A Very Sad Situation

Vinny

I was in New Hampshire this morning after going north to take a look at a piece equipment and while having breakfist I was reading the local news paper. In it was yet another write up about the economy. But this artical had direct significance in our world. The artical was about home owners in search of bargins at a home show and how the displaying contractors were more than willing to oblige.

It was clear the feed frenzy was on. The bait ball (the unprepared contractors) were being eaten by the sharks (the ready to take advantage home owners)

I began to think about this and couldnt help wonder if every contractor stood strong and said "no, I will not negotiate", what would be the outcome. Would a consummer that has some money simply not spend it and hope for a time that they could get a better price??? Or would the projects get done at the going rate????

I would assert that the jobs would get done by the contractor that offered the best value and not the best price.

But in order for a business owner to be strong he must first be in a position of strength. And that strength would stem from a capital reserve that will help get a contractor through bad times.

To be clear, I am not talking about your home line of credit or a business line of credit. No amout of debt spending can save or help most contractors. (LOL, unlike what our government does) I am talking about a savings account of cash that can be injected as needed when needed. Retained company earnings. A war chest to do battle with.

I know. Its sounds so simple. So why am I stating an obvious solution?? Because its appearent that during a time where we should have all been doing this, hardly anyone was.

It seems that the more money that came into most growing businessses, the more was spent either foolishly or for simple personal material enjoyment by the business owner. Mercedes sports cars, 4 vacations per year, cabin cruisers, and vacation villas in the islands are nice, but if you cant pay your bills to your subs or material suppliers then its thier money that bought that crap. Not your "entrepenurial genius".

Some may take this as a rant but its appearent that few out there have any skin in the game. And maybe, these guys deserve to vanish. But in the meant time they eat up the few precious jobs out there at below cost prices in hopes that tommorrow will bring a better day, and at the same time destroy the work market for those that were conservitive in thier efforts and knew bad days happen.

For those that are unfamiliar with the book by Michael Stone, Mark Up and Profit... A contractors giude", you should read it. There is no one size fits all and some of Michaels stuff wont apply to every situation, but he does offer advice (sound, conservitive advice) on running a business that I was fortunate enough to have my dad teach me.

Things like living within your means. Having or building a capital reserve. Managing your payables to balance with your recivables. And how to keep debt under control.

Pretty harsh reality for start ups that thought this business was the golden goose, but just the same old fashioned good advice we need to live by wether its good times or bad.

__________________
Roccies Asphalt Paving
The Right Way Driveway Company
If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

Mike Finley

Good advice, there are probably a hundred or more posts on Contractortalk from me since 2004, pounding the need for a cash reserve into the ground.

I spent this weekend on the computer designing the office portion of the warehouse I just rented out and coming up with the renovation budget. It keeps me up at night spending money when we are having a hard time making any. But because we have a cash reserve it will ensure we make it through this rough time and come out the other side stronger and better positioned then ever before when the economy recovers.

Vinny

Yep. Thats what I'm talking about Mike. Good for you

I recall the story my dad would tell me when I first started working for him about the squirl and the fox.

The squirl spent all his free time in the summer storing nuts like some sort of dooms day maniac while the fox would laugh at the squirl and spend the whole day having a good time partying.

Then the winter sets in and the squirl is sitting pretty, nice and warm, with food to eat all the time and the fox is sitting at the stump of the tree that supports the squirls nest begging for hand outs.

The moral is obviuos but unfortunatly few heed it

__________________
Roccies Asphalt Paving
The Right Way Driveway Company
If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

tinner666

Very true Vinny. Sad to say, not much reserve here though. The Big C took care of that.

__________________
Frank Slate Roof Repairs, Richmond, Va.

Vinny

LOL, I hope the big C isnt short for a 4 letter word that describes a womens private part, is it??

__________________
Roccies Asphalt Paving
The Right Way Driveway Company
If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

Mike Finley

No, it the Bigger C, the 6 letter word. Sorry to here that tinner, some things you just have no control over.

dubz

I made some poor decisions having to do with the 4 letter c, and have been struggling after that payout for 3 years now so I can hold onto the house I built on 4th gen family land. If I can get through this, I promise I'll be ready for the next one Vinny.

Vinny

Sorry here too Tinner. I didnt mean to make light. I'm just a little slow on the uptake.

But I would say I hope this president helps this country get to a point where a family health crisis is another sad situation that shouldnt be allowed to wipe out a person or a family.

I'm not trying to start a political tit for tat here and I'm no liberal for sure, but I cant help but say there are some very seriuos issues this country hasnt done the right thing on, and health care is one of them.

__________________
Roccies Asphalt Paving
The Right Way Driveway Company
If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

Vinny

Yea, the 4 letter C may be the worst killer of all.

