The Design Builder's Blog

Great Way Contractors Can Make Sure Payroll Taxes Get Paid On Time

Payroll is complicated enough without having to worry about when to make payments and when to file which form to which government entity. I have many clients who are comfortable creating paychecks, but are nervous about missing payroll tax payments or filing forms late. A client recently asked if I couldn’t find a simple way to have reminders that would prompt him to do whatever had to be done. To help I created a simple “in your face” payroll reminder.

Since he uses QuickBooks, my first thought was to use the Reminders or To Do functions. However, he leaves his computer running and QuickBooks open, and these only pop up when you open the company file. Then I considered putting an Excel spreadsheet or Word document on his laptop desktop so he could just open it up. But that required him to make a habit of opening it up to see if anything was due. As we stared at his laptop desktop, he said, “What I really want is something right here” (gesturing to the screen). And that provided the solution!

Here's what I did, you can easily do it yourself

I created a calendar in Excel, including all the various due dates for payments and forms, being careful to make the proportions similar to the laptop display proportions. I also included dates for making federal and state estimated income tax payments. The next step was to convert to a graphic file format. This can be done easily by simply printing and then scanning the calendar.

How to get it on your desktop

The final step is to save the scanned image to a convenient location, and then right-click the file and choose Set as Desktop background.

Now, whenever you turn on your computer, or minimize your work, the list of due dates will be in your face!

Protect Your Business and Your Prospects By Not Leaving Your Plans and Proposals Behind

The information you include in your proposal comes from your many years of experience and education. For this you deserve to be compensated. I would also suggest your proposal probably only contains a level of detail adequate for you and your team to build from. In reality your proposal may not have adequate detail for others to build from. This may be the best reason to explain to your prospect why you won’t leave it with them unless they buy from you.

If you leave your proposal and specifications behind and the home owner in turn uses them to engage with another business bad things may happen. Although you may not be doing it on purpose or for any devious reasons, by allowing the possibility that other contractors will work from your proposal, inexperienced contractors and homeowners may be making incorrect and costly assumptions. I am referring to assumptions about what is or should be included to do the job correctly, and to comply with building codes as well as safety requirements. By allowing such things to happen you may be putting other contractors, the home owners and or the success of the project at risk.

I also suggest you consider the possible liability you take on by creating specifications, in particular project plans, and leaving them with a prospect that does not do business with you. By doing so you may have put yourself into a position where the prospect or another contractor actually works from them. If they have challenges when building the project and decide those challenges were caused by your plans and or specs, they may have legal rights to sue you. Even if they technically don’t have legal grounds, what if they do sue you? Regardless of whether you feel you are innocent or guilty, you will need to cover your own legal expenses if you end up in court. Most likely you will not be able to re-coup your legal costs even if you are found innocent. If you are found guilty you may actually be required to pay the legal expenses incurred by the person suing you.

If you decide to take this risk, I highly recommend you obtain Errors and Omissions insurance coverage or Professional Design Liability coverage. Discuss these insurance policies and how they work with your insurance provider.  

Some big picture thoughts for remodelers to chew on before deciding to leave their work behind:

• I suggest you are in the business of selling remodeling, not giving away free designs.
• Some consumers will contact you just to steal your knowledge. Avoid being used as an unpaid consultant.      
• Don’t let your proposals, specifications and plans facilitate the ability for “Bubba” to get the job rather than you.
• Not every lead you get should or will be YOUR customer.
• If you think you have to leave your work behind because every other contractor does, you are wrong.
• If you have not had professional sales training you may be leaving your plans and a lot of money on your prospect’s table!

Other related articles:

All Plans and Specifications Will Be For The Exclusive Use Of …

Managing Risks With The Right Design/Build Insurance Options

Design and Spec Considerations for Remodelers Looking to Break $1Million

Four Considerations for Contractors Offering Design - #4 is Most Important!

Is A Contractor Really A Salesperson If He Or She Hits Send?

How You React To Your Own Frustrations May Set The Example For Your Team

Dealing with customers, subs and employees isn't always easy. All too often they can say and do things to us that can really strike a nerve.   How you react in the situation can really make a statement about your professionalism as well as what they might actually share with others about your reactions.

