Markup & Profit

End of Year Planning, Part 2

2007-12-11T08:46:00.000-08:00

Last week's newsletter ended with "Have you tried direct mail advertising? What have you tried that generated the type of leads you want? That is where to focus your money. Check the results monthly to see the results and adjust your advertising as needed."

Let me add a comment. If you are not getting the type of leads you want, or if you are getting leads from customers whose only focus is price, you are advertising in the wrong place. This also frequently happens when you are working by referral only. You end up with leads that are a waste of your time.

What else do we need to plan for 2008? Below is a list of the things that need to be resolved. Using the stats you compiled from 2007, it should be a relatively easy task.

But first, there are two thoughts you need to keep as you go through this exercise.

1. Always keep the attitude of: "Where can we save", not "Where can we cut".

The attitude of "Where can we save" means thoroughly analyzing the subject at hand. What is it, where and how is it used? Can we use it differently or in conjunction with other things? What can we do to reduce the cost of owning or operating the item? Can we extend its life, can we reduce the maintenance required for successful operation? Saving costs requires taking a long-term view and making a smart, well-thought out decision.

The attitude of "Where can we cut?" is an emotional reaction. It means eliminating something completely so you can save money today, but it doesn't take the long term view. Normally this happens after little thought to anything other than eliminating that expense.

The two are as different as daylight and dark and the prudent contractor will always focus on saving rather than cutting.

2. I read a quote recently from one of my favorite guys, Brian Tracy. He said, "Decisiveness is a characteristic of high-performing men and women. Almost any decision is better than no decision at all."

Decide to give this 2008 planning session your best effort. Spend quality time each day working on your plans and goals for 2008. Don't give it lip service, reading through this newsletter and telling yourself you will get to it right after Christmas.

You will get out of this exercise exactly what you put into it. Give it your best effort and one year from now you will be amazed at the results.

2007 TAXES

This needs to be a priority. Make it a goal to have all your tax materials together and ready to go to your CPA by the end of January, 2008. Call your CPA and schedule an appointment for the last week of January to be sure you follow through. Taxes are a distraction.

OFFICE

What is your budget for office equipment for 2008?
What new equipment do we need?
What equipment needs to be repaired or replaced?
Is the traffic flow in your office good or do you need to rework or remodel your office next year?
Do you have staff members that might function better in a different place in the office?
Is your showroom a collection spot for almost anything that comes in the front door, or is it kept neat, clean and ready to help your customers?
Are parking spaces in front of the office reserved for visitors only? Staff, subs and suppliers should park away from the front entry so your customers have easy access to your front door.

STAFF

What is your budget for office staff for 2008?
Are classes or seminars available for your office staff to help them do a better job?
Do you have a plan in place to take key people to at least one convention this year?
Do you have a plan in place to purchase (and read) at least one new book each month?
Is there someone you can bring in, a coach, a consultant, a trainer that can provide training for you or your staff?
Do you have problems or issues that warrant that?
Have you scheduled your year-end review for each member of your staff, which should include reading and signing your employee manual?

This review should include an analysis of their performance in 2007. Ask yourself this question for each employee:

Do I need this person in this job?
Are they doing the job they have been hired to do?
Should I combine two or more jobs, or should I hire another to share their workload?

Here are some additional questions about your employees:

Are they willing to cross train for other jobs?
Can they help doing the cross training of other employees?
Should this person be asked to take a more responsible position?
Could I find a replacement that would do a better job?

COMPANY FORMS

What is your budget for paperwork for 2008?
Does your contract need updating? (Very few don't)
Do you have pre-printed change work order forms?
Do you have pre-printed Right of Rescission forms?
Do you keep about one month of paperwork in reserve?
Is your company Employee Manual up to date, a copy on file for every employee? Has everyone signed the manual?
Is your sub-contractor manual up to date?
Are you using a sub-contractor agreement manual with a separate form for each job? Are all your subs required to sign the agreement before they are allowed onto any job site?
Do you have a standard checklist in place to check that your subs license, bond and insurance are always up to date?
Does your company provide or help with obtaining financing for your customers? Do you have a checklist to cover every step that needs to be taken to obtain the financing needed for your work?

TOOLS & EQUIPMENT

What is your budget for tools and equipment for 2008?
Do you have a list of each tool or equipment owned by the company complete with serial numbers, make, model and instruction books?
What needs to be repaired?
What needs to be replaced?
Did you spend more in 2007 to rent equipment that you would have spent purchasing the same equipment?
What will be our maintenance cost for the year for T & E?
Do you have equipment in storage that should be sold?

VEHICLES

Are all of your vehicle licenses up to date?
Do you have all the VIN #s and license plate numbers written down and easily accessible?
Are all your trailers legal, including lights, license and weight postings?
Did you pay more in 2007 for moving equipment to different job sites than you would have spent if you had a trailer for that equipment?
What vehicle(s) needs to be repaired?
What needs to be replaced?
Do you have a written maintenance schedule in place for each vehicle?

INVENTORY

Plain and simple, you should not have any inventory. If you have leftovers from a job, take them back to the supplier and pay the restock fee. It is far cheaper than maintaining a storage facility.

EDUCATION FOR 2007

What educational programs do you need for yourself and your staff? After your review of 2007, you should notice if you or your staff need outside instruction on how to do things more efficiently and/or more profitably.

As stated above under "Staff", plan on adding at least one new book to the company library each month. Place someone in charge of the library, checking books in and out so they don't wander away permanently.

Attend at least one convention in 2008. You should be able to take your key people with you. This is not a fun and games trip, this is an educational trip. You and your staff should take advantage of every class available.

ASSOCIATIONS

Are you involved with an association? If you are, it is time to ask some tough questions. It is all too easy to get caught up in association work and involvement at the expense of both your business and your family.

If you are on the Board of Directors, is it taking time away from your business that is costing you money? You need to look long and hard at your level of involvement and weigh the value of your time and money invested compared to the return you are getting. Yes, you need to give something back to the industry. You also need to take care of your own business. All too often company owners work through the chairs of their association while their business goes from bad to worse, then bankrupt.

Associations are very good for our business in general and for your particular business. No question. They provide political clout to keep bureaucrats and elected people focused on what is important. They provide marketing that can be a boost for your business. And the networking available, the ability to spend time with others who fight the same battles you fight, is invaluable. But make darned sure that your involvement stays balanced with the discretionary time you have available from your business and family.

FINANCIAL CHECK UP FOR YOUR COMPANY

Just as you would schedule your vehicles and equipment for regular maintenance, scheduling a financial check up for your company is a sound idea.

Whether managing cash flow, determining whether you can afford employee salary increases or projecting sales figures for the next quarter, a frequent review of your financial position is beneficial to keep your company running smoothly and avoiding problems that could derail your progress.

Please keep in mind that almost all financial problems of any construction company show warning signs well in advance. I have written about the Eight Warning Signs of Financial Problems in construction related companies in these newsletters, and discuss it in the Markup & Profit Video. Ignore them at your own peril.

If you are new in business or have been in business less than two years, check your financial position every other month at least. After that you should have the experience to check things about every six months and make adjustments as needed.

The key issue here, gang, is to put the financial checkup in writing, with check lists and a definite schedule, then make darned sure you do it. No excuses, no stories, no procrastination. "Get-R-Done".

WRAPPING IT UP

As I talked about last week, I have been through eight cycles in this business over the last forty plus years. Things repeat themselves every five to seven years in this business so what you are seeing today in our economy is normal. The economic adjustment we are going through has nothing to do with the present administration, what the media thinks (or doesn't), what any political party or candidate likes or doesn't like, believe or doesn't believe. This is America at work.

When you get married, it is for better or worse, richer or poorer. When you go into business, it is peaks and valleys, the good with the bad. If you can't handle this market adjustment that will probably hang around until after our next presidential election, now is a good time to call it quits and find something else to do. We wish you well.

For those that see this downturn as an opportunity to polish both your sales skills and the way you run your business, you will find many rewards in the near future.

Planning 2008 - Part 1

2007-12-04T08:00:00.000-08:00

This week and next we are going to review 2007 and plan 2008. I am borrowing some thoughts from Tony Robbins, one of the better known motivational speakers and educators. I also got help from my friend Sonny Lykos, who has been in business many years and knows this exercise.

First thing, describe your business. What is it exactly you do? What is it exactly you want to do? Are the two the same? Write it down so you can see and touch it, make it yours. Gang, this is no place to get lazy. You'll want a reference point throughout this exercise.

