Free The Slaves

There's a dirty little secret in the industry. Worse than thirdworld, low-pay sweatshops, we have no pay contractor shops. There's a class of employees who work unpaid, like indentured servants, like slaves. They are the wives of contractors, working without compensation. It's time to free the slaves.

It starts with a favor. The purported entrepreneur is hustling as hard as he can striving to keep his new venture afloat. But turning a profit requires more than turning a wrench.

He quickly discovers he needs help — with the books, with the calls, and with the myriad government forms that must be filed. So, he turns to his bride.

It starts as a favor, the type that couples do for one another, like running to the store for a gallon of milk. No one thinks about pay. That's not the way families work.

The favors multiply and repeat. It's now a task and part-time job. It may even come on top of full-time work elsewhere. Since the couple keeps everything generated from the business, it seems rather silly to pay wages and add to the paperwork burden and tax burden.

It's not silly. It's part of growing a real business. If a contractor's wife works in the business without compensation, it screws up the numbers. It throws off the overhead calculation, holding down billing rates and artificially inflating the bottom line.

The company may appear profitable, but is actually operating as a charitable institution without the ability to avoid taxes. It's a charity because the wife is donating her time. The business is subsidizing the customer. If the business fails to turn a profit, operates as a nonprofit, it's not really a business. It's a hobby.

Pay practices that would get a contractor hauled before the wage and hour board if applied to non-relations are just as wrong when applied to the family. Employees should not be penalized over blood and matrimony.

Some contractors recognize the need to compensate family members at market rates from the outset. Others do so in time.

A contractor's spouse can be a great asset to the business. Despite a possible lapse in judgment at the altar, most are smarter than their husbands and often excel in areas critical to growth, such as marketing and financial management. The great husband/wife teams in the industry bear witness to the upside potential.

Conversely, the wives who work without pay in the business, work without being extrinsically valued. Who wants to be told their labor, their ideas, their value fails to merit basic pay?

Moreover, the business that uses uncompensated or below market labor from a family member probably fails to charge enough. It's a business operating in an environment of scarcity. It's a recipe for bitterness and resentment.

At the extreme, every expense and investment in the business is seen as money taken from the family. Thus, every expenditure becomes a potential source of discord, stressing the operation of the company, straining the marriage. Rather than argue over investments in the growth of the business, it becomes easier to maintain the status quo, leading to a slow spiral towards insolvency.

Stress on the business is matched by stress on the marriage. According to the Virginia Cooperative Extension service, the divorce rate is five times higher for the owners of failing small businesses than it is for the general population. With one contractor in five closing annually, families are paying a steep price for the failure of many to charge the right price.

If your wife works in the business without pay, give her a paycheck. If you pay her less than she could make elsewhere, give her a raise. If you need to charge more to afford to pay her, increase your prices.

By freeing the slaves, you leave the environment of scarcity. By freeing the slaves, you free yourself.

Matt Michel is the CEO of the Service Roundtable (www.ServiceRoundtable.com), HVAC's largest and most affordable contractor alliance. For a free copy of Matt's pricing calculators so that you can easily determine what you need to charge to pay your family members market rates, contact Liz Patrick by email at [email protected] or toll free at 877.262.3341. Matt can be reached at matt. [email protected]
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