Besides the people who get your goat others may be observing your reactions as well.  The observers may include your employees, trade partners as well as your customers.  How you react to stress and frustrations will definitely leave a lasting impression on them.

Consider these examples

If you beat the snot out of a chunk of wood with a sledge hammer as a way to cope with frustration and or stress your employees will likely think it’s ok to do so as well.  What if after seeing you do it they are frustrated by a client the next day , go out to the back yard of the job site and do the same in view of the customer?  What will the customer be thinking and how might it affect the atmosphere on the job site for the rest of the project?  How might it affect future referrals?

Now consider this example.  If you asked a prospective lead carpenter you are considering hiring how he or she deals with stress or frustration on the job and they share that beating the snot out of a wood scrap with their 28 oz Estwing works best, would you hire him or her?  I certainly wouldn't.

A better suggestion 

Instead why not consider the difference between your roles and your identity.

Your true identity is who you would be if all of your roles were stripped away.  It's who you really are as a person and in reality has nothing to do with what your job position is.  

By contrast, your roles are the responsibilities and activities you assume in the course of life, or while on the job, whether by choice or otherwise.  And no matter what roles you serve in life, they are not who you really are as a person.

I've learned from experience that until owners, managers, and employees can separate their identities from their roles, they may be personally affected by the comments, attitudes, and expectations of their clients and co-workers.  This doesn't have to be.  Life is stressful enough already.  Don't let job stress add to it.

For more specific information on the differences between your roles and identities check out this Remodeling magazine article I wrote several years ago.

Summary

The next time someone really upsets you at work stop, before you react, consider you are only at work and it's your job position that is being questioned or judged, not your identity.  Your ability to keep your identity and roles separate will help you keep a cool head in otherwise stressful situations.  And, how you react and act will serve as a much better example to everyone with whom you interact.  If what I suggest doesn't work for you or one of your employees you might want to seriously consider anger management therapy.

More articles related to leadership:

Breaking Past $1M in Remodeling: Getting Ready To Do It

Invest In Your Remodeling Business Now, Or Pay Forever

Information and Guidance To Evolve From Being A Contractor To Being A Construction Business Owner

Five Great Books for Remodeling Business Owners

Contractors, Is Your Pricing Really Fair?  

I often hear contractors say they offer fair pricing.   When I ask them what they mean by that most really can't provide a logical answer, or their answer is subjective. It got me to thinking about what fair pricing really is.  I came up with three considerations I think make a contractor's pricing fair to their customers, but also to their business as well as their employees.  Let me know what you think.

#1: Your markup is established using math, not a Wild Ass Guess (WAG)

Your pricing will be fair if the markup your company uses to price your projects is based on a budget that identifies your true overhead costs for running a professional operation and a respectable net profit.   I suggest if you run your business, but don't work in the field, you shoot for a salary at 10% of your produced volume as well as a 10% net profit for the risk of being in business.  Remember, if you don't work in the field your salary is considered overhead.  If you do work in the field be sure to split your time and related salary appropriately between direct job costs before markup for your hammer swinging activities and the balance for your time under overhead for your business management efforts.

Your overhead will be fair if you include enough money to properly manage your business, market to the right customers and adequately staff your office so you’re not a slave to your business.  Therefore, your price will be fair if your markup is fair. Click here to read an article on how to calculate your markup using simple math.

#2: You pay and treat your employees as professionals

I would suspect most contractors work for customers who have good jobs offering decent pay for the job performed, workers compensation coverage, benefits like vacation and holiday pay so they can enjoy life, health insurance so they can stay healthy and retirement contributions so they can save for a comfortable retirement.  I bet if their employers took any of those things away from them “it wouldn’t be fair”.

Therefore your pricing is fair if it includes enough money to offer those same things to you and your employees.   Perhaps remodeling prospects who don’t think paying enough so you can offer those things aren’t being fair to you and or your employees when they hire contractors who pay their employees under the table or as 1099 subs.

#3: When consumers buy from illegal businesses they aren’t being fair to any of us.