Next, review 2007. We want to look at all the issues, not just the good stuff that has happened. This is called an honest evaluation.

Let's start with the following.

How much business will be sold, built and collected by December 31?
What will be your net profit?
What will be your Gross Profit?
What will be your Gross Margin?
What will be the total owner's compensation?
How many leads did you get in?
How many leads turned into actual appointments with customers?
How many jobs did you sell?
What was your sales to leads ratio?
What was the average sale price?
What markup (or gross margin) did you use?
Did you use just one markup or did you fall into the trap of different markups on different jobs?
List all of your lead sources.
List the leads and sales in each category.
Calculate the cost of each lead in each category.
Who are your employees?
What are their skills?
What is their record of on time performance both showing up for work and getting jobs done?
Do we have deadwood on staff?
List the good and any problems you had with each employee.
If you had a problem, did you come up with a solution and implement it?
Do you have a program in place for cross training employees?
Are any of your employees willing to be cross trained?
Are any of your employees willing to cross train others?
Who can you train to cover for or replace you?
What subs do you have an ongoing relationship with?
What subs are on your "don't use again" list, and what subs are on your "call first" list?
What is their record of on time performance both showing up for work and getting jobs done?
What are the strengths and weaknesses of each?
How was your safety record?
Did you hold regular safety meetings?
How did each of your jobs end this year?
Are you on good terms with the building owner or was it a relief to both of you to end the job? If things went wrong, where did they go wrong?

You should be getting the idea of where I am going with all this. You can't tell where you are or set a course for where you want to go until you know exactly where you have been.

Compiling the info above, plus anything else you can think of that is important, will give you a clear picture of your company and how efficiently it is running. It will also tell you how good of company owner/manager you are or have become. Honesty here, gang. No bs, no rationalization, put down the straight skinny.

Now answer these questions (from Tony Robbins):

What are the key strengths of your business? Do you have a unique selling point that separates you from your competition? Write it down.
What are the weaknesses or challenges of your business?

Put this down on paper also, so you can see it, read it and most importantly, own it. We are where we are and that is a fact of life. Face it straight on.

Now let's begin to apply it to 2008.

I have been through eight cycles in this business over the last forty plus years. A cycle is from a high with a great business climate and more business than everyone can handle, down to an economy in the toilet due to high interest rates and "Oh, woe is me", then back up to "Everything is Beautiful". It is the same old story. Things repeat themselves every five to seven years.

I think we are at or near the bottom of a cycle, waiting for things to get better. But it will probably hold steady until after the next presidential election in November 2008. That said, for planning purposes it would be good to assume that 2008 will be about the same as 2007. Take a conservative approach, and if you can beat your goals and projections, that's terrific.

Estimate how much business you will do in 2008. If you have been in business more than three or four years, you might be able to forecast an increase of 5-8 percent growth, maybe more depending on your market. If you have been in business less than three years, your growth can be as much as 10-30 percent as your business becomes known. Most if not all your growth next year will depend on your marketing program for 2008.

Remember, when the economy tightens up, you must increase your advertising budget, not reduce it. Those that cut back on their advertising when the economy makes an adjustment, go away. Cutting your advertising budget to save money is like stopping your watch to save time.

I recently spent three days working with a company in Florida that is doing exceptionally well in this business climate. They have a solid marketing plan in place supported by a good budget. They schmooze and they ask for referrals. They take self-promotion seriously and as a result they will do over $6.5M this year. Best part of it is their net profit is well over 10 percent. Their biggest concern is how to get the jobs done. It all boils down to your marketing campaign.

If you aren't sure how to estimate how much business you will do next year, use the Owner's compensation method. Determine exactly how much money you, as the owner, want to make next year, and divide that number by 8 percent (.08). The answer is the amount of business you must sell, build and collect for the company to support your salary.

You now have your sales goal for 2008. Let's say you want to sell, build and collect $1.5M. That is 7 percent more than the $1.4M you sold, built and collected in 2007. The math shows you can safely pay yourself $120,000 compensation for 2008. ($1,500,000 X .08 = $120,000). That should keep you focused.

Now the question that begs to be asked is how do you get that $1,500,000 in the door? Let's assume that your overhead figures this year (2007) were 31.5 percent of total sales. Because the economy is tight and will be for the next year, and your focus needs to be on getting (or keeping) your company debt free, you are going to force yourself to maintain the 31.5 percent overhead and spend not a dime more. That is the way a disciplined and prudent company is run. Cardinal Rule #8 is: You shall honor your overhead budget at all times, and spend not otherwise. If you haven't been doing that, this is a good time to start.

Our overhead for next year will be a total of $472,500, of which you will pay yourself $120,000, and 5 percent of your total budget is for marketing. 5 percent of $1,500,000 is $75,000. So subtract those two expenses off your overhead budget ($472,500 - $120,000 -$75,000 = $277,500). We now have $277,500 to pay the entire balance of the overhead for the company.
A side note. For larger companies, you might consider hiring a full time Marketing Manager. I have read several reports about companies putting such a person in place and it seems to be working well. It is worth looking into.

Now look at what you spent and where last year, and apportion the $277,500 available to pay those bills in 2008. Make a plan to have 2008 a "No New Toys" year. Sorry, but the discipline must start somewhere and this is as good a spot as any.

Now sales. Reviewing our numbers from 2007 we find that we sold 43 jobs with an average sales price of $32,558. If you sell primarily large jobs with a few small ones, throw out the small ones when calculating your average sales price. You want the average to be as close to average as you can get.

If your sale to leads ratio is normal, you will sell about 1 in 4 leads you go on. That means to sell 43 jobs, you need 172 leads. For safety's sake, add about 20 percent to cover the possibility of more "tire kickers", "I want a square foot price", or "I am just looking for the cheapest price" calls next year. 172 plus 20 percent means you need 206 leads.

In your review of 2007, you found that your average lead cost you $73. So in 2008 to generate 206 leads, you can reasonably expect to spend 206 x $73, or $15,038 to get the leads in the door.

This is well short of the budgeted $75,000. Where does the balance of the money get spent? Part of your review from last year was to:

List all of your various lead sources.

List the leads and sales in each category.

Then, Calculate the cost of each lead in each category.
That tells you where the best place is to spend the initial investment of $15,038. Now let's enhance the number of leads that come in from each source. If you know that your web page generated half your leads last year, it would be smart to enhance your web site so you get the maximum advertising value from that page. If you do kitchens and baths, why not have a web page for each? Can you add testimonials or pictures?

Have you tried direct mail advertising? What have you tried that generated the type of leads you want? That is where to focus your money. Check the results monthly to see the results and adjust your advertising as needed.

Next week we will continue this exercise and finish planning for 2008.

THE SALES CALL: Why do your customers tell you "your price is too high"?

2007-11-20T09:57:00.000-08:00

Good question. Do you think for a minute that they really know one way or the other if your price is too high? Consider this. If your customers did in fact know that your price is or was too high on any given price quotation that you have given them, you and your company would not be necessary. They would do the work themselves.

"Your price is too high" is a tired old line that your customers have been trained to use to get you, the contractor, to lower the sales price of your work. They have been told by the media, their neighbors, someone at work, their family, whoever that if they tell you "your price is too high", you will, in alllikelihood, change the quotation to some lower number. You will do this in hopes of getting their job. That is exactly what most "order takers" will do. The good salesperson knows better and doesn't lower their price, unless the customer changes the job.

"Your price is too high" (and that statement can come in a number of different forms) simply means that you have not done your job as a salesperson. Plain and simple, you have been lazy and have missed some very important steps of the sale.

You have not pinned down the budget to the point that you know what they want and are willing to spend. We outline this procedure in our seminar on sales, on our tapes of the M & P seminar, and we also talk about it at length in our Markup and Profit book. To get a "Yes" when asking for the order, you must get the four basic questions answered.

Those four questions are:
1. What do you want to do?
2. When do you want to do it?
3. Who will make the buying decision?
4. What does that person(s) want to spend?

If you get the answer to those four questions, you will get to "yes" much quicker.

Sticking to and getting the answers to those four questions will help you determine if your customer is in fact qualified to buy from you. You will also eliminate most of the so-called "sales objections".

Knowing the answer to those questions will take your sales ratio from 1 in 5 to 1 in 3 very quickly. It will also give you the ability to raise your markup at least 10% to 15% and keep your sales ratio the same.

