The Contracting Doc Lilli Day/Photodisc/Getty Images

The Contracting Doc

The cure for an ailing contracting business can be found in an assortment of best practices, such as smart pricing and marketing activity.

My business was feeling a little run down so I went to see the Contracting Doc.  He specializes in healing sick companies.

“Hey Doc,” I said, “My business is feeling a little sluggish. Can you give it a pill or something?”

The Contracting Doc sighed. “It doesn’t work like that.  Everyone thinks there’s some kind of magic pill. There is no magic pill, no bromide that can improve your business. Besides prescription without diagnosis is malpractice. I need to ask you a few questions.”

No magic pill, I thought. “Shoot,” I said.

“Let’s start with the obvious.  Are you profitable?”

“Well sure… I think.”

“You think?  Don’t you know?”

“I had to pay taxes.  That means I’m profitable, right?”

You have no idea whether you’re making money or not. You probably don’t charge enough. You don’t market. You can’t keep technicians and you have nothing to offer them.

The Contracting Doc was staring at me, aghast. "Are you telling me the closest thing you have to a P&L is a tax return?”

“Well, I uh…”

“What do you charge per hour?”

“A little less than everyone else.”

“A little less than everyone else? Why do you charge less than everyone else? Do you think everyone else knows what to charge?”

“I charge less than everyone else to get the phone to ring.”

“How’s that working out for you?”

“Well, the phone’s not ringing. That’s part of the problem.”

“Does anyone know you charge less?”

“Well sure.”

“How?”

“People talk.”

“So your big differentiator is you charge less than all of the other idiots who probably don’t charge enough and you keep it to yourself?  Have you done any marketing?”

“Sure.”

The biggest problem with your company is the person running it. The first thing I would recommend is firing yourself and hiring a general manager who’s got a clue.

“What?  What have you done?”

“I tried direct mail.”

“And what happened?”

“Nothing. I mailed a hundred letters and didn’t get one phone call. Direct mail just doesn’t work in my area.”

The Contracting Doc was staring dumbfounded. He said, “Surely you’ve done more than that.”

“Why? It doesn’t work in my area. Doing more would be throwing good money after bad. Besides, if I couldn’t handle a lot more work.  I don’t have the technicians for it. The kids these days just aren’t loyal. Give ‘em another buck and hour and they jump ship.  And I don’t want to hire another contractor’s bad habits.”

“So your plan is to hire people who haven’t worked in the industry and train them?”

“Train them? What if I train them and they leave?”

“What if you don’t and they stay.”

“You think I can get them to stay?”

“I don’t know. Can you? It sounds like you pay less. You don’t want to train them.  Do you offer any benefits?”

“Well, I send them home when there’s no work.”

“Alright,” the Contracting Doc said, “You have no idea whether you’re making money or not. You probably don’t charge enough.  You don’t market. You can’t keep technicians and you have nothing to offer them.”

“It’s not that bad.  Well, I mean, when you say it like that.”

“And you wonder why your business is sluggish?”

“Come on, Doc. What’s should I do? What’s one thing I can do?”

“One thing?  One thing? There’s not one thing. There’s one million things. I’ve only spent five minutes with you and we’ve revealed have a dozen problems.”

“Half a dozen?”

“One, no financial statements. Two, poor pricing. Three, no marketing to speak of. Four, below market pay. Five, no benefits. Six, you.”

“You?  What do you mean by you?”

“I mean, the biggest problem with your company is the person running it. The first thing I would recommend is firing yourself and hiring a general manager who’s got a clue…”

“Wait-a-sec,” I interrupted.

The Contracting Doc interrupted back, “…but since that’s not going to happen. After all, who would be willing to take over this train wreck of a business?”

“Now hold on…”

“No, you hold on. You wanted some medicine. Well, you’re going to take it. It may come back up, but you’re going to take it now. Okay?”

“Uh, okay.”

“Get a CPA. Get some financial statements and learn how to read them. Find out what your overhead is and allocate it across your standard hours. And bump your overhead to cover what you should be spending for benefits, training, and marketing not what you’re spending now. Figure out what you need to charge to run decent business and make a profit. There’s too many things wrong to cover, but it all begins with pricing.”

“Will that fix everything?”

“No, but it’s a start. It’s triage.”

Need a speaker for your contractor meeting?  Check out the Service Roundtable’s Speakers Bureau or call 877.262.3341.

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