Home owners who work with illegally operating contractors aren’t being fair.   If contractors ignore RRP requirements, that’s their choice, but it’s not fair to legal business, or to those who end up getting lead poisoning as a result.   When they buy from unlicensed contractors when licensing is required, or purposely do the work without a building permit, that’s not fair. And when they knowingly work with contractors who operate this way, then sue them because they can, that’s not fair either.

If you and your business comply with these things and many others such as OSHA regulations and payroll taxes at your business, and charge appropriately for them, it is my opinion that your pricing is fair.

Are my article and my opinions fair? 

Let me know what you think. Did I miss some things you think should be considered regarding fair pricing?  Do you disagree with my thoughts? If you don’t share your opinions, maybe you’re not being fair either?

How to Keep Bubba From Bidding On Your Plans and Specification

Don’t you just hate it when a prospect you expected to do business with gives your detailed plans and or specifications to another contractor?   That’s bad enough, but isn’t even worse when they give the job to the other contractor and that guy would never have been able to offer the work or price the job without your specs?

Here’s a quick look at the simple process I share with my coaching clients to help them remove themselves from that frustrating way of selling.

Consideration #1: Do they already have them or do they need them?

If you have a good sales process and approach you can find out if your prospect has or even needs plans and or specifications. Simple projects may not require elaborate specifications to price them.   If your prospect’s project needs specifications to properly price it, and or if your prospect needs specs in order to make a buying decision, you will have to decide whether you will leave the specs if they do not buy from you or you will take them with you when you leave.

Consideration #2: Do they see a value in your expertise?

The next time your prospect needs plans and or specs to make a decisions try asking them something like this:

“Will you need help discussing and specifying the details and products to be used in your project in order to make good decisions about your project and how much money to invest in it?”

Assuming they say yes, you could respond with something like:

“That makes sense. If I were to help you do that could we set up a time for me to come back and review what I put together for you and get a decision from you about working with my company or not?”

Again, assuming they say yes, you can now let them know the information will remain your company’s property if they choose not to work with your company.

If you choose to not leave your proposal with prospects unless they commit to your company, it is imperative this policy be discussed with your prospects during the initial sales call. Your policy should not become a surprise to them when you come back to present your proposal. Surprising them will likely erase any trust or confidence they have in you and your process.

You are presenting, not emailing proposals, right?

Confirm your policy inside your proposal

Here is some sample language you can consider using inside the remodeling proposals you create for prospects. This information is for your reference only. Be sure you have it reviewed by your own legal council before using it.

Sample text:

This proposal and any related plans and specifications shall be for the exclusive use of; and will remain the property of “Construction Company” until a Construction Contract agreement for the proposed work is reached between both parties. The acceptance of this agreement will require the owners’ signature(s) and payment in full of the specified deposit.   If this proposal is not accepted at the time of presentation, owner(s) are welcome to view all plans and specifications at the contractor’s office at a mutually agreeable time.

This language is best used at the beginning of your proposal so you can remind your prospect about your policy very early during the proposal presentation meeting. If they have a problem with your policy, the one they should have already agreed to, you can discuss their concerns and both of you can decide whether it makes sense to continue presenting and discussing the rest of the proposal.

Want To Sell Your Construction Business Someday- Consider These Buyer Types Today

In a previous blog about selling your construction business I had suggested business owners write a for sale ad describing the business they plan to sell in the future. In this blog I describe the two typical construction business buyer types that became obvious to me as I worked towards selling my business.  By considering your target buyer you can make better decisions about what to do and put in place as you build your business to get it ready to sell.

First is the investor. 

This person will want to buy a business that pretty much runs on its own, needing little hands-on attention from the buyer. This buyer will be looking for time tested systems and industry best practices already in place and well documented.  This buyer will also be looking for a business that already has technology and software in place to proactively predict and measure business activities.  This buyer will also be looking to keep most or all of the existing employees in place. To attract this buyer type make sure you assemble a great team of high performing and self directed employees who work well together and embrace the systems and technology you will put in place.

This investor buyer will need a leader/manager to run the company. Before offering your business for sale to this buyer type I suggest you transfer the leadership and the day to day management of your business to a well qualified employee over a period of time. During the evolution you can test and prove his/her effectiveness as a general manager in advance of selling.  By taking adequate time to accomplish this important consideration at my business both me and my employees felt good about and respected the new leader, before I fully transitioned out of the day to day.