Learn the technique, ask the questions, get the answers and watch not only your sales increase, but your profits increase as well

Copyright © 1999-2005 by Construction Programs and Results. All Rights Reserved. No part of this website or content thereof may be reproduced, distributed or transmitted in any form or by any means, nor may any part of this website be stored in a database or other electronic retrieval system, or any other website, without the prior written permission of CPR.

Getting Your Phone to Ring, Part 4

2007-10-30T07:22:00.000-07:00

One of the things we've heard over and over again recently is, "We don't have any leads coming in. Our phones are dead!"

When I ask how they spend their time, almost always their focus is on building jobs. When the market gets tough, your focus must be on sales. You can be the best mechanic in the world but if you don't sell jobs, you have nothing to build. That is the reality of our industry today.

Brian Tracy said, "The key to success is to focus your conscious mind on things we desire not things we fear." If you desire a profitable business, you must get out there and sell.

Let's take a look at some of the ideas sent to us by other readers.

First, from my buddy Sonny Lykos (this is also posted on our blog):

"One of the reasons Michael offers a free newsletter is the same reason others do. It's reading tells the customer or potential customer that its author is an expert in his/her field."

"Several months ago I stopped sending my own one page, 2-sided newsletter I created on my word processor. Nothing fancy; only information. I stopped it due to the large numbers of calls I was receiving from it. Some of the people that called said things like: 'Mr. Smith received your newsletter and made a copy for me. Can you come and give me an estimate on some work I want done? You seem to be the caliber of person we need.'"

"If anyone's interested in doing the same, email me and I'll email you back with a couple of copies to give you an idea of it's simplicity and contents. It was a quarterly newsletter that only took about 1/2 to 1 hour to create since I used the same format for each issue. It was snail mailed and emailed to them. I also kept several copies in my truck to give away to neighbors of my customers."

Sonny Lykos, Construction Solutions Systems, Inc.
Naples, FL slykos1@earthlink.net

I recently spent the day with Sonny as he made his rounds. He does, in fact, carry copies of his newsletter with him and is ready to respond to any request by a customer for more information about his business.

And another note from Brad Stearns, whom we also quoted last week. This guy is full of ways to promote his business, and they work. He is as busy as he wants to be. What downturn?

"Thought I'd relay another strategy I use to create more business with an example. I asked and was approved to be a vendor for a local elders service agency. As we boomers get older we will need many more services – especially with the rise of efforts to keep seniors in their homes. My first request was to meet with a man about patching a 'Top hat size' hole in an asphalt driveway so that no one would trip on it."

"When I arrived at my appointment I was actually met by a group. It turned out that the driveway was shared by a group of condo owners all 70 and above in age. I was there for several hours putting together plans to rebuild several porches, replace rotting wooden gutters and fascia (which we are very experienced in), and repairing numerous small safety and security needs. In the end, conversations turned to the possibilities that when we're done with the outside work before winter we could discuss new kitchens and baths. Not bad for a day's work that started out as a small quick asphalt cold patch job."

"I wanted to provide this example for another reason. While we are very busy, I here the same complaints you hear about how slow it is and getting worse. Since we are so busy with new leads and business, I've been intrigued why I see lots of work available and others don't. So I started to ask non-referral prospects about how they found us and why they called us and not someone else. 'I couldn't find anybody' was the most common refrain. Our yellow pages book has 13 pages of contractors, so it's not a shortage of contractors. I began asking why they couldn't find anybody. The answers were very telling of our industry. The consumer couldn't figure out what the contractor did because either:

His marketing message was not clear
He claimed to do it all like 'you need what repaired? I do that' which makes people distrustful
The consumer didn't know how to locate one or (here's the best one)
They couldn't find someone who KNEW HOW TO LISTEN."

"The last one is a huge issue. I can't count the times when I went to a prospect's home, let them speak and walked away with a job."

"And of course you know the other complaints: Appointments were not kept and calls were not returned."

"You already know some of the ways I make myself available to be 'found' but one of my favorites is yours: hand out a minimum of 4 business cards a day!"

Best, Brad

I could not have said it any better, Brad. (With the exception of the business cards - 4 is a lot of pressure, I recommend a minimum of 1 business card each day!) Returning phone calls and showing up on time for appointments is just as important as placing ads anywhere, direct mailing your stuff or even making phone calls to potential clients. Brad is a great example of someone who gets out and gets it done instead of sitting back and complaining.

One more comment about Brad's note. He commented that ads that say, "you need what repaired? I do that," make people distrustful.

That gang, is exactly why I have said over and over again. Don't try to be all things to all people. Pick three things you do well, three things you know you can make a profit on and pass on all other work. Stay focused on what you do best.

Now from Odus Sweetin, some thoughts on radio and newspaper advertising.

"A tip you may share for low priced advertising sources. Seek out the new and upcoming radio stations, little existing station completely changing their format, community newspapers, community news inserts in a larger newspaper, etc., for low cost ads in your target market. Some of us are small businesses. We do not need a great number of leads to meet our planned production goals."

"Normally you will find that if you start the media source off and become loyal, lots of deals come your way first. An example locally is our local online news. When it started out, it was a long time group of downsized/phased out primary newspaper editors. Obviously, they would have a great following. A yearly ad in a prime location was $750. Then it went to $950 as readership increased. If you started with them in the early days, your costs are the same now. New advertisers for the same space now pay $1,950 per year."

"In advertising, one thing is the rule; big is better. It generates more leads so we have a lower cost per lead. If we must be big, we can be bigger with the smaller costs."

Have a good day,
Odus

Odus has a great idea, especially as a long term advertising strategy. And as Morris DeShong discussed last week, long term advertising is much more effective than hit-and-miss.

Last week, I also mentioned the importance of a website. We've been asked for ideas on quality websites for construction companies - I'm going to list a few of the ones we've seen and admire.

Roy Kennedy sent me a link to his web page. Notice on Roy's site that he has a section on Home Tips. Additionally, he makes it easy for his customers to sign up for his newsletter.

Another example by Dennis Gehman, who also offers a newsletter. Notice also that Dennis has a focus on just the work he wants to do.

I've talked about the importance of having a website that loads quickly. Check out Burgin Construction. Brad and Rhonda do a great business and they get many leads through their web site.

Here are more impressive web sites from companies we know:

http://www.johnsonassociatesdesign.com

http://www.bulliardconstruction.com

http://jtconstructionllc.com

http://www.harbourtowne.net

http://www.kirkwoldhomes.com

Note, Michaels other three parts will be available soon.

ARE YOU DOING DONKEY WORK?

2007-10-08T10:41:00.000-07:00

Time Management is one of the most misunderstood and most abused elements of our business lives.

There are three basic uses of time in your life. The first, and by far the most important should be the time with your family. Do you want more time with your family? Then let's look at the second use of time - Donkey work.

What is "Donkey" work? It is the time you spend chasing your tail, doing things that will not increase your bottom line, and in fact might cost you money.

Not delegating is a major problem with most contractors that I've spoken to across the country. Here is where my Cardinal Rule # 4 kicks in. You must put your ego in your pocket and trust that someone else can do a particular task as well or better than you can. Doesn't make any difference what the item is, if you can find someone else to do a given task. . . . "Delegate". Even if they can't do the task as well as you, big deal. As long as it is done adequately, that should be good enough. Too many people in this business get hung up on the idea of "we build great quality into all our jobs. That is what we are known for!" Yes, but others can provide quality work for you. "Delegate".

Delivering materials to job sites. Oh the pain of it all. Millions of dollars are wasted each day by the owner of a construction company running around delivering materials to job sites. If you are doing that, you are wasting not only your time and money, but it should be ample warning to you that you have not delegated responsibility for material procurement to someone on the job site as you should have.

And, now my favorite subject to rag on some of you about . . "Working On The Job With The Tools"! More millions are wasted here each day also. Put the tools away and run your business. The best you can ever hope for working with the tools is to make a living. Maybe, if you're young, have lots of smarts and know what you're doing, you can make a good living. Bottom line, you will never make any money. Physically you can't work enough hours, nor can you bill enough hours each week. If you are over 35, you should have all the education you need on how to build a given job. It is time now to put the tools away and run your business. A good rule of thumb for time management in a construction company is that the owner should spend 50% of their time on marketing and advertising and 50% of their time running their business.

Now I know I'm going to get some squawks from readers that don't believe this, or are convinced that they must be on the job site. So, those of you that have been to the M & P seminar, and have put your tools away, or have started to put the tools away, would you send me an e-mail and tell me what your profit picture has done since you put the tools away and started running your business? I would greatly appreciate the input. I know a bunch of you promised me in class that you would put your tools away and you have. We would love to put feedback in a future newsletter to show what happens to company profits when the owners start running their business instead of letting their business run them. Thanks for the help here.

