American Painting Contractor Magazine

August/September 2012

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Sound Business Management Contracting…It Really Is a Simple Business By Monroe Porter Notice I did not say easy; I said simple. The more networking groups I facilitate, the more of an impact I see the basics making. Motivating contractors to practice the basic fundamentals can have an immediate impact on their profitability. C It is not uncommon to find a contractor with five to eight employees making $50,000 or so a year and the next year jumping to over $100,000 in salary and income. So what are those simple components that every con- tractor should get right? • Know the numbers. • Sell at a premium price. • Offer great service. • Make the phone ring with the right kind of cus- tomers. • Be productive. Knowing the numbers: ont r ac t i ng really is a sim- ple business. pricing jobs at what the market would bear. With the 2007 recession, those days of blind success are long gone. Knowing your num- bers is simpler than you might think. Start with a budget. Take a few minutes to add up all your expenses for the year. It is impor- tant to keep score the same way you esti- mate. Your accounting format should look something like this: Sales Direct Costs Field Labor Material, Subs Special Job Costs Many contractors do not like paperwork and bookkeep- ing. They are Marlboro men, a working man's man. (If you are one the many suc- cessful women that run a contracting busi- ness or a person who prides yourself as a businessperson, please forgive me while I pound the stereotype.) To be successful, you must be interested in the business and not just your trade. If not, you should work for someone else; you will make more money and work fewer hours. For years, I did not know a single con- tractor who was successful and did not know his or her numbers. However, the booming economy of the late '90s and early 2000s did create some profitable companies that were merely surviving on volume and 14 • August/September 2012 APC " Indirect Labor Variable Overhead Fixed Overhead Basic fundamentals can have an immediate impact on profitability. You can have as many categories in each area as you like but follow that pattern. When bidding jobs, contractors are calcu- lating their direct costs and then adding markup. By following that pattern, you can see if your margins are being main- tained and accurate. It is not uncommon for a contractor to send us a 10-page statement with a comment that he or she does not understand it. My response is always the same: I don't understand it either. If you are going to go to the trou- ble to keep records, you might as well keep records that are useful. Sell at a premium price: You cannot survive as the low-priced contractor in " your market. There is always a guy with a pickup truck, ladder rack and shovel who is cheaper than you are. Know your costs and what it takes to do the job right. Nothing improves sales better than know- ing your price and what you have to charge to do a professional job and stay in business. Let's suppose you are looking at 10 jobs. Two or three of those jobs are probably "give me's," another three or four are maybe's, and two or three are heck no's. By charging a realistic price, you are at least going to make a profit on the give me's. Improving your sales skills will allow you to gain a few of the maybe's, and the heck no's are people you should not even be marketing to. I know, you are thinking the market is competitive. Sure it is, but if you are going to try and survive on price alone, you are not going to make it. People will pay more for your ser- vices if you can show them value and differentiate what you are offering. It is not the customer's responsibili- ty to determine the differ- ence between your and your competitor's proposals. Offer great service: Get the basics right. There is no question you need lettered trucks, job signs, uniforms and proposal packets. They will improve sales by driving more point-of-sale referrals and help the customer feel good about the experience. Go further than that and make fans out of your customers. Do your best to make point-of-sale customer contact an excep- tional experience. Repeats and referrals are your most profitable source of work. Closing ratios are high, and there are no advertising costs required to generate the lead. Practice good introductory and departure procedures. Have foremen

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