Adages are short sayings. However, when we make adages shorter, or change adages in any fashion other than originally intended, we misinterpret the meaning of these sayings.
For example, you have probably heard, “Money is the root of all evil.” That statement is a partial quote of the original adage which was, “The love of money is the root of all evil.”
The partial quote distorts the meaning of the original adage.
Half a loaf is better than none
Another adage states, “Half a loaf is better than none.” However, if your selling price of a task is $500 and the cost to you to perform that task is $400, but, you decide to adhere to this adage, you would only bring in $250. Not making a $100 profit is one issue. But, losing $150 because you followed this adage is foolish.
Too many contractors sell their services below their true cost. Many do not realize what their services are worth. A contractor/tech with whom I recently had a consultation about his costs of operation, told me his budgeted salary, which he used to calculate his prices, was $18,000 annually. That’s only $8.65 per hour and is absurd for a PHC contracting professional.
I explained to him, as I do with all contractors, if you want to set your selling prices properly and profitably, you must include numbers that will get you where you want to go. This brings up yet another adage.
Turn over a new leaf
You must identify and calculate your true cost and apply a proper profit margin to your true cost in order to arrive at properly profitable selling prices. If your prices are based on what other contractors charge, what type of car the consumer owns or which way the wind is blowing, it’s time for you to, “turn over a new leaf.”
A counterman at a wholesale plumbing enterprise once told me he had never met the second best plumber. Individually, we each think we are the greatest. Common sense dictates that if you deliver excellence to consumers they should deliver dollars to you that are commensurate with the value they received.
When contractors call me looking for business help, I usually spend a good amount of time speaking with them. This affords me the opportunity to understand how I can assist them while giving them the chance to interview me so they can decide if I am the person who can best help them.
I often ask them to tell me how they rate their technical skills on a basis of one being the worst and 10 being the best. Majority of the time, I am told between seven and 10. Yet, their selling prices indicate they don’t really believe it since they sell their services at the prices of those who deliver mediocrity while selling their services below their true cost.
Why would someone who delivers excellence to consumers sell their services at low prices? Ignorance of true costs turns into stupidity when selling prices are below true cost. Ego makes humans blind to their own wrongdoings. Fear keeps people from taking steps that can improve their situation. And, anxiety gives cause to worry about that which will probably never occur.
The end effect is selling prices based on wrong numbers and flawed business protocols that can only produce wrong results. The remedy is to turn over a new and proper leaf. If you are one of those contractors, change your ways.
Fair is a two-way street
I have my own adages. My belief is, “Fair is a two-way street.” It’s another way of saying, “do unto others as you would have them do unto you.” If you want to be treated properly and respectfully you must act in a proper and respectful manner.
Consumers want value for their dollars. Value comes when excellence is dispensed. By performing each task for consumers in an excellent manner, including your true costs to perform a task in your selling prices and applying a correct profit margin to your costs, you will give yourself the opportunity to earn the reward you deserve while delivering excellence to your clientele.
To be able to afford to continually deliver excellence, you must remember another of my adages, “Two plus two equals four — never less, never more."
Two plus two equals four — never less, never more
For selling prices to be correct you must allow yourself to recover your cost to produce any service or product and make a profit above that cost. It’s that simple!
To develop properly profitable selling prices you must identify and properly calculate your true cost of operation in totality inclusive of your tangible and intangible costs. A tangible cost is one for which you pay a certain amount and receive a specific product or service e.g. a gallon of vehicular fuel, insurance, tools etc. An intangible expense is one which is not so easily identifiable, but costs you none the less e.g. callbacks which take away from your available revenue producing time.
Knowing your true cost of operation is the foundation of your potential success. If you do not know or are not sure of your true cost, your business will be built in an unstable condition like a house built on sand. Eventually collapse is imminent.
Yet another adage states, “Those who do not learn from history are doomed to repeat it.” If you are not satisfied with the results you are getting from your monetary and sweat equity investments in your business, don’t repeat the same mistakes that are giving you the results you are experiencing.
Make a budget that will take into consideration your operational costs in totality, and, hourly so you can properly calculate the true proportionate costs of any task before you start quoting prices. Remember to include a salary for yourself as an employee of your business. That salary should be at least the amount you would want me to pay you as a tech if you worked for my contracting business.
Another old adage that comes to mind is, “You get what you pay for.” When hiring additional personnel remembering this adage will come in handy. And, when addressing questions about your prices reminding consumers of this adage can make your point.
If you fool yourself by not including the proper numbers you will be repeating history and trading the potential of success for the calamity of failure.
If you need my help in achieving your contractor profit advantage, call me. The excellence you deliver should deliver to you the excellent reward you deserve. But, it is up to you to make the right decisions.
Richard P. DiToma has been involved in the PHC contracting industry since 1970. He is a contracting business coach/consultant and an active PHC contractor. For information about the CONTRACTOR PROFIT ADVANTAGE or to contact Richard: call 845-639-5050; e-mail firstname.lastname@example.org; mail R & G Profit-Ability, Inc. P.O. Box 282, West Nyack, N.Y. 10994; or fax 845-634-7236.