Ok, so what is the third use of time? It is staying focused on "Making a Profit ". Everything and anything else you do in your company is "Donkey Work". No, you probably don't want to hear that, but it is true. If you are not focused on making a profit, then you are focused on "Donkey Work".

Forget about "being competitive", that is an absolute money loser. You must be profitable. Forget about delivering materials to a job, delegate. Forget about working with the tools, hire it done.

Forget about sitting in coffee shops or association meetings with your buddies. That is time you could be spending on a whole laundry list of things for your company. And last but not least, forget about "donating" your time to associations or other groups (unless it is with your family). Donate your time to your family, they are the most important "business" you have.
Do these things and watch your bottom line grow to the minimum 8% net profit.

Copyright © 1999-2005 by Construction Programs and Results. All Rights Reserved. No part of this website or content thereof may be reproduced, distributed or transmitted in any form or by any means, nor may any part of this website be stored in a database or other electronic retrieval system, or any other website, without the prior written permission of CPR.

Customer Games with Your Money

2007-08-07T09:40:00.000-07:00

I believe a majority of the conflicts I see as an expert witness, arbitrator, consultant and business coach are a direct result of a lack of respect for our profession. I served as expert witness last week and this attitude was obvious from both the owner and his attorney. I'm not sure about the judge, but it was clear that he was not happy that his precious court time was being used by yet another fight between an owner and a contractor.

That lack of respect is generated by the business practices of many in construction who run their business as a hobby. Unfortunately, everyone gets painted with the same brush, and it allows some clients to believe they don't have to pay if they don't want to. We're going to talk about how to insist on respect (with kindness).

First and foremost, don't drive around and give out "free estimates". As we outline in our new book, "Profitable Sales, A Contractor's Guide" and our video, ask and get answers to the four basic questions, get the budget set, and then design the job to the budget. Your design, estimating and proposal writing work should be done only with a design agreement, letter of intent or some other device that gets you paid for your time and effort. The rule in your company, and especially for the sales staff, needs to be "No freebies for any reason." If the customer wants you to work for free, find another customer. You are not in business to give out estimates or other work for free. You are in business (or at least you should be) to provide a service to your customers and make a profit doing it.

When you and your customer have agreed on a budget, designed the job to that budget and agreed on the job to be done including the price, it's time to write a solid, clear contract. The contract should include your proposal for the service or work, the legalese language necessary, a clear payment schedule, and the Right of Rescission. The contract should have a clearly written definition of how Change Work Orders are to be handled, and what happens if the payment schedule is not kept.

What happens? Example: You are working on a job, either a new home or a remodel and the owner has obtained financing from a lender. Your contract calls for a progress payment. For whatever reason the owner does not get it to you on the date specified. Don't just remind the owner that a payment is due and then go right on with the job. Bad plan. In your contract, specify that if a payment is not made on time, you will wait 24, 36 or 48 hours for the payment and then you will shut the job down. If you shut the job down, you may also file a lien against the property at the same time.

If you really want to let the folks know that you are serious, include a clause in the contract that says if you have to shut the job down, you will charge an additional $750 - $1,000 to restart the job.

Now, if the owner is late with their payment, shut the job down. No ifs, ands or buts, shut the job down. If you don't, you have accepted the owner's new terms on the contract. From that point on you will have a hard time getting any court to help enforce the terms of your original contract because you knowingly let the owner breach the terms of that agreement.

You have heard me say before that when we set foot in a courtroom, we are assumed guilty unless and until we can prove our innocence. To that end, it has been my experience that most courts will expect you to adhere to and convey the terms of your contract to the owner. You are the expert, you wrote the contract, and it is up to you to make sure both parties follow it.

Now, let's suppose the lender insists on an inspection to justify draws against the project. Here is where careful forethought and wording on your contracts is necessary. Suppose you ask for a draw at the 40 percent completion point. The lender says the job is only 30 percent done and wants to issue a check for that amount. That will short you 10 percent of the money that is due and you have probably already spent. Bad plan.

Make your draws based on a start or completion point. Insist that the draws be issued on the point in the job you are at or you will either charge interest to the owner for the delay in payment, shut the job down, or both.

I hear it already - "You can't do that." Why not? If you are smart and word your contracts correctly, you can do just about anything you want as long as it doesn't violate the city, county or state laws that apply. In this case, state usury laws would probably apply so be sure to talk to your attorney and include language in your contract that specifies how and when you will be paid and what the penalties are if the owner doesn't comply.

If you let others either write the contract or if you don't know what your legal rights and obligations are pertaining to how you are to be paid for your work, it's your own fault. You have to know the laws as they apply to your business, because that's part of being in business.

For those of you in California, I deal with California's stupid state laws all the time with our coaching clients. I know all too well the conditions that the well-meaning but ill-informed bureaucrats in Sacramento have dumped on you. You, above all others, need to be sure you know the laws and any workarounds that your attorneys recommend. Yes, there are several workarounds pertaining to such things as down and progress payments.

Ok, so suppose you shut a job down and one thing leads to another and now you have to file a lawsuit to get your money. Before you do that, make sure of the following:

You have an attorney who knows the law and preferably one who knows construction.

You have written a clear, solid, fixed figure or guaranteed price contract. (Not cost plus or time and materials.) You have kept your end of the contract and wrote change work orders whenever a change was made to the job.

Your contract carefully outlines what an allowance is, how and when it will be used and the amount you will charge. Additionally, it spells out exactly when you expect to be paid for the allowances and when you will issue refunds on any allowance amounts.

And your contracts include clear and concise language that spells out exactly how the job punch list will be handled.

I'm sure there are any numbers of other things that can and should be included, but those are the big ones.

One last issue.

Suppose you aren't getting paid for your work. You place a lien on the property. The Owner can bond around the lien, thinking they are taking the wind out of your sales. Maybe, maybe not. I read the following at the website of Levy . von Beck & Associates, P.S..

Here is what they had to say about bonding around a lien claim:

A properly perfected lien claim attaches to the real property that is identified in the lien. This means that the property owner cannot refinance or sell the property without taking care of the lien. In many states the owner or general contractor can, however, purchase a bond worth 150% of the lien amount and file it with the recorder's office. This will have the effect of removing a lien from the title. Many contractors and suppliers view this as a bad development, because it may relieve some of the pressure on the owner to resolve the lien claim quickly. Thus the property owner or the general contractor may threaten to bond around the lien, in an attempt to pressure the claimant to settle. In reality, however, bonding around the lien, or getting a lien discharge bond, is often good for the lien claimant, as a bond may provide a faster and less expensive legal remedy.

What does that all mean? It means, Pilgrim, that you need to get your derrière down to your attorney's office and get your contract language checked inside and out so you know exactly what the laws are before you enter into a contract with anyone. Every state's laws are different when it comes to a surety bond, so you need to fully understand the law in your are.

Customers can change between the day you sign a contract and the day you ask for a progress payment. Make sure your contracts are clear and there is no doubt about the payment schedule or the contract intent. Protect your assets.

FINDING GOOD EMPLOYEES (using your cell phone)

2007-07-03T08:07:00.000-07:00

Good employees, with a strong work ethic and knowledge of their trade, are already employed. When they want to change jobs, they can usually do so quickly. That is why, when you decide to hire an employee, you also need to move quickly.

Here is a method that some of our coaching clients are using and so far it is working great.

Write a four or five line ad, starting with "Top Pay for (insert job name here)." Then list briefly what you are looking for, i.e., experience, must have own hand tools, late model vehicle, good driving record, no drugs or alcohol, whatever else you feel is important. The key phrase is "Top Pay for . . . " (If you can't give top pay, read our book "Markup & Profit; A Contractor's Guide". You aren't charging enough for your work.)

Put the ad everywhere you can: in the paper, on the Internet, on the bulletin board at the supply house. List your cell phone number - and make sure you have your cell phone with you to take the calls. When potential employees call in, here is what you say:

"I'm going to give you a 30 second commercial about the job, when I am done I want you to tell me if you can do it. You will be checked and evaluated during the first two weeks of employment so if you tell me you can do the job, be aware you will be checked and tested. I will not talk about money on this call. If you can do the job, we will meet later today or tomorrow morning, have some coffee, talk about the job, the pay and see if there is a fit between us. Is that fair enough?"

