How Come.....

 
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Old 12-02-2007, 07:53 AM   #1
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How Come.....


it's pretty evident to me, that as a whole, tradespeople lack the most basic business acumen....we don't know how to price, we don't understand the concept of profit, we are afraid to make money, P&L? what's that?

I have my theories, but what do y'all think....

Why do so many trade business owners not have any concept of running a business?

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Old 12-02-2007, 08:30 AM   #2
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Re: How Come.....


This has been one of my complaints with public education for a long time. Business prep has usually involved training secretaries to work in offices. Well, we need secretaries, but we need people to run the actual operations. The basic ideas of profit margin are lost on most people.

When I was I was 10 I ran a lemonade stand. I insisted on buying my own cups, mix, etc. I kept track of my expenses, and counted out my profits after three days. I had made maybe $.05/hour profit. Even at the age of 10, that was not good money. I closed the stand, but I had gained something much more valuable: a real understanding of what expense and profit is. Nobody taught me how to do this, it was a gut-level thing.

I could easily imagine teaching juniors and seniors in high school how to set up a business and charge realistically for their services. But instead, kids are trained to be employees, and poor ones at that.

I think most college business training is abstract and/or over the top. You don't need to know how to run a multi-million dollar business in order to run a small trade shop. You need to understand start-up costs, expenses, margin, etc. Four years of college are not necessary to run a successful business.

I hate to say it, but in academics, the trades are still considered what you do if you can't do academics. It's ridiculous. I look at my husband, who doesn't have a college degree, who can look at a project and price it in his head. Then he'll work the spreadsheet and be within cents of his in-head estimate. I can't do that, and I minored in math in college. He's got me hands-down on real world applications. Who's the math pro here?

So where do business lessons come from? The real world, in most cases. It should be no surprise that so many new businesses fail:

Quote:
According to the U.S. Small Business Administration, over 50% of
small businesses fail in the first year and 95% fail within the first
five years. (“Are You Ready?” United States Small Business Association:
http://www.sba.gov/starting_business...eyouready.html
In addition to a basic non-understanding of how a business works, many of us are subject to economy of scale within our communities. Sure, there are always survivors, but I'd hate to be a builder in Naples, FL right now, for example. And if there's a recession going on, how many of us can take the hit when the phone stops ringing?
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Old 12-02-2007, 09:12 AM   #3
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Re: How Come.....


I was a high school dropout with long hair who like to build things. I wasn't prepared to open a business, but I did anyway. I went to the library, attended technical classes at night (Blueprint reading, estimating) and used the local library for sales lessons and business information. In time I learned about overhead and profit, production and customer service and communications. My point is that no one with a business in the building trades survives without an education. For some of us it's trial by error and it's do or die. I would be considered successful by most people, I don 't mean I'm rich but I have a nice home, a great family and we live well. After all this I do work for a fair number of professors (U of M) and I can't believe how little they understand about the challenges and complexities of what we do, and I find myself explaining the remodeling process to PHD's who assume were a bunch of illiterate cavemen that need adult supervision, Duh! Now that I'm older I can blow off a lot of the misunderstandings and assumptions some educated people make about us, but I guess I still have this big Blue Collar chip on my shoulder. A few days ago I talked to a "Doctor" of education and introduced myself as a "Doctor" of home remodeling, he chuckled and we had an equal exchange. I will educate the HO's one at a time, but we should get the same respect as any doctor, lawyer or educator. In response to "mahlere" I struggled with those issues, I got over it. For me when I was young I stupidly thought a real man worked with his hands and now I know a real man takes care of business.
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Old 12-02-2007, 09:15 AM   #4
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Re: How Come.....


I couldn't agree more.

Quote:
Originally Posted by Susan Betz View Post
This has been one of my complaints with public education for a long time. Business prep has usually involved training secretaries to work in offices. Well, we need secretaries, but we need people to run the actual operations. The basic ideas of profit margin are lost on most people.

When I was I was 10 I ran a lemonade stand. I insisted on buying my own cups, mix, etc. I kept track of my expenses, and counted out my profits after three days. I had made maybe $.05/hour profit. Even at the age of 10, that was not good money. I closed the stand, but I had gained something much more valuable: a real understanding of what expense and profit is. Nobody taught me how to do this, it was a gut-level thing.

I could easily imagine teaching juniors and seniors in high school how to set up a business and charge realistically for their services. But instead, kids are trained to be employees, and poor ones at that.