Some key advantages of selling to an investor can include a high selling price assuming you have a great business with future growth potential.  And, this buyer will also have the funds or can get his/her own financing for the purchase. My experience proved this could be a great way to go, but due to the reputation of our industry, the pool of potential buyers was very limited. I think this is still true today, but may not be the case in the future.

The second type of buyer will be the owner operator. 

Likely an entrepreneur, this type of buyer will want to take over an existing business and jump right in physically working in the business.  This buyer will want to see steady profits and a strong customer list, but as an entrepreneur with energy to burn will also be looking for growth potential. 

Having systems and employees in place will be important, but you might want to assume that this buyer will likely change or evolve the systems you have put in place.  As a result the employees described above might not like and/or agree with the changes. In particular experienced management employees may not tolerate any loss of the independence they have already earned in performing their day to day roles. If you plan to sell to this type of a buyer, I suggest you assemble employees who desire to follow a leader and will go with the flow. 

Also consider selling to this type of buyer will not command as high a price when you sell. On the other hand you will likely find more potential buyers because of the lower price.

The best of both worlds?

The sale of my business was in several ways a hybrid of the two models described above. I ultimately sold to my general manger. He had already earned the leadership role and had participated for many years in the direction, growth and day to day management of the business. All of the practical experience he gained during that evolution prepared him to be a well trained, experienced and motivated candidate to buy and continue growing the business. To make the purchase practical I had to finance the sale. In my case I felt financing the purchase was worth the risk because the buyer had proven his competency, trustworthiness and ability to not only maintain the business, but also grow it in a strategic and manageable way.

Selling a Contracting Business: Are You Building Yours On Speculation, Or Is It A Custom?

Since selling my remodeling business in 2004, many remodelers have asked me for help and insight about how I did it and how they too could sell their businesses some day. They ask great questions. The challenge is that there is no easy one size fits all answer. In this article I will share a few big picture considerations to help guide you.   In a follow up article I will discuss typical buyer types you can consider as possible prospects to sell to.

What kind of business should you build?

Most remodeling businesses were not designed, they evolved. Each business will be unique because each owner is unique and has unique motivations that drive the evolution of his or her business. In addition, each buyer will be looking for specific characteristics when assessing which businesses to look for and ultimately buy.   These are facts that became clear to me as I thought about and planned for the eventual sale of my business.

Rather than share specifics about what I did, I think you will find more value in the related considerations I discovered that helped shape the direction I eventually went in. Perhaps by considering my suggestions below, you can make a plan for and evolve your business in a specific direction to increase its potential salability and value.

Begin with the end in mind

First, I suggest it is best to be thinking of your exit strategy now so you can keep your future options open. By planning now you can identify what you will need to do to get your business ready for sale in the future.  The idea is to always be getting your business ready to sell, even if you never sell it.  If you do it right, in addition to the selling option, maybe someday it will be worth keeping. If you keep it you can collect the net profits, while someone else leads the business and manages the day to day.

Put your strategy in writing

To get started, I suggest you write an ad today to describe the company you will be offering to sell some day.  When writing your description, think about the things that will make the business worth more money and at the same time more attractive to your target buyer.  By writing the ad I suspect you will be able to identify and list the positive characteristics your business already has and should work to keep. Then you should list those characteristics you will need to work on and or add to make your for sale ad valid by the time you want to sell. 

Consider who you will sell to

If you’re considering selling your business some day you will need to consider the types of buyers out there as well as their typical motivations for buying one business versus another.   In my next blog I will discuss the two typical buyer types you will want to consider as you make you plan and write your for sale ad.

If you haven’t done so already consider subscribing to my blog so you will be notified by email when new blogs are posted.

Construction Equipment: Should You Buy or Rent?

The decision to rent or buy equipment for construction work depends on different factors for each business, according to Peter Gregory, Wells Fargo Construction Group Equipment Finance VP. He says that while renting is often a more attractive option in a tough economy when construction activity has slowed down, companies that need and use construction equipment regularly must decide how buying affects their bottom line.