Now, notice that you won't talk money. That forces the potential employee to focus on the job requirements, and it stops your competition from calling and finding out what you are willing to pay good help. If the caller comes back with any questions about pay, they are the wrong person for you. Their focus is obviously on the pay, not the work, and it tells you they won't follow directions!

Give them the short commercial, describing the work and the requirements. Remember to keep it short and to the point. 30 seconds is plenty of time to tell them what you want. When you are done, you ask them, "Can you do that job?" If they say no, then say good-bye nicely. That is one less resume to look at, one less interview to hold - both you and the potential employee have saved time.

If the answer is yes, set a time and place to meet for coffee. When you meet, go through your normal hiring questions. If they measure up, hire them on the spot. Forget the resume and job history stuff. Good employees are not going to hang around waiting for you to go through the three to five week game of interviewing every guy in the world. Give your new employees a two-week trial period. If they make it through the first two weeks, there should be a second probationary period so you get a chance to really see what they are like and what they can do. The second period should be at least six weeks or more. At the end of the second trial period, you set their wage.

Remember, asking for resumes, former employers, and the rest of the fall-da-rah that goes with that approach seldom will get you the same truth that a short trial period will provide. If they don't work out, send them down the road and start over.

You should have an employee manual in place, and one job requirement is reading and signing the manual. If they won't sign the manual, don't hire them. In today's market, the deck is stacked more and more on the side of employees, and you must protect yourself and your company from those who are looking for a free lunch.

Using this approach, you will find that good employees are available, and they are ready to move ahead. Be ready to move ahead as well and you'll save yourself time and aggravation.

Final Comment:

I can't emphasize enough the value of a good employee manual.

I received a call from a company that terminated an employee. Almost a year later, the employee sued them for $26,000 for discrimination, etc. In your employee manual, include language that states they can only file a claim against your company for a period of 6 months after they leave. That limit has been upheld in the courts. Have your attorney write it, add it to your employee manual, and be sure that everyone, including long time employees, sign off on it. Cover Your Assets.

Calculating the correct Gross Margin for your company

2007-05-22T08:31:00.000-07:00

To continue our pursuit of making good profits this year, let’s look at calculating the sales price for your work using gross margins. As I said last month, thoroughly understanding the numbers is how the smart people in this business make money.

Using gross margins to calculate the sales price for your work is a more complicated process than using a markup times your job costs. That is why I always recommend the use of markup instead of gross margins. However, some folks started using gross margins and are comfortable with that, so let’s review that process.

We will use the same numbers as we did last month to allow you to compare the results.

Again, you must make 8% net profit on every job you do. This gives you a cushion against mistakes and the inevitable stuff that seems crawl out of the woodwork during jobs that leach our profits and can put our company in the red.

A specialty business that builds fences, decks or other outside work will normally have a gross margin 26% to 34%. If you set and use good estimating habits and tightly control your overhead spending, you will derive a lower gross margin to work with.

OK, same numbers as last month. Our sales goal is $875,000. We know we want an 8% net profit of $70,000, and our overhead expenses are (for this example) $210,000 (or 24% of sales). That means our job costs will be $595,000.

Job costs ($595,000) plus Overhead ($210,000) plus Net Profit ($70,000) = $875,000

Your basic formula to establish your sales price using gross margins is your job costs ÷ the reciprocal of your gross margin = sales price

The question then is…how do we get to our gross margin?

Gross profit is the total of our overhead and profit. In this case it is $210,000 (overhead) plus our net profit of $70,000 = $280,000.

Then, gross margin is our gross profit divided by our total sales:
$280,000 ÷ $875,000 = 32%

Now to use our gross margin to calculate the sales price, we have to jump through a couple of math hoops.

Our job costs for the Kopetski job are calculated by adding up your labor, materials, any subcontractor quotes and any other costs such as rental equipment, plans, permits, etc. on your estimate sheet. Job costs for the Kopetski’s is $5,690.

Now we must divide the $5,690 by the reciprocal number of our gross margin of 32%. That number is 1 - .32 = .68

Then: $5,690 ÷ .68 = $8,367.65 or $8,368 sales price.

One of the things I must caution you about is the arbitrary use of some number, which you divide into your job costs to get to the sales price. In most cases, when I talk to various contractors, they are using some number that someone else gave them. This number will be wrong for your company in over 90% of all cases. Why? Because another companies overhead expenses and their profit expectations almost certainly will be different than yours. No two companies will have the same overhead expenses. Therefore, they rarely will have the same gross margin.

Next time we will talk about why you cannot cut your markup or your margin on larger jobs. This is one of the old myths in this business that gets so many contractors into financial trouble. We will also discuss a couple of other math formulas that are guaranteed to help you make good money for your jobs.

You can learn more and get far more detail about your markup in our book, Markup and Profit; A Contractor’s Guide. You can find this book on our web site at: http://www.markupandprofit.com/books_mark.html

To learn to sell your services at a good profit, take a look at our new book, Profitable Sales; A Contractors Guide that you can find at: http://www.markupandprofit.com/books_sales.html

Calculating the correct Markup for your company

2007-05-01T09:22:00.000-07:00

Heading into the summer months, your fence or deck building business has many financial opportunities. Most of you would like to make a good profit this year. If you didn't last year, you are even more determined to be profitable this year.

Let’s look at how the smart people make money in this business.

To begin, you can decide to be either competitive or profitable. You can’t be both. If you decide to be competitive, remember that no matter how low you price your work, there will always be someone willing to be more competitive, and undercut your price. It's business suicide.

Statistics are clear that nine of ten contractors will fail in this business. The overwhelming majority of them fail because they are not charging enough for the work they do. So if you are busy trying to be competitive with other companies who under price their work, what does that make your numbers?

If you decide to be profitable, you need to learn two things. How to price your jobs at a profit, and how to sell those jobs. This article will discuss the first, we will discuss selling those jobs in the future.

To assure long-term success, you must make 8% net profit on every job you do. This gives you a cushion against mistakes and Murphy's Law that can put your company in jeopardy. We know from our coaching clients that an 8% profit on all your jobs gives you the ability to pay your bills and focus on running your company. Do you like the idea of being able to sleep at night without worrying about how to pay your bills?

Your basic formula to establish your price is Job Costs times Markup equals Sales Price. This is the simplest method of establishing the sales price for your work. A specialty business that builds fences, decks or other outside work will normally have a markup ranging from 1.35 to 1.55. Accurate estimating and tightly controlled overhead spending will allow a lower markup.

Example: Add up your labor, materials, any subcontractor quotes and any other costs such as rental equipment, plans, permits, etc. on your estimate sheet and get your total. Let’s say for the Kopetski job, that total is $5,690.

Then: $5,690 X 1.45 = $8,250 sales price. The smart salesperson knows they always quote using odd numbers so this $8,250 number would then become $8,297 to the Kopetski’s.

Suppose your labor figures for the last several jobs have been higher than you estimated. Your labor is running 6% high. To correct for this, when you estimate the next job, add 6% to the labor estimate and then total your costs. Apply your markup, then sell and build the job. Now, you will find your estimated amounts and actual job costs coming in much closer together. That is smart estimating.

How do you set your markup, especially if you haven’t been in business very long or your numbers were not consistent over the past few years? You don’t know what your volume of work was or will be and you need that number to set your markup. Here is a very simple method that works.

Figure out how much money you wish to pay yourself for owning and running the company. Remember, this is an overhead expense. If you are working on jobs, your wage is a job cost. Never consider your salary as payment for working on jobs. If you do, you are giving your work away. What if something happens to you, and you need to hire someone to work on the jobs in your place? You won't make a penny. Additionally, the net profit from your jobs is not your salary. Net profit belongs to the company for growth and re-investment, etc. Pay yourself a salary. A good rule of thumb is 8% for owner's salary, 8% for profit.

In the next 12 months, let's say you want to make $70,000. $70,000 ÷ by .08 (8% of sales) = $875,000. That means you must sell, build and collect $875,000 for the company to support your salary of $70,000. Now we have a sales goal that will meet your salary needs.

Now, establish your overhead numbers. Overhead expenses are any expense that can be charged to two or more jobs. Materials, labor, rental equipment, etc., are almost always job costs. Overhead is the rest of the stuff you spend money on and you must pin that number down tight. Don't forget your salary.

To calculate the markup, look at what we know. We know our sales goal is $875,000. We know we want a 8% net profit of $70,000, and our overhead expenses are (in this example) $210,000 (or 24-28% of sales). That means our job costs will be $595,000.

