The NFL football season is upon us. Your personal and business life is like a football game. In life, we all start out the same way — naked, with certain God-given talents, free will and integrity. Your nakedness is soon addressed by those present at your birth. Your life’s test is how you use your free will to hone your talents while keeping your integrity intact.
Your business success relies on honing and correctly implementing mathematical procedures to arrive at properly profitable selling prices for your services, as well as utilizing intelligent, ethical and logical ways to entice consumers to avail themselves of your services.
Similarly, football coaches must evaluate the talents and weaknesses of both their team and their opponent’s team to have an opportunity to win football games.
The first quarter
A football game has four quarters. The first quarter can be compared to your life as an infant, toddler, older child and adolescent. That’s when you are supposed to learn and adapt. It’s similar to what a rookie player in the NFL went through playing Pop Warner youth football, high school and college football.
You might wonder what this comparison has to do with your contracting business. Think about it. Before you became a master of your trade, you had to utilize your free will and hone your talents to become a master. In that process, you, as well as the rookie football player, had to learn the fundamentals of your chosen occupation.
After all, you have to know how to play the game in order to play the game correctly. Each team enters the game with a game plan. However, during any game, those plans will probably be altered to adjust to the plan your opponent is throwing at you. This is similar to the trials and tribulations you will encounter in your business and personal life.
The second quarter
As a master of your trade, you entered the second quarter. During this quarter, you accepted the responsibility that comes with being a master — the person at whose feet the buck stops. If something goes wrong with a job, you have no one to blame but yourself. Learning from errors so you do not repeat them is wise. Making excuses, ignoring errors and continuing to make mistakes is foolish.
At some time in the second quarter, you might ask yourself whether you should continue to work for someone else or open your own contracting business. If you are not entrepreneurial — willing to take chances, capable of enduring stress and frustration and possessing a logical mindset complete with the fundamentals of mathematics as it pertains to business — opening your own business is not for you. In which case, staying in the employ of a good contractor who knows how to run a business properly and profitably would be the answer.
As an employee, your duties would be to do the best job so you make yourself indispensable in the eyes of your employer. That means you must bring in more money than your employment costs your employer.
If you decide to enter the business arena, your primary duties become that of a head coach. You must come up with game plans that will make you successful. If you are a one-person operation, you must realize your game plan determines that which you do as a player (tech) on your business team.
The third quarter
The third quarter consists of the time between young adulthood and old age. In football, those players are called the veterans. They should have accumulated the wisdom that comes from experience. Whether they utilize that wisdom to improve their playing abilities is yet another matter. This, too, is true in your personal and business life.
Unfortunately, our noble industry is chock-full of contractors who continually price their services at, below or insufficiently above their true cost of operation. When I say insufficiently above their true cost of operation, I’m referring to the fact that just because they place a profit above their cost, the volatile nature of business expense fluctuations must be considered before choosing a proper profit margin that can get you where you want to go.
The wisdom that comes with experience and age escapes those contractors. It’s why the line, “Stupid is as stupid does” is repeated in the film “Forrest Gump.”
Be wise — revise game plans that don’t work. But do so with proper knowledge and intent. It does you no good to jump from the frying pan into the fire.
The fourth quarter
The fourth quarter of life marks the beginning of the end of the game. As a player, you must successfully execute the plays the head coach sends in. If upon entering the fourth quarter, your team is ahead, you must continue to play in a fashion that will keep you ahead. If your team is behind, you must play smarter and harder. If you’re the head coach and your team is behind or the game is tied, you must come up with a revised game plan and plays that allow your players to take the lead and win the game.
As Frank Sinatra sang, “That’s life. That’s what all the people say.” As a contractor (head coach), you must understand that’s business life and you must constantly work on honing the skills of your players and coming up with winning game plans.
The game plan
To win games, head coaches must understand the strengths and weaknesses of their players and put together game plans that provide their team with an advantage over the opposition. Winning games also requires the delivery of excellence in performance. As Vince Lombardi, the great NFL head coach who won the first two Super Bowls, said, “Perfection is not attainable, but if we chase perfection we can catch excellence.”
As head coach of your business team, you must draw up a financially prudent game plan that allows your business to recover the cost you incur to perform any task while giving you an opportunity to earn a profit above that cost, which also affords your techs the ability to deliver excellence to consumers. The delivery of excellence helps you keep your integrity intact.
Your game plan must include the calculation of your true costs and the development of properly profitable selling prices so you can afford to deliver consistent excellence to consumers. If your game plan is flawed, you won’t win many games and you won’t get you where you want to go.
Keep in mind that fear of losing a job will tempt you to fool yourself into thinking you can get a job done faster and cheaper than your competition. That’s when you will price it below your true cost and lose money on the job.
When consumers ask questions, you must address those questions correctly, quickly and honestly.
Then you must implement logical procedures for everyday administrative duties that make those duties easy to perform; hire employees who can deliver the excellence you owe your clientele; and compensate your employees in a fashion commensurate with their contribution to your business.
Cheating at the game
I’ve seen PHC contractors advertise prices for their services such as drain cleaning for $99 for any drain and replacement water heaters for $1,000. Those contractors cannot possibly recover their costs without impugning their integrity by utilizing bait-and-switch techniques.
In the United States, one tech/truck hour costs a PHC service contractor between $100 and $250 if all available tech hours are sold all the time. Any drain-cleaning task inclusive of travel time takes more than one hour. A $99 fee cannot recover the cost for one hour at the minimum end of the cost range.
Water heaters and the material needed to connect heaters to plumbing systems, inclusive of taxes, cost at least $600. The actual average replacement takes about four hours (inclusive of picking up the heater), plus one-way travel time to the consumer’s location. If travel time is only 15 minutes, the labor/overhead cost to the contractor is $415 at the minimum of the aforementioned cost range. Add $600 in material cost and the $1,000 price doesn’t cover the costs incurred by the contractor.
In either example, those contractors sell those services below their cost. They don’t get to the break-even point. Forget about earning a profit. The only options available to those contractors are limited. Losing money is neither smart nor honing their talents. And at the higher levels of the aforementioned cost range, they lose more money.
On the other hand, they could bait consumers with their low-ball prices and then hike their prices up after hooking them or defraud consumers by telling them they need something they don’t need. Both of those options deplete the contractor’s integrity.
If you have opinions on, or questions about, this article, let me know. If you need help setting up your game plan and attaining your contractor profit advantage, don’t panic; I’m as close as your phone. Just pick it up and call me.
Richard P. DiToma has spent 41 years as an award-winning contractor. As a contracting business coach/consultant, he has authored books on contracting business management as well as customized price guides for contractors. His Contractor Profit Advantage programs show contractors how to do the right thing for their businesses. Contact Richard at 845-639-5050 or email@example.com.