I visited a very nice "dancing establishment" while in Manchester N.H. and realized i can be a weak individual. On the other hand I knew that. Oh well, too bad

__________________
Roccies Asphalt Paving
The Right Way Driveway Company
If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

dubz

I have been thinking about getting to waterbury to help me get my mind off things for a while. They have a couple of places like that. (so they tell me)

BattleRidge

this isnt aimed at anyone here, but for the most part I see alot of the guys biting the dust that had it coming. 20's on there trucks 4 doors Leather, $400,000 houses that maxed there credit. Then they sit at home and wait for work part of this problem is the lack of planning. I agree. Its amazing the money you can save and have in SAFE investments. I get 3.3% on my etrade account, and I put like everything in there. I leave enough to get by thats it. Its paid off now because It doesn't matter if I have work or not I could live a year off my savings, but I still knock on doors and network all day so Im not worried as far as work either. I agree with the OP.

pcplumber

For those in a bad position, you may just have to make some drastic changes. You have to decide what is most important and cut away your excess baggage even if it means living in a cardboard box. While we are having this economic problem, many new businesses will start with absolutely no money and fly by you. Businesses are in either the growing or shrinking stage. When growing, we are full of vinegar and we have optimistic and positive attitudes.

I know not everyone has the large selection of services my company can offer, but this is my suggestion. If you feel strong that the services you offer are not being sought, there is no use beating a dead horse. Look at expanding your list of services by teaming up with other contractors and expand each others services. It is possible to learn a new trade and make a lot of money by teaming up with another contractor.

I would team up with another good contractor who offers a different service. I have a license for far more services than I can do myself. I hate roofing, but I also know my flyer campaign can get more work that 20 to 30 roofers could handle. If the right contractor approached me, I would be more than happy to work a deal where he could use my license, learn roofing, and earn at the same time. It is possible. You need to start thinking different.

I don't buy the theory that every customer is beating contractors into the ground. My experience is that most customers are not that savvy and they don't have the time. We're only noticing things more because we are wary.

tinner666

No offense taken Vinny. I might have made that mistake too.

It's just life. If it had been the other one, I think I would have stopped before I expended nearly everything and cancelled so many contracts I couldn't keep.

__________________
Frank Slate Roof Repairs, Richmond, Va.

Forry

Only part left out of this story, is who the fox ate for dinner....

__________________
now i am scared for my future
i've got all ten
smashed a lot of them stupidly before
-john5mt

Grumpy

Here is the way I look at it. The reporter was at a home show, correct? Who sells anything at a home show? The fact of the matter is your purpose for being at the home show is to generate awareness, generate leads, etc... So if a customer came up to me while I am at a home show and said somethign to the effect of "Do you give discounts?" I'd say yes, in order that I could set the appointment and sell him my services.

I think a professional contractor who has been doing the sales side of the business for a little while would recognize immediately how to sell this guy. Jack up the price and give it back to him. People like this outsmart themselves.


Guys PLEASE don't fall into the hype that the economy is as bad as the social engineers and media want you to think. Yeah we are having a hicup right now but it's not the great depression part 2.


Will I give deals? Sure sometimes. If it take a hundred bucks to close a deal worth a couple thousand gross profit, I'll give in a little bit... Though I make them fight me tooth and claw for it. However in this supposed economic turmoil I had raised my prices substantially. I would never give my discount without the customer first having to ask me for it. Go in first with the price you are comfortable doing the job for, plus some padding for negotiation and errors or ommisions.

Ok so the last discount I gave was substaintial on the surface. The job was just over $8k, and I was the high bidder, infact $1,300 higher than the low guy, but I was able to blow the low guy out of the water since he obviuosly did not know his supposed trade. Infact I convinced the customer to cancel the contract he had already signed witht he low bidder before I got my foot in the door. Back to the discount, he wanted me to match the middle guy's price. I told him I could IF he opted for the $1,300 solar fan optional upgrade, to which he agreed.

So on the surface I did give him a discount but I was also able to further increase the job at the same time. For me that's a win win. I'm usually the high bidder on much of my work. Hey, I know quite a few companies who charge more than us, but it's not unusual for me to be $2k higher than the low bidder on a typical 7 or 8k job either. Yet here I am still in business. Here I am having had my very very best year since I started this company 5 years ago, in this supposed economic turmoil.

The moral? You don't have to be the low bidder to get work and be PROFITABLE. And if you think you have to be the low bidder to get work, you need to stop selling immediately and hire someone to sell for you who undestands customers buy confidence and trust, not price (although some do buy price, just avoid these few.)

Brickie

I agree


Exactly!


Same here.

__________________
“Ron Paul is one of the outstanding leaders fighting for a stronger national defense. As a former Air Force officer, he knows well the needs of our armed forces, and he always puts them first. We need to keep him fighting for our country.” – Ronald Reagan