Job costs ($595,000) plus Overhead ($210,000) plus Net Profit ($70,000) = $875,000

Markup is calculated by dividing Sales by Job Costs -
$875,000 ÷ $595,000 = 1.4705 = 1.48 (Always round up)

So, until you revise your markup due to changes in overhead expenses or adjustments to your sales goal, your markup will be 1.48.

In a future article, we will talk about why you cannot cut your markup on larger jobs. This is one of the old myths in this business that gets so many contractors into financial problems.

You can learn more and get far more detail about your markup in our book, Markup and Profit; A Contractor’s Guide. You can find this book on our web site at: http://www.markupandprofit.com/books_mark.html

To learn to sell your services at a good profit, take a look at our new book, Profitable Sales; A Contractors Guide which you can find at: http://www.markupandprofit.com/books_sales.html

GROWING YOUR BUSINESS

2007-03-20T08:52:00.000-07:00

When Michael leaves next week for the JLC Live conference in Providence, Rhode Island, he'll carry flyers announcing our new book, Profitable Sales, A Contractor's Guide. The book will be available for shipment around May 31 2007, we begin taking orders next week.
In the meantime, we need storage space and are offering a few products at a substantial discount. The 6-hour Markup & Profit seminar on VHS video is now only $99.95, and on audio cassette tapes only $39.95 (with the Markup and Profit book included). While supplies last, inventory is limited.

We received the following note. "I would like to
see the best way to grow my company. Do I start with the office manager, the
sales person, the lead carpenter or . . . ?"

Here's the easy answer. Evaluate your own talents and abilities, and those of
your spouse if they are involved in the business. Then you evaluate what needs
to be done in your company, and if you do not have someone capable of doing
that job, then you will have to hire someone to do it.

But it's not really that easy. You need to be careful to not think only in
terms of what you "like" to do. Owning a business is not about doing
what you like, it is about what you and/or your spouse can do better than
anyone else. If you are doing what you are best at, not just what you like,
you are running and building a business that benefits everyone involved.

If you disagree, let me ask you - do you hire employees and let them
tell you what they want to do? Or do you assign what needs to be done based on
their talents and abilities? You must have the discipline to assign
yourself the jobs that need to be done based on the same criteria. As the
business owner, your goal is to get the jobs sold, built and collected, not to
do the things you like to do.

The second thing that you must do is to be sure that the money you need to
hire and pay a new employee is already included in the jobs sold before you
hire them. That doesn't just mean increasing your markup for future jobs. It
means making sure all jobs on the books that haven't yet been built will
generate the money to pay for the employee. If they won't, you have to wait
until the money is available.

Determine what pay is necessary to attract and keep someone long term. If the
person you want to hire will work on jobs, the expense is a job cost and will
be covered in your estimate. If the person to be hired will not be working on
jobs, but will be selling or supervising jobs or working in the office, that
will normally be an overhead expense. Add the expense to your normal overhead
and calculate your new markup before you sell the next job.

If you, as the owner, are skilled at both job supervision and estimating, and
you have the opportunity to hire an excellent estimator/salesperson, then do
it. You concentrate on getting the jobs built and let the new estimator
salesperson secure the jobs. When it's time, look for the job superintendent
you need and when they become available, add them to your staff so you can
focus on operating your business, not on jobs.

There is no cut and dried path to follow when hiring people for your company.
Careful planning, and evaluating yourself and your company for the talents and
skills needed is the only approach, and the answer will be different for each
company.

I will close by adding that you should always build accountability into the
pay of your employees. Create incentives for your employees to get profitable
jobs sold, and or built, and or collected. If paychecks are tied to
performance, you will see jobs built in a timely manner and at a profit.

Promoting Your Business

2007-02-27T09:31:00.000-08:00

Aaron Rosenthal sent the following note late last year:

"Would you care to have a section on business promotions within your electronic newsletter, for we who work alone and spend more time on the site than invoicing/sales calling/estimating/planning and rarely get concentrated time to look at the newer ideas of promotion of leads?"

Thank you Aaron, good request. I will share with you some of the things that have worked well for our coaching clients this last year. Not all of these will work for everyone, but they are certainly better than no advertising at all.

But first, I have to make a quick comment.

Invoicing (or billing) is a no-no. Put your payment schedule in your contract and get paid on that schedule. If you are doing handyman work, it should be part of the contract that all money due is paid before you leave the job site. There should be a penalty clause in your agreement (15 to 20 percent of the total) if they tell you, "I will send you a check" or "Send me an invoice and I'll get a check out to you".

Second thing, for those that work by themselves, remember that you can only work so many hours a day on the job. That means the best you can do working on jobs is make a living, possibly a good living. You will never make enough to retire on. If you want to make money in construction, you must grow and expand your business so you are running the business, and hiring others to do the work.

Okay, now let's talk about how to get your phone to ring.

The best advertising method we've seen is giving out one business card a day to someone you do not know. Over a given period of time it is the least expensive and highest rate of return of any advertising you can do. Your business card MUST have the following:

- Your company name
- Your name
- Your address, city, state and zip
- Your phone and fax number and possibly your mobile number
- Your email address and website.

All this should be on the front of your card. On the back of your card you can include your company slogan or specialties. The front should be reserved for a clear message on how the reader can reach you. Your phone number should be on both sides of the card (if both sides are used).

In 2006, I collected about 1,200 business cards from attendees at classes and seminars I conducted. I get business cards from only about 35-40 percent of those attending. Sometimes, I only receive a piece of paper with the contact info handwritten on it. I assume that many of those who don't give me a business card don't have one with them. Your business card is as important as your credit card - "Don't leave home without it".

Of the cards collected, many don't have any address information. If that sounds like your business card, let me ask you a question. If I were your customer, and I wanted to send you a check, where should I send it? Make it easy for your customers to contact you - include your address.

Second best means of advertising is a website. You must have a website in today's market place. Many who have the money to spend on remodeling or for a new home do their research on the Internet first. Contractors tell us that their customers research on the Internet long before they call a contractor.

Unless you have extensive training in website development, don't try to do your own website. Time and again we hear from contractors who are getting few if any calls from their website. When I ask who designed the site, it is almost always "I did". These same contractors holler loudly when firemen, schoolteachers, and others with large blocks of time away from their real jobs do their own remodeling or build their own homes. Pay a pro to do what they do best, and you do what you do best. Websites can easily produce half or more of your leads. Make your site a quality one.

Job signs and vehicle signs are still very good lead producers. Let's take it one step farther. Do you (or your sales people) visit at least 20 homes in the immediate area where you have a job sign displayed during the course of a job? You will get your highest rate of sales per contact doing it. During the approximately 30 years I actively sold remodeling, I often canvassed the neighborhoods around the jobs we had working. I would get at least one sale for every 22 to 24 doors I knocked on. That is one sale in twenty-four contacts. What other type of advertising can you do that will get you that high a rate of return for either time or money invested?

Have you thought of putting before and after pictures of your jobs on the side of your vans? One of our contractors told me he has before and after pictures of a nice kitchen remodel on his van. He has had people follow him to job sites and ask him if he would come to their home to talk about their kitchen remodel. If you haven't tried it, you will never know if it will work for you.

Aaron, above, mentioned that he was sending an electronic card to potential customers. I think that is a good idea. Add a note that it is a one-time mailing and apologize if you have inconvenienced them in any way. Or how about sending a quarterly newsletter?

One more idea for those interested. A good friend of mine, Dave Lupberger now works for Service Magic. He told me they are making many changes to the way they deal with both contractors and the buying public. Here is what Dave said in a recent email:

"I'm trying to help Service Magic develop a 5 or 6 step training program to help contractors be more successful using the 'SM system.' I've been putting together individual training modules with the following content:

1. Getting Started
2. Setting Up Your Online Profile
3. Managing Your Leads
4. Qualifying Your Leads
5. The Powerful Presentation Portfolio"

I have known David for many years and if he is involved with anything, it is going to be done right. So, if you have tried Service Magic before and it didn't work for you, you might want to take another look at the service they provide. They are trying their best to eliminate problems that some had in the past, and with David on board I would not hesitate to recommend you check them out.

Another good lead generating system is a direct mail campaign. Here again the success of the campaign will depend almost entirely on the piece that you send out. Whatever you send, it should be built around addressing your customer's three basic fears. If you don't address those three fears you will be wasting your money. Don't pick just any ad agency to do your mailing piece. They may have a big name in your city or town but if they have not done a mailing for a construction related company, you will end up paying for their learning curve. Find somebody that has done it and can prove their success.

