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How to survive the boom economy of 2018

Jan. 13, 2018
Sometimes it good to reflect, to take stock of the past year, and contemplate just where we are, what we did that worked, what didn’t and what we can do to make this year better.

Here we are, right at the beginning of another new year. Sometimes it good to reflect, to take stock of the past year, and contemplate just where we are, what we did that worked, what didn’t and what we can do to make this year better.

With the economy booming, the stock market at record highs and unemployment at record lows (although trade manpower is still woefully below par), businesses are investing and expanding at rates not seen in at least 10, more like 20 years. Whether you are in a large, medium or small market, it might be time to start expanding your horizons.

Whereas the past decade or so has seen shops hunkering down in survival mode, many established companies have begun to regroup and get more aggressive in their marketing.  Smaller and mid-sized shops, too, need to step up their game to take advantage of the current market conditions. So, how do you plan on taking advantage of the current upswing?

In areas of south Texas and the west coast of Florida where the hurricanes hit the hardest there is a decided lack of available contractors. Many local shops are so busy that they can’t accept any more work. Service shops are working seven days a week and can’t keep up. There appears to be, arguably, a decade’s worth of work laid out in front of the contractors in those areas.

In other Sunbelt states, commercial, industrial and residential construction is also on the upswing. You can’t have housing development without retail and you can’t have retail without support industries, can you? Such a climate brings advantages...and danger to subcontractors.  Contractors are going to be doing the same thing; sucking up work as fast as they can. They’ll be looking for new subcontractors because their go-to subs will be full up with work. 

Do not be bullied into giving up your lien rights. Legitimate contractors will not object when you file a pre-lien. Those that do bear close scrutiny.

Unlike the past 10 or so years, finding work is not the issue. The question you have to ask is, “what type of work do I want?” or “what type of work can I do?” When there is a glut of work in the marketplace, it would seem to be an easy question to answer, but is it?

Let’s take, as an example, a small plumbing/HVAC shop in a suburban area. You get a call from a guy who got your name from your supply house. He’s building a strip mall in a town near you and wants a bid. You’re thinking, “that’s great, a referral for a job that fits right with what we do best.” You pick up the plans, produce a bid, get a contract, start work, and get stiffed on your first (or second) draw.

The guy you contracted with is gone and now someone new has taken over the project. What do you do? You could sue, but that takes time and money and you’re already into the job for cash that you really can’t afford to spend. You could try to negotiate with the new guy, but most likely he’s not going to pay you for work you did for the first guy. So, you’re out of pocket.

The previous scenario is just a cautionary tale. Those of us who have been involved in these boom/bust cycles have seen it before and, as the saying goes, the more things change, the more they stay the same. So, take heed. Do your homework!

Check out, as best you can, who it is you are going to work for. Dun & Bradstreet, as well as the three credit reporting agencies, can give you valuable information on prospective clients. Be cautious when taking on work from general contractors that you don’t know or are new to town. Be careful of those that you do know. In large cities and towns that might be a bit more difficult, but do it anyway.

Beware of contracting directly with owners. The historical record is littered with the bones of small businesses, and a few large ones, who have contracted with owners who have delusions of producing a great project on a shoestring budget, and a few have no conscience about breaking the subcontractors they hire.

Make sure that any sizable new work you are asked to look at, or to contract for, comes with all the appropriate safeguards for payment and lien rights. If you do contract for a project, get together with you supplier and establish “job accounts.” Job accounts compartmentalize your exposure by keeping the credit exposure on any one job separated from others. If a job goes bad, or if the contractor/owner/architect, etc., fails to pay as agreed, you can still purchase material for your other jobs without incurring restrictions. To have only one supply house account for all of your work is a dangerous game and one which has signaled the end for many a small contractor.

Lastly, always establish your lien rights. The rules vary slightly from state to state but, basically, once you establish a pre-lien on a project, the financial institution funding it will at the very least know who you are. It won’t stop someone who is bent on cheating you, but it will offer some protection. Do not be bullied into giving up your lien rights. Legitimate contractors will not object when you file a pre-lien. Those that do bear close scrutiny.

Take advantage of the current economy, but do so wisely. Use it to grow your business, to “put on some weight” and to prepare yourself for the inevitable downturn that will eventually occur.  This boom has been awhile in the making — make the most of it.

The Brooklyn, N.Y.-born author is a third-generation master plumber. He founded Sunflower Plumbing & Heating in Shirley, N.Y., in 1975 and A Professional Commercial Plumbing Inc. in Phoenix in 1980. He holds residential, commercial, industrial and solar plumbing licenses and is certified in welding, clean rooms, polypropylene gas fusion and medical gas piping. He can be reached at [email protected].

About the Author

Al Schwartz | Founder

Al Schwartz is a third-generatin master plumber from Brooklyn, N.Y. He founded Sunflower Plumbing & Heating in Shirley, N.Y., in 1975 and A Professional Commercial Plumbing Inc. in Phoenix in 1980. He holds residential, commercial, industrial and solar plumbing licenses and is certified in welding, clean rooms, polypropylene gas fusion and medical gas piping. He can be reached at [email protected].