I think most college business training is abstract and/or over the top. You don't need to know how to run a multi-million dollar business in order to run a small trade shop. You need to understand start-up costs, expenses, margin, etc. Four years of college are not necessary to run a successful business.

I hate to say it, but in academics, the trades are still considered what you do if you can't do academics. It's ridiculous. I look at my husband, who doesn't have a college degree, who can look at a project and price it in his head. Then he'll work the spreadsheet and be within cents of his in-head estimate. I can't do that, and I minored in math in college. He's got me hands-down on real world applications. Who's the math pro here?

So where do business lessons come from? The real world, in most cases. It should be no surprise that so many new businesses fail:



In addition to a basic non-understanding of how a business works, many of us are subject to economy of scale within our communities. Sure, there are always survivors, but I'd hate to be a builder in Naples, FL right now, for example. And if there's a recession going on, how many of us can take the hit when the phone stops ringing?
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Old 12-02-2007, 12:08 PM   #5
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Re: How Come.....


Quote:
Originally Posted by mahlere View Post
it's pretty evident to me, that as a whole, tradespeople lack the most basic business acumen....we don't know how to price, we don't understand the concept of profit, we are afraid to make money, P&L? what's that?

I have my theories, but what do y'all think....

Why do so many trade business owners not have any concept of running a business?
Because they are not businessmen they are tradesman, instead of being schooled in business they spent their time being educated in the hands on details. It is like driving a truck with lots of gears. You can drive and learn as you go at your expense and maybe never really learn. Or you can go to driving school and learn how to shift correctly, this will save you maintenance costs and even fuel ecomomy.
Same reason we have weekend warriors.......everyone thinks there is an easier way. Being a businessman does not make you a tradesman and being a craftsman does not make you a businessman.
If I had said being a "smart" businessman or "smart" craftsman, then niether would become trade owners because they are smart.....
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Old 12-02-2007, 12:11 PM   #6
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Re: How Come.....


Quote:
Originally Posted by silvertree View Post
I was a high school dropout with long hair who like to build things. I wasn't prepared to open a business, but I did anyway. I went to the library, attended technical classes at night (Blueprint reading, estimating) and used the local library for sales lessons and business information. In time I learned about overhead and profit, production and customer service and communications. My point is that no one with a business in the building trades survives without an education. For some of us it's trial by error and it's do or die. I would be considered successful by most people, I don 't mean I'm rich but I have a nice home, a great family and we live well. After all this I do work for a fair number of professors (U of M) and I can't believe how little they understand about the challenges and complexities of what we do, and I find myself explaining the remodeling process to PHD's who assume were a bunch of illiterate cavemen that need adult supervision, Duh! Now that I'm older I can blow off a lot of the misunderstandings and assumptions some educated people make about us, but I guess I still have this big Blue Collar chip on my shoulder. A few days ago I talked to a "Doctor" of education and introduced myself as a "Doctor" of home remodeling, he chuckled and we had an equal exchange. I will educate the HO's one at a time, but we should get the same respect as any doctor, lawyer or educator. In response to "mahlere" I struggled with those issues, I got over it. For me when I was young I stupidly thought a real man worked with his hands and now I know a real man takes care of business.
I have a very successful business aswell and I still work with my hands and my heart.....I just get paid from the neck up....
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Old 12-02-2007, 12:27 PM   #7
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Re: How Come.....


A lot of us learned from the school of hard knocks and have paid our dues.
To see someone request charging practices from experienced tradesmen who have put in their time and sweat ,is like asking them to give up what has been a personal struggle for each tradesman.
It won't be appreciated,and it will only lead them to rely on others for what they want.To me ,it feels like an office worker who sells an idea to his boss that originated with a co-worker.
It's not theirs to have ,but it is theirs to earn!
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Old 12-02-2007, 12:40 PM   #8
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Re: How Come.....


I don't know how it is these days, but when I was in plumber school they taught us to do the job, now how to run a business.

Your typical tradesman looks at the huge amount of money he perceives his boss/company to be making, then looks at his salary and thinks he can certainly do a lot better than that on his own.

e.g.: I was talking to a sewer cleaner a couple of days ago. His dad owns his business. He cleans a drain for maybe $85, then gets paid $25 for himself. He said he only made about $115 last week - so maybe there's a little more to the math. Just think - if he owned the business, he could keep all that money for himself.

/irony

I wonder what would happen if, near the end of the training programs, apprentices were taught basic business skills? Would they be better employees because they understand how their companies work, or would everybody think that they should now go it alone?

