My 20-year-old daughter is a fully trained emergency medical technician. We often share vegetating time by watching EMT reality shows featuring trauma care, sports disasters and other mayhem. Nearly every episode includes some mention of how lucky the principal character was to have survived a mishap or illness.

We also see stories of endurance. Recently, an artist spent 12 hours bunny-hopping across the wilderness in search of help. Next time, when he decides an abandoned mine is a good setting for a picture of his legs chained together, he'll make sure he has the key to the lock.

Or imagine bobbing across the ocean in a rubber raft with nothing to drink but rainwater and nothing to eat except an occasional curious sea gull. Whether the story includes a life-threatening injury or a marathon against nature, every survival story includes a combination of suffering and misery, which is ultimately conquered by the human desire to live.

Sometimes, contractors are forced into survival mode. If a key employee embezzles six months' worth of revenue, it's time to break out the survival gear. A lawsuit (justified or not, since the lawyers always win), major illness or death of a principal, or loss of a key customer could push your company to the brink of disaster. But these situations, thankfully, are rare.

In the contracting world, survival may mean covering last week's payroll with this week's first draw on a new contract. Survival may mean cutting profit margins just to keep jobs on the books. Survival may mean stretching the supply house bills out to 90-120 days or using credit cards to juggle balances. Survival may mean cutting employee wages, foregoing your own paycheck or taking shortcuts on workmanship.

This is not much different than when the human body begins consuming muscle tissue and shutting down organs just to stay alive. Yes, it's a dire, morbid picture. Are you feeling depressed? It gets worse!



The Contractor Survival Mentality

I frequently work with contractors who are perpetually in survival mode - chronic contractor survival syndrome. Their survival mentality means decisions are based upon immediate cause and effect rather than forethought and vision. The survival mentality forces them to settle for hiring anyone who has a pulse rather than investing in the future and developing their own personnel. Survival means keeping last century's service truck on the road for another year while cautioning employees to increase their following distance since the brakes aren't what they used to be.

When survival gets to the point of using subcontractors in order to avoid withholding taxes, or even worse, if they're hanging on to 941 withholding checks, then the doctors will soon be reaching for the paddles; this contractor is about to flat line. Are you crying yet?

Usually, a person's survival is dependent upon the resources of others. The extreme skier who ends an 80-mile per hour slide sprawled across a boulder would be just another statistic if it weren't for the paramedics in a helicopter. The skier's disastrous joy ride will cost someone a huge sum in trained manpower and resources.

The contractor survivor is no different. Someone else has to provide resources for his survival. His slow pay/no pay strategy results in higher supply house bills for other contractors. His frantic, “any job at any price” mentality suppresses the market pricing for legitimate contractors who deserve to earn a profit. His low wages and scant benefits deplete the hiring pool of quality personnel, rather than attracting top-quality people to the profession.

Wait! Don't jump off the bridge yet - it gets better.



Warning Signs

When my daughter, the EMT, encounters a patient, her first step is to assess the situation and do what's necessary to stabilize his or her condition: stop the bleeding, establish an airway, get the heart beating again. Then pulse, blood pressure and other vital signs are checked. If you're a contractor who has suffered a traumatic circumstance, you're in an acute survival mode. You need to do what it takes to stabilize and recover and do it stat.

But if you're a contractor in chronic survival mode, you need to do a self-exam and figure out what it takes to get healthy again. Here are some warning signs that can help you determine if you're in chronic survival mode:

  • Profits - The whole idea of being in business is to earn a profit. Profits provide fuel for growth, better customer service, longer employee retention, better training - profits put the fun into being in business. A healthy, vibrant company in our industry should be showing double digit profits.

    Note: If you're a smaller contractor, you may be under the impression that the profits are your salary. This is a very common and deceptive symptom. If you “keep the profits,” then technically, your business is not earning a profit; your compensation is, in fact, a part of the cost of doing business. If the business is not earning a profit, it is very near to needing life support. Figure your compensation into the cost of doing business, then price your sales in order to earn a profit like other legitimate businesses do.

  • Cash flow - There are several ways to compute and project cash flow for your business, but in diagnosing chronic survival syndrome, all we're concerned about is whether the cash flow is positive or negative. Here's how to tell without a spreadsheet: When you go to the bank, do you run stop signs and break speed limits in order to get the deposit in before posting time? If so, then you're probably racing to cover the checks you've just written, and if you're racing to cover checks, then your cash flow is probably negative.

    Check your receivables and you may find lots of your cash sitting in your customer's bank accounts. It's not uncommon to find that receivables outnumber profits, which means that customers are enjoying the profits you've worked so hard to earn.

    Improving this vital sign could be as easy as being tighter about giving credit. Be aggressive about C.O.D. Use finance sources such as credit cards and consumer financing programs. Since cash flow is also a function of profits, make sure your pricing includes the necessary profit margin.

    A side benefit of this surgical procedure could be a reduction in your car insurance rates once the speeding tickets have stopped.

  • Employee turnover - There's a reason that the guy is sitting alone with his beer at the back of the bar room. He's miserable and no one wants to hang out with miserable people. Survival is misery, just ask the sailor adrift in the dinghy in the middle of the ocean.

    If you can't attract and keep quality people, then perhaps it's because chronic survival isn't enough for them. They don't care that your company name has been around for 30 years. They wonder how much longer it's going to last before someone signs the DNR papers and pulls the plug. Today's employees want to contribute to winners. They want opportunities to grow and prosper. A chronic survivor doesn't see that far ahead, so if you're guilty, it's time to dilate your pupils so you can see the big picture.

  • Taxes - Some of my clients have accused me of working for the IRS. It's an accusation that I'm rather fond of because that means they have progressed beyond mere survival and are now flourishing in their businesses. Paying taxes (or accountants to help avoid taxes) is definitely a sign of a life in a company.

    Beyond taxes, a vibrant business will also contribute to the community. A chronic survivor, on the other hand, is more like a parasite using up community resources just to keep the doors open.

    The bottom line is that chronic survival is misery. If your company is unable to flourish in our currently robust economy, then perhaps you've been satisfied with chronic survival rather than seeking prosperity. Surviving may mean you're still alive, but it doesn't mean you're living.