This spring will be a good season for contractors. The writing is on the wall. The recession is finally somewhat over and folks are starting to prepare for renovations to their homes.
People are staying in the homes they own longer. The banks aren’t making the easy loans anymore. Instead of shopping for larger homes, people are renovating what they have. The new housing market is still in the gutter; those spec builders have moved into renovation and remodeling work and people are not buying the glut of homes on the market. Photos: crunchyroll.com, neishon.com
If you ran a handyman service during the recession, you have realized that for most, work continued and actually grew because of the repair service aspect. Small repairs have saved a lot of decent contractors — if they were smart enough to adjust to it. These repairs also gave the contractor an entry into the clients homes, thus enabling him to recommend and sale larger projects to them.
The people that hire handyman services have waited out hard times; however, they still needed to continue upkeep to their rental properties and homes they live in.
So where does present day competition leave the average remodeling company? In late 2008, you had people losing their jobs by the boat load. Many picked up their DIY toolbelts and headed out to carve a living in remodeling and handyman services. This meant that off-duty firemen, out of work factory guys, and others crowded the pool to put food on their tables — leaving dis-satisfied homeowners throughout the country with terrible experiences due to bouts of hackery.
The blame does should not rest solely on these hack contractors. Blame must also include the homeowner who went with the cheap guy. Due diligence in selecting the right contractor is of primary significance.
I’ve seen it first hand. I’d go bid a job and the homeowner tells me that they have 4 other contractors they have contacted to give them free estimates. How do you compete with that?
“The homeowners are enjoying this buyer’s-market!” some will say.
Not so fast Mr. Homeowner. In this “buyer’s-market” you have all kinds of start-ups that are really unprepared; they figure as long as they can get the work, they will find a way to turn a profit. Being unprepared opens the door of not pricing projects correctly — according to their overhead and profit.
There are also hack tradesmen who specialize in the weaknesses associated with unsuspecting folks and certainly will take advantage of the homeowner when the opportunity presents itself.
Every company has different costs associated with their overhead and profit numbers: that is why you have different ranges of remodeling prices. Oftentimes, when these rogue contractors get a few projects to work on, they find out that it’s not worth what they were contracted to get paid. They’ll run off with the money, they’ll haphazardly install stuff incorrectly and in a hurry — to get to the next unsuspecting customer because they aren’t making enough money on the project, or they will resent the homeowner once they start a project — realizing that they are losing their shirt (money) on the project. Homeowners should beware the “change-order conundrum”, where once hired, they find ways to boost the bottom line by building up charges from unforeseen circumstances that don’t exist.
When you start changing who you are, the company, and your business practices you become like these fly-by-nighters. You soon begin to de-value your company’s services. Some cut their prices to accommodate the homeowners. This is problematic.
Number one rule in business: never adjust your prices down to keep your guys working. This is the recipe for failure.
If you have done your math and know what it costs for you specifically to stay in business, why would you adjust your prices down? The bills you pay are still the same; I’m pretty sure the gas and electricity company did not say to you, “Since these are hard times, we’ll give you a break so you can get back on your feet”.
So. With the present state of many more contractors, builders, remodelers, and handymen for the homeowner to choose from, who exactly is my competition?
Short answer: You are your own competition. This means to stay the course in regards to pricing your work. Continue to sell those jobs as you have been doing. The homeowner is much more likely to pick a firm that comes completely prepared to the meeting, that is confident, and presents their proposals in the most professional manner.
“Got your presentation package tahgether?..”
You’ll also have the homeowner that decides that price is the most determining factor. That is a slippery slope; a recipe for disaster. It is so important to educate them as to why they should pick a reputable company. After all, you wouldn’t want to trust your home to just anybody would you? Hire a licensed pro and the courts will back the homeowner should problems arise. That is the homeowner’s protection and recourse. It goes without saying that the firm they hire should be insured with proper coverage — Another protection afforded the homeowner.
Many contractors say, “All of these other guys are charging half of what we charge. They are stealing our jobs!” The key here is changing the mindset. These guys are not my competition. Logically, if you ran their numbers, you’d find out that they are the ones who are barely able to scrape a profit from their jobs.
Most just want to keep their guys working. This type of thinking is wrought with challenges. This is an emotional decision. Successful businesses don’t operate by emotions. Lay them off until work picks back up. Some will say, “But, I’ll lose my best carpenter!” Maybe so. You have to dig deep and see the larger picture if you plan to stay in business any fair amount of time.
It’s kinda like being in a sinking boat with a lot of holes. You constantly have to juggle which holes you put your finger on to stop the boat from sinking. In effect, it does not matter how many holes you try to stop; the boat will ultimately sink because of the decision to fore go making the necessary funds and repairs that it takes to properly operate a sea-worthy vessel.
Determine your overhead and profit early on if you are just starting out: It pays for itself ten-fold. Then stick to it.