By Thomas Oakes
Why do some contractors flourish, while others with just as much talent struggle to make ends meet? The answer is sometimes simpler than we may think. Truly, the most successful contractors earn a reputation for providing top-notch work and customer service. That’s not all, however. The truly successful, professional contractors take it one step further: they become true entrepreneurs.
Now, Entrepreneur is a fancy French word; what exactly does it mean? Think of it as a contractor business owner, who perceives a need and then takes steps to fulfill that need in the most efficient, responsible, and professional way possible. Anybody can be a business owner; only a few with drive, dedication, and commitment can be true entrepreneurs.
To be a successful entrepreneur, you must first consider whether you are up to the job. It’s not easy. At some point, you will be working 90-hour weeks to get your business to the point where it starts to pay off. One possible benefit is that you can tell the boss man good-bye and walk off that job that, at times, annoys and frustrates you. No more bosses! But wait. You’re not getting rid of one boss; you’re taking on a bunch of bosses, and they’re all going to be more demanding than the guy you last worked for. I am talking about your customers.
Customers often have demands that go above and beyond what the state government requires contractors. Some customers will want you to provide a certificate of insurance on a weekly basis to them. Does the state require you to that? Nope. However, a customer can demand that you show up for work in a 1959 Ford Fairlane with baby moons and a three-speed on the column. Yes, this is an extreme example, but the point is that the customer can demand pretty much anything he wants in order to award you the contract.
Customers, especially the residential type, often have expectations that are beyond the realm of reason and possibility. Hopefully, you can use your entrepreneurial skills to persuade them to have a more balanced view. These people can turn out to be your best customers, as long as you never stop selling from the first meeting until completion of the job. Just make sure you have a contract in place.
You might be thinking, “Everyone knows my word is my bond. A handshake has always been good enough.” That may be true, but it is not a guarantee that you will never have a sly customer whose main goal is to get free work out of you. There’s an old saying: “A verbal contract is not worth the paper it is printed on.” Get everything in writing, get your customer’s signature, verify his identity, and then proceed with the deal. If your customer objects to signing a contract, that’s a red flag.
Speaking of red flags, former U.S. Chess national champion (1909 to 1936) Frank Marshall once declared, “A bad plan is better than none at all.” That adage often rings true in business as well. Before you start operations, you need to have a plan in place. It is true that no plan ever survives the battlefield intact; often you need to make adjustments as you go along. But as the old saying goes, “If you do not know where you are going, any road will take you there.” It is worth your time to make a plan and a budget.
Planning involves doing market research, to see what the people you intend to service have a need and desire for your services. You might discover or develop a superior evaporative cooling system, and summer is drawing near. You wouldn’t want to spend large sums of money advertising in Florida. Why not? Evaporative coolers work best in dry climates, in places such as West Texas, New Mexico, Arizona, California, Nevada, and Utah. In areas of high humidity, they just pump out wet, soggy air. Figure out what your target customers want and need, and then set your sights on fulfilling that need.
When it comes to budgeting, you have two choices: you can start out with enough capital to keep you running for at least six months without a steady income stream, or you can try to do it on a shoestring. If you don’t have enough money, then you will face slow times when it may be a struggle just to keep your head above water.
Bear in mind also that a single major problem can run you out of business and possibly threaten your assets. For example, if you start operations but cannot afford a contractor insurance policy, then how viable is your business really going to be? You will also want to forecast your first year’s gross revenues (the total amount of money that flows into your business before you pay any salaries, taxes, or supplies.
Don’t forget to get your business license(s) and any municipal or county permits you will need. Customers feel better about hiring licensed contractors whose documents are all in order. Do not do even one single job before you have general liability insurance. If you are accused of causing property damage, personal injury and/or bodily injury – even if the accusations against you are totally false – you will need a good insurance company or insurance agency that will defend you.
If you have any employees, most states will require you to have workers compensation insurance. Worker’s compensation is very expensive; be sure to do your homework before you hire anyone. You want to protect yourself and your brand.
Speaking of branding, you will want to pick a fairly short name for your business (referred to as a trading style or fictitious business name). The name should roll easily off the tongue, and people ideally will remember it. It is best if your business name contains a brief description of the products and services you provide. The other day I saw a women’s clothing shop named, From Here to Maternity. A clever play on words referencing a classic Hollywood movie. You might choose something like Grandpa’s Grading, or Drywall Daddy. I don’t particularly think those are great choices, but it helps to brainstorm.
Finally, after opening your business bank accounts, get yourself a good accountant or a bookkeeper. At first, you may be able to do your own work using an off-the-shelf accounting software program. Remember, business taxes – even for sole proprietors that own small businesses – are complex. If accounting isn’t your thing, find someone who is qualified and can prove it (not just someone who says, “Oh sure, I can do that”). It is easy to promise and hard to deliver.
When it comes to promising, be certain your promise a little less than you can actually deliver. Why? Things often do not go according to plan; dialing back your promises a bit can give you some wiggle-room when things do not go as planned. However, make sure you always deliver what you have promised and more. Your customer will think, “Wow, this contractor went out of his way to do a good job.” That customer will probably tell at least two or three people about how great you are. It’s free advertising. It is expensive to get a new customer; nurture the ones you already have. In the end, the money you save will go straight to the bottom line.