10 Sign’s You’re Playing The Game of Contractor Roulette
Most contractors are great craftsman but terrible at accounting and financial management. Most can build a house from the ground up without any plans but have no clue how to identify and create the financial reports they need to know whether they are making or losing money.
Building or remodeling a house without any idea of whether you are making money or not, and if you will be able to pay all the bills as they come due, is like spinning a roulette wheel at the casino. You put money down, spin the wheel and hope to make money. Problem is that you have no idea or control over where the wheel will stop. If you run out of money the casino is happy to let someone else step in, lay down some money and do the spinning.
Like most gamblers, contractors always brag when they win, but never want to talk about it when they lose.
Contractor Roulette Is Not A Good Gamble
If it sounds like I'm describing you and your business you are playing what I call "Contractor Roulette". Sure, once in a while you may win, and even win big. But remember the odds are with the casino. How about you? Have you been spinning and winning or has the “casino” been winning and encouraging you to keep playing?
My list of 10 signs you’re spinning the “Contractor Roulette Wheel”
- You lose sleep at night worrying about money.
- You have no idea what markup to use.
- You think margin and markup are interchangeable terms.
- You never know if you will have enough money to pay your bills until they're paid. Again
- You guess at project payment schedule amounts and when they're due. As a result you constantly suffer from cash flow challenges.
- When a prospect asks you if you will match someone else’s price for the same job you figure if the other guy can do it for that price so can you, so you say yes.
- You are always putting the whip to your production employees to beat the labor allowance in your estimate because you need to make up for dropping the price of the job just so you could sell it. Again.
- Even though you got price quotes for the materials before you sold the job, after you take the job you either bid the materials out to a get a lower price or beat your vendors up to sell them to you for less than they already quoted you. Again.
- You do little or no marketing so you have to try to sell to everyone who contacts you, even if you have a feeling they will try to beat you out of any profit. Again.
- You need to sell a job this weekend and get a deposit just so you will have enough money to meet last week’s payroll. Again.
Strive to become a Big 50 Remodeler
If you believe in the idea of relative success, where you convince yourself you are doing pretty well if you compare your results to other contractors who are doing far worse than you, then maybe you can be happy staying where you are regarding financial management at your business. On the other hand, if you want to measure your success against truly successful contractors, perhaps use Remodeling Magazine’s Big 50 list as your reference. To qualify for that list you need to be making a decent net profit.
There is hope!
If you have been playing Contractor Roulette here is a simple three-step plan to help you end your gambling habit:
- Admit you have a gambling problem and commit to do something about it.
- Get the professional help you need to help you stop gambling and eliminate the causes of your gambling addiction.
- Find someone you can trust to hold you accountable to doing what it will take to make the switch.