Talking to that sewer guy, I get the idea that he has no idea whatsoever what it means to run a business. They finally got a sewer camera for about $4,700 and he's been trying to figure out how much to charge for it. His method: call all the other businesses in the area and see what they're charging. And then, of course, he's cogitating on how he can charge just a little less because he wants to draw in more customers.

These guys have been running this business for at least 20 - 25 years. They're the only sewer cleaner in this town of about 11,000 and it's still just a truck and a couple of machines. I applaud them for finally trying to get a camera and thinking about a jetter, but somehow I don't think they're going to pull it off if they don't learn some basics.
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Old 12-02-2007, 12:42 PM   #9
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Re: How Come.....


1. Guy gets job in trades

2. Guy gets another job in trades... another... another..

3. Guy gets good at what he does, decides if his boss can do it he can do it...

4. Goes into business and creates a job for himself. Only difference between what he has now and what he had then is nobody tells him what to do. Is it a business? Technically it is. It's more just self-employment of a job for himself.

5. Somewhere down the line he might want some help, probably spends the next 5 years off and on, struggling now with the very beginnings of what a business really is. Hiring, firing, never figuring out how to get any bigger. Reality sets in the first time you actually hire somebody legitimately. (Not under the table)

Most never get beyond 5 because up to 5 you can pretty much struggle at it the whole time and your 'business' will still be your job and you will still get by, usually no big risks involved, no big responsibilities to anybody, the worst that happens is you close your doors and go work for somebody else. You don't have a payroll, no equip leases, no building, just a truck some tools and your trade knowledge in your head.

How many times have you read on these very forums warnings against borrowing money! Whoa! Borrowing money, that's like what businesses do. That mentality is there because 90% of us are products of steps 1-5.

I don't see the natural cycle of how construction businesses are created as a problem, it's the most American thing there is. Just a guy who sees a better life for himself and gives it a go. Nothing wrong with it. Not everybody has to be the next Wal-mart.
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Old 12-02-2007, 12:46 PM   #10
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Re: How Come.....


e.g.: I was talking to a sewer cleaner a couple of days ago. His dad owns his business. He cleans a drain for maybe $85, then gets paid $25 for himself. He said he only made about $115 last week - so maybe there's a little more to the math. Just think - if he owned the business, he could keep all that money for himself.




You just hit the nail on the head......That statement is why so many tradesman fail.......You equated the entire amount too wages not paid, and nothing to the cost of doing business....
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Old 12-02-2007, 12:47 PM   #11
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Re: How Come.....


Quote:
I was talking to a sewer cleaner a couple of days ago. His dad owns his business. He cleans a drain for maybe $85, then gets paid $25 for himself. He said he only made about $115 last week - so maybe there's a little more to the math. Just think - if he owned the business, he could keep all that money for himself.


No, he would charge the same $25!!!! And lower the wages while going bankrupt himself.
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Old 12-02-2007, 01:08 PM   #12
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Re: How Come.....


I struggled big time for years because I did not have a clue and I knew for certain my competition didn't either.

I finally went to community college night school (then the internet classes offered by same) and got a business degree. Learning to read, write and speak has helped me to no ends.

I was 43 years old (yeah, I took some lumps) when I started and finished when I was 47. As soon as I finish this thing I've started here (or at least have some time), I will continue on with my ebucation.

GO TO COLLEGE.
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Old 12-02-2007, 01:08 PM   #13
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Re: How Come.....


Quote:
Originally Posted by oldfrt View Post
A lot of us learned from the school of hard knocks and have paid our dues.
To see someone request charging practices from experienced tradesmen who have put in their time and sweat ,is like asking them to give up what has been a personal struggle for each tradesman.
It won't be appreciated,and it will only lead them to rely on others for what they want.To me ,it feels like an office worker who sells an idea to his boss that originated with a co-worker.
It's not theirs to have ,but it is theirs to earn!
fully agree - and you seem to be able to say that a lot quicker/shorter than I can.

You're right - it won't be appreciated. It'll just get them by for the short term - and they won't have "grown." Are they bad people for asking? Nope, not at all - just they don't understand, yet.



Mahlere - to answer your OP ... I think another contributing factor is the "DIY" and "EGO" factor. Ever get this overwhelming conviction that you HAVE to be doing something yourself?? I used to feel that if I wasn't sweating like a pig - i wasn't working hard enough. Or that book keeping was something "to be done at night." That's a trades mentality if there ever was.



Back to what OldFrt was saying ...

