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10 Sign’s You’re Playing The Game of Contractor Roulette

 

10 Sign’s You’re Playing The Game of Contractor Roulette

Contractor Roulette wheel

 

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”

  1. You lose sleep at night worrying about money.
  2. You have no idea what markup to use.
  3. You think margin and markup are interchangeable terms.
  4. You never know if you will have enough money to pay your bills until they're paid.  Again
  5. You guess at project payment schedule amounts and when they're due.  As a result you constantly suffer from cash flow challenges.
  6. financial mistakes contractors makeWhen 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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

Big 50 class of 2013If 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!

Financial advice for contractorsIf you have been playing Contractor Roulette here is a simple three-step plan to help you end your gambling habit:


 

  1. Admit you have a gambling problem and commit to do something about it.
  2. Get the professional help you need to help you stop gambling and eliminate the causes of your gambling addiction.
  3. Find someone you can trust to hold you accountable to doing what it will take to make the switch.

 

 

Related articles:

The Five Biggest Financial Related Mistakes Contractors Make

Remodelers: I Bet You Don’t Know Your True Burdened Labor Costs

Five Ways To Think Like A Business For Business Owners

 

Comments

Thank God it is nearly impossible to do these thing and stay in business. However, there are hundreds, maybe thousands, of start-up roofing companies who have no clue and inadequate start-up funding.
Posted @ Thursday, August 29, 2013 6:02 AM by Pete Curtis
Shawn, 
 
Your article is on target. A number of good people become contractors with the intention of developing a business that will generate a good income for themselves and their families.  
 
As you point out in a number of your articles and publications they are very good at one third of the business, Production (P). 
 
The other two thirds Marketing (M) and Accounting (A) are the rest of the combination that can unlock cash flow and profits. 
 
M.A.P. = Marketing first, Accounting second, Production last. 
 
Warm Regards, 
 
Randal DeHart
Posted @ Thursday, August 29, 2013 10:08 AM by Randal DeHart
Great pints Pete and Randal. I was at a local restaurant this past weekend. Behind me, at the bar, several contractors were chatting. I overheard one say someone else "bid" the job lower than him, so now he has to lower his price because he will have nothing to do otherwise. I did not find it to be a good business strategy. Maybe he could have said "I think I'll get some sales training so I can help prospects see the value I bring to the table if they hire me"
Posted @ Thursday, August 29, 2013 11:38 AM by Shawn McCadden
Shawn,  
 
I like the way you think!  
 
When contractors get sales training it is like searching for gold in a jewelry store.  
 
Did you happen to introduce yourself and ask to exchange business cards?  
 
That could be considered a bold move; however, The Universe does present opportunities for us to reach out to strangers when we have something worthwhile to offer. 
 
And having read your articles and visited your website for quite a while now I can attest that you sir have lots to offer. 
 
Warm Regards, 
 
Randal
Posted @ Friday, August 30, 2013 2:32 AM by Randal DeHart
Thanks Randal. I did not offer my business card.  
 
Maybe I was "profiling", but from the appearance of the contractor and the number of beers he had in him already at 3PM, I guess I figured he was not a prospect for my services.  
 
I have been fortunate that the contractors I do work with are motivated to move to the next level, in their businesses as well as their personal lives. I find it rewarding to help those that seek to help themselves. When I see their eyes light up from what they learn and experience from a new direction I know that I am making a difference.
Posted @ Friday, August 30, 2013 6:55 AM by Shawn McCadden
I'm 91 now, and not in business, but when I was, it was all time and material. It's easy when you have a good reputation, but it takes time and effort.
Posted @ Friday, August 30, 2013 3:37 PM by Elmer Stenger
Shawn, 
 
I agree with you 100%! Let the gentleman enjoy his adult beverages in peace since he may not be a good prospect at this present time.  
 
Professional contractors and those of us who serve professional contractors are stewards of the gifts, talents, resources and knowledge we have been given and it is incumbent on us to invest it wisely. 
 
Warm Regards, 
 
Randal
Posted @ Friday, August 30, 2013 4:00 PM by Randal DeHart
Elmer,  
 
Thank you for your service to the construction industry! 
 
At 91 you sir have a vast storehouse of knowledge and wisdom that perhaps you would consider sharing with us sometime. 
 
Warm Regards, 
 
Randal
Posted @ Friday, August 30, 2013 4:05 PM by Randal DeHart
You hit the nail on the head, I would like to know more,  
Thank you.
Posted @ Saturday, August 31, 2013 2:48 PM by Marvel Lawson Sr.
Marvel, what do you want to know more about?
Posted @ Monday, September 02, 2013 3:27 PM by Shawn McCadden
This is completely true. It's also such an unstable way of living. You'll be constantly stressed and worried, and very dependent on luck which is never guaranteed and will require you to put a lot of effort all the time.
Posted @ Thursday, January 16, 2014 11:54 AM by Sign Spinners
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