You are sick and tired of being a slave to that disaster you call a business. The one that pays slave wages and lousy benefits to employees and little or nothing to yourself and your spouse. The business -- that is sustained only by the patience of your vendors, who don't get paid for 90 days or more when times slow down.
Finally, you are ready to make a change for the better. You attended a Frank Blau "Business of Contracting/Flat Rate" seminar. You have become a numbers cruncher. For the first time in your life you've learned what it really costs to run a business, and what you and your employees are worth in the way of compensation. You make the decision to run a business as it should be run -- in a way that takes care of you, your spouse, your employees and your customers the way they deserve.
Reality Check No. 1
In so doing, you come across this daunting truth -- the only way to accomplish all of the above is to make sure you have more incoming cash than outgoing expenses. Can't do that on $45-$55 per hour. Chances are, after you crunch the numbers, you'll find out that your dollar-per-billable-hour overhead alone is in that area. When you add the direct cost of an hour of labor ($20-$30) to that overhead, you realize that you have to raise your prices big time. Then comes the understanding that you have to flat rate your service work in order to de-emphasize the selling price of labor.Suddenly you begin to realize that this business is about more than the mechanical aspects of plumbing and heating, etc. It's about recordkeeping, accounting, marketing, customer and employee relations -- and things that have to do with the human spirit, such as treating people the way you want to be treated.
Do all those things right, and the business becomes profitable. You now draw a respectable salary and so does your wife. Your business associates, otherwise known as employees, can afford braces for their kids' teeth and you are providing a pension plan for everyone in the company. You are discounting your vendor bills for the first time in the history of the enterprise. Life is certainly improving.
Reality Check No. 2
Your success hasn't gone unnoticed. Not everyone is applauding. To your bewilderment, you find out that some people begrudge it when an owner makes a decent living, pays his associates well, no longer considers his wife a ward of the state, pays his vendors promptly and never welshes on a deal with a customer.Don't be surprised, but it's virtually assured that the following people will be taking potshots at you.
Vendors -- Some wholesalers and manufacturers will become your allies. They will respect your success -- to a point. However, submit an invoice to them with your new labor rate to correct a product defect and they will scream bloody murder. You find that they, too, regard "slug" prices as the norm in the marketplace, at least when it serves their own interest. They'll smile to your face but denigrate you to others as a rip-off artist.
What I find puzzling is that they will refer a consumer to a contractor who is 90 days behind on his wholesaler bills, but not to one that pays jolly on the spot. It makes absolutely no sense to me.
Employees -- Some stubborn long-time employees are unable to cope with higher prices and professional business practices. They will accuse your of overcharging your customers and leave, viewing themselves as accessories to something improper. Theirs is a mindset lacking in self-esteem, one that would rather shortchange themselves and their families than "overcharge" customers -- many of whom make far more money than they can even imagine.
Live with it. If they complain about the prices you are charging, share with them your charts of accounts and ask for suggestions about saving money. This usually mollifies all but the most stubborn technician.
Most of your associates will appreciate it when their standard of living increases. Their morale will soar, productivity will increase and they will walk through a wall for you.
For a while anyway. But human nature being what it is, they will begin to take their newfound prosperity for granted. They forget what it takes to generate it, so they start to resent being on call, working the occasional Saturday, and going the extra mile to satisfy a customer. You must keep reminding them of where they were then and where they are now.
Competitors -- Jealousy will rear its ugly head, guaranteed. When your technicians begin to tell their peers at other companies what they are paid, when your competitors see your clean, new trucks around town, when supply house salesmen begin to leak information about your business, that's when you will make enemies with people you have never met, as well as those whom you have regarded as friends and colleagues.
They will spread misinformation. They will revel in any real or imagined business failing of yours. They will hate you for becoming what they are not -- a prosperous and professional business owner.
Customers -- You will find customers who experience buyer's remorse. They tried reaching their regular contractor, Bubba the Slug, but he wasn't around. So they called you and got the "go the extra mile" type of "Sudden Service" customers expect to receive. Along with that, they paid a higher-than-expected fee commensurate with the type of service your company renders.
Next day they talk to Bubba, who informs them that he would have done the work for half the price -- if only they had left a message on his answering machine, if only they had waited patiently from him to return from his fishing trip to return their call. Then come the calls to the BBB, the Consumer Affairs Office, the TV people and so on. Such is the reward for knowing your costs to the penny and trying to be a service professional.
Reality Check No. 3
Is it all worthwhile? This is a question each of you needs to answer for yourself. Is it better to maintain the status quo and finish your life and career as one of those poor, retired contractors who didn't make waves? Or do you wish to provide security for the future of your company, your family and your faithful associates?I say, "Full speed ahead." Leave the jealous competitors, self-doubting associates, two-faced vendors and low-buck customers to roll around in the mire they self-propagate.