Not that I consider myself to be successful yet - I am overall pleased with the progress I've made over the past several years I've done this.

I didn't get to that point by throwing my arms up in frustration and calling my competitors and asking what they charged. It took a couple of really bad mistakes, several miscalculations, and one VERY BAD day. But it's like that old cliche - whatever won't kill you, makes you stronger.

for every aspect of business that I feel I have control of - there's 10 others that are neglected or weak.

I certainly do not mind helping someone. In fact - I love to do it. But I don't believe in just spreading HARD EARNED "tricks" and "secrets" all over the internet Not when I had to go through what I had to go through to be able to gain that knowledge.
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Old 12-02-2007, 03:02 PM   #14
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Re: How Come.....


Quote:
Originally Posted by Putty Truck View Post
I struggled big time for years because I did not have a clue and I knew for certain my competition didn't either.

I finally went to community college night school (then the internet classes offered by same) and got a business degree. Learning to read, write and speak has helped me to no ends.

I was 43 years old (yeah, I took some lumps) when I started and finished when I was 47. As soon as I finish this thing I've started here (or at least have some time), I will continue on with my ebucation.

GO TO COLLEGE.
Yeah, that works better than asking people, some of whom know less than you. I am in Certified Kitchen Designer classes right now and I'm 57. Will it make me a better kitchen remodelor? Well it won't make me worse. CKD online through the NKBA. I'm no longer shocked at what I don't know, at this point I just want to get better at what I do know. As for getting advice, I have 2 daughters who give me all the advice I can handle.
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Old 12-02-2007, 03:04 PM   #15
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Re: How Come.....


Quote:
Originally Posted by Putty Truck View Post
I struggled big time for years because I did not have a clue and I knew for certain my competition didn't either.

I finally went to community college night school (then the internet classes offered by same) and got a business degree. Learning to read, write and speak has helped me to no ends.

I was 43 years old (yeah, I took some lumps) when I started and finished when I was 47. As soon as I finish this thing I've started here (or at least have some time), I will continue on with my ebucation.

GO TO COLLEGE.
Yeah, that works better than asking people, some of whom know less than you. I am in Certified Kitchen Designer classes right now and I'm 57. Will it make me a better kitchen remodelor? Well it won't make me worse. CKD online through the NKBA. I'm no longer shocked at what I don't know, at this point I just want to get better at what I do know. As for getting advice, I have 2 daughters who give me all the advice I can handle.
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Old 12-02-2007, 03:04 PM   #16
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Re: How Come.....


Ooops!
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Old 12-02-2007, 03:07 PM   #17
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Re: How Come.....


I guess you feel pretty strongly about that
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Old 12-02-2007, 03:33 PM   #18
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Re: How Come.....


I think I remember Mike Finley saying this a while back and it has stuck with me...(Don't blush Mike)....but what he said is oh so true and simple.

"You don't have to re-invent the wheel"

Just take a business model that is working for other Contractors in your trade. Learn it. Follow it. Master it. Then...and only then can you start thinking about how to tweak it, make it better, take it to the next step etc etc.

"You have to learn from your mistakes"
Make mistakes, fall on your face, then get up and learn and keep moving forward. Never give up, never slow down. If you are half-smart and willing to work hard you'll make it.

And there is also something to be said about the fact that a very high number of men in the trades are just stupid, lazy, arrogant pricks.

They would never survive in 90% of other businesses out there. They make 10k one month and blow it all before the end of the next month. They never get out of the cycle of making and spending.

That and coke aint cheap.
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Old 12-02-2007, 03:42 PM   #19
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Re: How Come.....


Quote:
Originally Posted by Mike Finley View Post
How many times have you read on these very forums warnings against borrowing money! Whoa! Borrowing money, that's like what businesses do. That mentality is there because 90% of us are products of steps 1-5.

.
Nope, you're right - I see it in that context ...

I still have some of the "tradesman mentality" to shave off ...

turnin into a good thread, keep it goin
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Old 12-02-2007, 03:54 PM   #20
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Re: How Come.....


Quote:
Originally Posted by Mike Finley View Post
I don't see the natural cycle of how construction businesses are created as a problem, it's the most American thing there is. Just a guy who sees a better life for himself and gives it a go. Nothing wrong with it. Not everybody has to be the next Wal-mart.
if you are going to risk everything you have to go after the better life....take some time to educate yourself and give you a better chance at succeeding...

just because you want to stay small doesn't mean that the laws of business and economics don't apply to you...
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