I received an email recently from a young guy crying the blues about how bad business is/was. One of his biggest complaints was that his advertising simply did not work. The only leads he got were from people who were price shopping, looking for the cheapest deal. (He wrote his own ads by the way.)

Well my friends, if you are getting that type of response, then you are advertising to the wrong people or you need a major overhaul on your advertising piece. Focus on the clientele that know and understand that one gets what one pays for. Those people are out there in buyer land; you just have to find them.

We wish you well in 2007. I hope you have your sales goals set and an advertising program in place to make the sales happen. Remember, cutting back advertising to save money is like stopping your watch to save time.

Make Every Possession Count

2006-12-19T09:07:00.000-08:00

Markup and Profit is a new feature to FenceWeek. Michael Stone is a coach and consulant for construction companies throughout the U.S. . Although the advice is not specific to the fence industry, we hope you agree that his advice is spot on.
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When asked why he thought the Chicago Bulls achieved an NBA best 72 and 10 record, Michael Jordan's response was, "We make every possession count". Now that may not seem like an earthshaking statement, but when you apply it to your personal life and your business, it is profound.

The possessions we are talking about are the things that you do every day in your business.

A possession is a phone call from a potential customer. It is the lead that you set, the sales call that you make. It is the presentation that you give and the contract you write.

A possession is the schedule you make for the job, and getting the job started and completed on time. It is the contacts you make with the subs and suppliers that will work with you on the job and the neighbors that live around the job. It is doing the job you contract for and leaving happy customers.

A possession is a call from a newspaper or a magazine asking about you and your business and it is your presence in a local trade show or county fair. It is organizing your time so that you have time for your wife/husband and your babies each day and on the weekends. And just as important, it is being thankful for all these possessions.

As you go through each day and each week, every possession will either be won or lost by you. You can rationalize, debate and discuss, but the bottom line is you are the responsible party. What are you doing about it?

Are you and your staff well trained on the phone, answering it properly and returning all your calls the same day or by 9:00 am the next day? Do you have a lead slip to record all the information that the potential customer gives you before you end your first call with them? Do you ask the appropriate questions of each lead to be sure they qualify to buy from you instead of them qualifying you to sell to them?

Do you arrive at your sales calls on time, well dressed, hair cut, shoes shined ready to do some business? Do you ask questions and really listen or do you spend your time talking about all you know. When you write a contract is it complete and blessed by your attorney?

Do your jobs start on time and do you complete them on time, with no excuses? Are your jobs kept clean from start to finish?

Do you follow up your jobs with a questionnaire asking how you did, and then asking for at least two referrals? What kind of advertising program do you have in place to keep leads coming in? And as long as we are doing an honest gut check here, how is your relationship with your wife or husband and your children? Are you a family? I have said in all our seminars, your business will be a direct reflection of your marriage.

Many contractors that write us are having a problem with their business, and in many cases, the contractor has simply lost focus on what is important. The owner of the company has drifted into dealing with minutia, instead of staying focused on the purpose of being in business.

Stay focused on winning. You are in business for just one thing: to make a profit, enabling you to take care of your family and provide for your future.

You're not in business to drive around and give out "bids" or free estimates. You're not in business to provide a free design service or to make selections for the customers. You're not in business to provide jobs for other people, including family members.

You must stay focused on making money (winning). The way you do that is to make every lead, every sales call, every job, and every possession count.

'tis the Season - Avoiding Those Holiday Hang-Ups

2006-11-14T09:48:00.000-08:00

We are taking a break from our usual Sales newsletter to discuss a timely issue - business planning for the holidays. Tisha A. Kuntz is our guest writer, and we appreciate her offering this article for your benefit.
Tisha is an interior designer and construction manager, owner of Verdugo Hills Interiors. Her Burbank, California-based company's work has been featured on episodes of HGTV's "Designers' Challenge" and "Outer Spaces." Her work in the design/build industry includes consulting for TV production companies on home improvement pilot episodes. She's proud to say that many of her clients consider her "family".

Avoiding Those Holiday Hang-Ups
by Tisha A. Kuntz
The time is upon us, friends, that brings consternation about so many things - gift giving, receiving gifts graciously, whether the holidays should be used as a marketing opportunity, and more. Couple the confusion with all the personal stresses at this time of year, and you can see why many opportunities are missed for bringing good tidings to clients and co-workers alike.To help foster holiday cheer and make things a bit easier for you, here are some suggestions in quick Q&A format, taken from years of experience in being asked about professional gift giving. Here's how to give, how to get, and - best of all - how to get your business noticed during "the most wonderful time of the year":

Q: Isn't it a bit awkward to use the holidays as a marketing opportunity? Seems a bit cold-hearted to capitalize on Christmas and New Year, just to get our name in front of clients and potential clients.

A: You're not "capitalizing" on the holidays if your marketing is done tastefully and in the spirit of the season. Think of all the companies you hear from during Thanksgiving through New Year's - everyone from your local grocery store to the folks who change your oil. What makes their marketing memorable? The context they use to garner your attention and keep it, while conveying a sense of warmth. Some very effective ways of keeping your company name in front of your clients' eyes include:

Professionally-printed Greeting Cards

There are a plethora of catalogs sent to your door every year from companies that will, for a price, print sharp-looking professional greeting cards for you.
Many will tailor their greetings to say exactly what you want, of which we prefer the universally accepted "Season's Greetings and a Joyous New Year," and the cards will often come with your return address pre-printed on the envelopes. This saves time, allowing you to simply send the cards, sign the cards personally, or add a simple message if you wish.

Calendars

Not the full-sized calendars that are expensive to produce and leave your client wondering where to hang it - rather, the small calendars that are professionally printed and fit nicely into greeting cards. Some companies prefer the smaller calendars attached to a magnet that contains their logo and contact information. While these can be a bit on the pricey side, they are very effective and worth the investment. Best of all, they slip neatly into a greeting card and can be a constant reminder to the client, keeping your company's name ahead of the competition.

Note Pads and Post-It Notes

If you see your clients during the holidays, keep a supply of custom-printed notepads and pads of customized "Post-It" notes handy. These may not seem like gifts, but when you see clients and subcontractors, they're practical items that people appreciate and use. Each time they use that note pad or Post-It note, they'll think of you - and not someone else.

Do you live in a small town where you see many of your clients during the holidays? Are you finishing jobs and getting ready to complete pre-holiday walk-throughs and punch-lists? Here are some possibilities for nifty gifts you or your site supervisor can hand to the clients in person:
Keep a supply of boxed holiday ornaments in red, green, blue, gold and silver on hand in your truck(s) or sales vehicle(s). These inexpensive ornaments make a stellar impression on clients and sub-contractors alike; when they hang that ornament on their tree each year, they'll be thinking of you and your company's kindness.

Boxed and wrapped coffee mugs are still good options to have on hand, but please, never send out an empty mug. Always make sure you've included an individual sized coffee or some tea bags (nestled into the mug before it's wrapped) to soften the look of yet another advertising mug.

Customized golf balls are a much-appreciated option for those clients who like to hit the links.
Gifts to avoid include plants, because some people will be allergic or will have pets that tend to think of plants as "food." Seasonal arrangements, while beautiful and often cost-effective, can cause more worry than warmth.

As much as you may be tempted, please remember that using advertising pens as gifts are completely passé, and are to be used mainly by your sales staff in conjunction with business cards at the close of a contract.

Q: My company doesn't have money for those fancy pre-printed cards and little magnetic calendars. Any ideas for smaller companies that have a next-to-nothing marketing budget?

A: One of the best ways to make your marketing money stretch is to purchase cards at after-holiday sales, in advance for next year's season. You can find appropriate cards at 25% of their retail price, which slashes the costs sending greetings at year's end. Often, holiday postcards are available, which allow for a brief personal greeting and are mailed at a lower cost than conventional cards. Look for them on sale at year's end as well, because they're another way to really stretch your dollars. Don't be tempted to make cards on your computer, however. Unless you have a wizard in your office that knows how to use standard card stock and create beautiful custom cards, the expense of "print-it-yourself" cards is higher than you think. Not only are you paying more in ink costs; you're paying your staffer(s) more to create, print and assemble the cards. It's easier to pay one or two people to write a personal message and address cards you've purchased.Instead of sending a calendar, go to your local "big box" office supply store and purchase business card-sized magnets, which have an adhesive side to attach your business card. This is a very cost-conscious way to compete with the "bigger guys" while keeping your marketing costs to a minimum. The magnets slip into your greeting cards along with your warm wishes, and everything ships for the price of one postage stamp.

