues while working with Craftsman Republic®.
If any of the above are a surprise fix-them-today, No charge from Craftsman Republic®.