Advantages of Buying

The advantages of buying the equipment your company needs to perform revenue-generating work include:

• immediate ownership
• deductions for depreciation
• interest to save on taxes
• onsite availability of equipment when work needs to be done

Note that deductions for depreciation are just one tax aspect of buying equipment, and any businesses subject to the Alternative Minimum Tax experience depreciation as a penalty, not a credit.

Thomas Westerkamp of Facilities.net says it makes sense to buy equipment that is just as expensive to rent as to buy, as well as equipment needed immediately in emergency situations to prevent loss or damage, or danger to health and safety, such as emergency generators and portable coolers.

Advantages of Renting

Equipment such as a scissor lift that might be used on a rare occasion would be wise to rent, allowing you to reallocate money towards buying equipment used more often on job sites. This way, the cost of maintenance is eliminated while the use of the equipment is still available. Renting is also advised when trying out new equipment and deciding if it's versatile, useful, and efficient for owning in the future.

How to Decide

One alternative to consider is to purchase quality used equipment which can bring the purchase price down from a new unit, while still providing the same capabilities and convenience of owning. But in this case, buyers beware! Check all safety equipment with the purchase, inspect it closely, and check all manuals and accessories to ensure it's in good condition for your purpose.

Other considerations when deciding to rent or buy include:

• Was the unit previously used as a rental?
• What are all the costs, initial and ongoing, of the rental or purchase?
• What agreements or contracts are part of the deal (purchase or rental) and what is included in them as far as dealer references, equipment demonstration, operator training, and terms of use and return?
• If you buy, will it eventually pay for itself when you consider the time saved and renting fees?
• Does the machine show signs of having been repaired? If so, what is the quality of the repair?

The decision about buying or renting really depends on unique business factors at individual companies. Mid Country Machinery owner Lucas Peed advises that the decision to buy or rent has a lot to do with the type of contractor business. He says local contractors are more likely to buy equipment to get the tax breaks and equity, while general contractors who travel a lot are more likely to rent equipment rather than haul it out of state for jobs, which adds to the cost of operation and ownership. Discuss your potential investment with your accountant and be thoughtful of the longevity of your potential purchase. If it will be an asset to your business for years to come, continue to bring new business, and improve the efficiency of your work, it is a wise investment.

Guest Blogger: Heidi Cardenas is a freelance writer with a background in human resources, business administration, technical writing and corporate communications. She specializes in human resources, business and personal finance, small-business advice and home improvement. She enjoys creating informational content for clients including blog posts, articles, white papers, case studies, and talking points, as well as business documents such as sales letters, business plans and strategic plans.

Four Considerations for Contractors Offering Design - #4 is Most Important!

With a well thought out strategy for offering design services contractors can differentiate their businesses and attract better quality clients and projects.  However if their offering is not well thought out contractors can lose a lot of money and waste a lot of time.   

If you want to offer design services consider these four important areas before you go for it.  If you are already offering design services, these same considerations can help you validate and or think a bit more strategically about your offering.

#1: Compensation

Nothing is free, neither is design.  Even if you offer it for free to prospects doing so still adds to your business overhead costs.  Charging each customer for their design is one option.  If you don't charge consider how many free designs you will complete to sell one job and add the anticipated costs for doing them to your overhead budget before you determine your markup.  How you choose to go forward with this consideration should be based on the targeted customer type you identify in your marketing plan.  

Offering design comes with risks. I also strongly recommend getting Design Liability Insurance and adding the cost of coverage to your pricing strategy. 

#2: Create a clearly defined process

To control costs and manage customer expectations you need to decide what level of service you will offer, and whether you will offer your design services at a fixed price or on an hourly rate.   At my business I used a fixed/defined process and price strategy limited to concept design.  This was because as a Design/Builder our goal was to quickly get to a contract for construction.  Completing the plans for permit application only happened if we built the project.   For our target customer type that process worked well and kept the upfront cost of making decisions and getting to a fixed price quote down for our clients.

The image below shows the first half of the Design/Build process I share with my clients.

#3: Ownership of the plans

Consider whether you are selling design services or plans.  If you sell plans your clients may see their project as a commodity and may want to use those plans to collect bids from other contractors. Allowing that to happen also definitely increases your design liability.  My recommendation is to differentiate your business by selling personalized design services, not plans.  Then, only offer design services to prospects who intend to hire your business to complete the project.  Plans for permit can then be created and shared with them after they commit to construction.

#4: Use a supporting marketing and sales strategy

After thinking through and deciding on the considerations mentioned above the business will need a way to market and sell their offering.  The right marketing should help define your offering so prospects can prequalify whether what you offer is right for them, or not.  Doing this will help attracted your targeted prospect and save salespeople a lot of time on sales calls. This is because by doing so prospects will only need to clarify and confirm your offering when they request to meet or speak with you, you will no longer need to introduce and explain your offering. 

Your web site is a great tool to use for marketing and explaining your design services. And, if the information is on your web site, you can direct prospects to it from the other marketing tactics you use, or when they first call your office to inquire about a project that requires design.

Other Design related articles you might find helpful

Managing Risks With The Right Design/Build Insurance Options

Design and Spec Considerations for Remodelers Looking to Break $1Million

All Plans and Specifications Will Be For The Exclusive Use Of …

As Designers, Are We Honest in our Business Dealings?

10 Ways Some Architects Do A Disservice To Contractors & Home Owners

Design Options for Design/Builders: Partnering for Design

Design Options for Design/Builders: In-House Design

Thoughts on Choosing a MA CSL Renewal Class and Instructor

Choosing your MA CSL renewal class simply by price or location may not be a good investment for some MA CSL license holders. Sure, you may get the credits you need, but why not also seek to increase the return on investment of your hard earned money!

Here are a few things to consider before you choose which class you will sign up for.

Different trainers offer different classes and subjects.  

Some trainers offer classes that concentrate on trade skills. Others offer classes that concentrate on building code and or energy code requirements and amendments. On the other hand we have decided to concentrate our classes on helping contractors charge and keep more money by helping them with the way they run their businesses and how they manage construction. For example, one of our previous 6 hour CSL Classes titled “Estimating, Pricing and Producing Successful Construction Projects” covered ways contractors can be accurate about pricing their projects, write proposals that help sell work and assemble job packages crews can build from on their own so the owner can concentrate on selling another job.

I find it amazing how many attendees don’t even know what topic will be covered when they get to the class they had signed up for. Before you choose a class to renew a MA CSL first consider the topic being offered. As a business owner you may want to take a business related class but send your licensed production employees to a different class.

Make sure you get the right number and categories of credits you need

Depending on your license type you will need either 6, 10 or 12 credits to renew your MA CSL. Check out this link for a full explanation of how many credits each CSL License type requires.

Although the number of credits needed differs by license type, all three license types require the license holder obtains credits in certain topic areas called categories. The list of required categories is different the first time you renew than subsequent renewals. Make sure the class or classes you take will give you the right credits to renew.   Check out this link for clarification about the required CSL Credit hour categories.

Some trainers have more experience than others

Two things to think about regarding the trainer you choose.

The first is whether the class instructor is experienced as a teacher and can effectively help you and or your employees learn the topic at hand. Some trainers have degrees in education and lots of previous experience actually teaching.   Other trainers lack the skills and or experience needed to help you actually understand and then apply what you learn in class in the real world. I suggest you choose a trainer with a proven educational background. If you don’t already have past experience with the trainer and his/her abilities, referrals and or testimonials from past attendees can be a big help when making your selection.

The second important consideration about choosing a trainer is the level of actual practical experience that trainer has had using and or performing the skills being taught.  In my opinion too many trainers have read the book on how to do something and then decided to teach about it. If the instructor lacks practical experience he or she may actually be misleading the attendees. We are seeing a lot of this now that contractors and workers are renewing their RRP certifications at our RRP Refresher classes. Many attendees share they are very disappointed when we tell them the information and guidance they got form a previous instructor was incorrect and has cost them a lot of money and or put them at risk for potential fines.

Renewing your MA CSL takes up a lot of your time.

If you have to do it anyway why not maximize the value of your time and the money you spend by being strategic about the topics and instructor you choose? By doing so the money you spend will be an investment, instead of an expense.