Q: When should I send cards? Is there a hard and fast rule, like before December 15th?

A: Being among the first, such as the day after Thanksgiving, usually means your card will get lost in the shuffle. After all, many people are thinking ahead to the busiest shopping day of the year, and the mail won't get as much attention as it deserves. However, please do keep in mind the guidelines set forth by the Postal Service, because even local mail will have delays during the season. An old marketing trick is to try and plan for your correspondence to arrive on a Tuesday, which seems to be a good day to get noticed. It's worked in the past for so many companies, though, that we tend to have "junk mail Tuesday" in our area. The best advice: Mail on a day that "feels right" to you, because you know your clients and the local marketplace best.It's also better to send cards late, rather than not at all. People are very forgiving when it comes to getting cards a few days late, usually thinking the Postal Service had more to do with the delay than you did. One year, I actually sent out a "Christmas in July" mailing and it worked well. You've probably seen those "Christmas in July" sales and chuckled at the thought, but it can be a very savvy marketing strategy for kitchens, baths and projects requiring a lot of lead-time. (Think about how long custom cabinetry takes, or special appliances, or, well, you know exactly what happens with lead-times.) With "Christmas in July," all of a sudden you'll hear from clients who want a new kitchen, bath or family room to be completed and decorated no later than the start of the holidays. By beginning in summer you can deliver on your promises and boost your sales goals as well!

Q: We did well enough this year to give our best clients small gifts, but we have no idea what would be most appropriate. What would you suggest?

A: Good news! Thinking "small" opens a variety of new opportunities, especially when it comes to gift giving. Here are some very effective ways to acknowledge your clients, while invoking the warmth of the season:
Turkey certificates from the local grocer, which can be tucked into a greeting card. Imagine the good tidings you'll bring by putting a beautiful bird (or country ham, roasting chicken or deluxe side dish) on their table. Food is a very powerful persuader; something unique will make sure you're remembered for a long time to come. Fruit baskets are almost always welcome, because of their universal appeal. Rather than pay a store to choose the fruit and assemble the baskets, delegate this or enlist some help from your staff. Here's a cost-conscious way to bring on the baskets: Choose smaller, inexpensive baskets from your local craft store or "big box" market.
Line each basket with tissue paper purchased in those huge bargain packages (red, green, gold, white, be creative). Add polished apples, pears and juicy oranges - or your favorite selection of fruit. For special effect, toss in a handful of holiday candies in bright wrappers.
Wrap the entire basket in colorful plastic wrap, and then top with a bargain bow.
Don't forget the card, thanking them for their business and wishing them a wonderful New Year!

Gift cards are always nice, especially for couples sharing similar tastes in music or books. Seasonal music CDs are another option, but that's a bit trickier because some prefer jazz versions, others purely classical, and so forth. Movie tickets are a welcome gift, because it offers a two-hour escape from the high-energy hassles of the holidays. Careful, though, because sometimes discount movie passes have strings attached like "blackout dates," that can frustrate rather than relax the recipients. While a box of chocolates may seem to be the way to go, unless you know for a fact that the clients are chocoholics, it's best to skip the candies. Not only is it passé to pass the truffles, it's also hard to know if the clients have health issues that prevent them from partaking.

Q: Should I invest in a case of premium liquor and gift my best clients with a bottle of something special? It seems like an easy route to take.

A: Excuse me? You're a contractor and you'd like to do something the easy way? Are you sure you're a contractor? This is a situation where the "easy route" isn't the best route. (Sound familiar?) There are just too many variables on who drinks and who doesn't, who prefers vodka to another liquor, what brand is the best is any given category, and, well, you get the idea.
It makes much more of an impression to provide your best clients with something their entire family can enjoy. For the price of a bottle of premium liquor, you can instead purchase a gift card toward a "movie night," or an ice cream treat, or a small gift basket. They'll not only be grateful you thought of them, but they'll be impressed you gave them something they can enjoy together. Don't forget to slip that gift card into their holiday card, to add an element of presentation to your generosity.

Q: One of my best clients came in and presented me with a bottle of premium liquor. I've never been much of a Scotch aficionado but would have taken well to a bottle of Cuervo 1800, so I'm at a loss for what to do. I thanked him very kindly for his extreme generosity, but now what?

A: We all have our preferences when it comes to libations. Many of us keep something on hand at home, when folks visit who may enjoy a drop of something. Add the Scotch to your personal liquor cabinet, and mentally toast your client's good wishes each time you bring out the bottle for friends.

Q: We made a profit this year and would like to give a small gift to each employee. While we didn't do well enough to provide actual holiday bonuses, I wanted to do something special for everyone. Is money the only option?

A: Actually, there's a lot you can do to help your entire staff feel appreciated and cared for, and it's easier than you may think.
No big bucks for a catered holiday party or sit-down banquet? Have a "potluck" or "carry-in" lunch, where everyone brings in something. (Yes, even those guys in the field can stop by and pick up fried chicken or some potato salad!) This gives everyone a chance to see each other and exchange season's greetings in person, especially if your office staff only knows the rest of the team by reading their names on pay stubs.
It's relatively inexpensive for you to pick up some of the following: Gift cards to local merchants, a gift certificate for dessert at a fancier restaurant, Baskin-Robbins ice cream certificates, cards for music or books, coupons for a free pie at the local bakery, vouchers for a free turkey at the local butcher or store. You get the idea. These, combined, cost considerably less than giving employees a percentage of the profits that you cannot currently afford. And best of all, it lets you "personalize" the gift to the employee; especially if you know Suzie in payroll is an avid reader and you've got a gift card for her from Barnes & Noble.
It's not the monetary value of the gift that your team will think about. It's the fact that you genuinely wanted to acknowledge them, you appreciate them and you cared enough to find a way to make their season brighter. (Note from Michael: Be sure that it is clear to your employees that any bonuses or gifts given are based on merit and are at the owner's discretion. Do not base them on length of time on the job or the time of year. Your policy on bonuses should also be detailed in your employee manual. This issue can be used to cause legal problems for you by your employees if you aren't careful.)

Q: The guys on the site are giving me a hard time about "throwing my weight around." In this case, they mean donuts, so I'm cutting back on all sweets. What should I do with this two-pound box of handmade chocolates, given to me by a grateful client?

A: Since the guys were on you about being a bit broad in the beam, it goes not to them but to those hard-working folks in the office. However, if you park that box of "fat pills" on the desk of Gracie (otherwise known as "The Office Manager Who Is Watching Her Girlish Figure"), be prepared for her to turn cranky. To paraphrase some words of wisdom heard in a subcontractor's office, "If the Office Manager ain't happy, ain't nobody happy!"
No one likes to have temptation staring them down over a cup of coffee, so please place the chocolates (or cookies, cakes, etc) in a location available to all, but tempting to none. And don't forget that brief "Thank You" note to the client for thinking of you.

Q: Wouldn't it be quicker to just call my clients and wish them "Happy Holidays"? It would skip a lot of hassle of sending things, would probably be cheaper in the long run, and they'd get the personal touch of hearing my voice.

A: It's a thoughtful gesture to want to call your clients, however there's more time involved than you might realize. A card allows the entire family to enjoy your thoughtfulness, and it is genuinely is less expensive than you taking the time to try and reach everyone individually.
Unfortunately, it's also a legal issue. Nothing puts a damper on the holidays faster than a lawsuit, and if you call your clients your holiday cheer could be misconstrued as telemarketing. With the "Do Not Call List" and other telemarketing laws in place, it's better to contact your clients by mail. Otherwise, what you meant as a caring gesture could be twisted into a legal hassle that spoils the joys of the season.

NASTY CUSTOMERS

2006-10-23T10:48:00.000-07:00

Markup and Profit is a new feature to FenceWeek. Michael Stone is a coach and consulant for construction companies throughout the U.S. . Although the advice is not specific to the fence industry, we hope you agree that is advice is spot on.
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A coaching client recently talked to me about a client being rude and nasty with both her and her husband. Maybe their client had a right to be upset, maybe not. Either way, this could have been prevented.

Sometime during the first call, the salesperson for the company needs to be sure the potential customer understands that you are not "whipping boys/girls". You need to impart to them they do not have the right to heap abuse on you as if they had some inalienable right to be nasty to you because you are a contractor.

Do this by explaining nicely, but firmly, that if they have any questions, concerns, or something they don't understand or like, they are to call you immediately. Tell them you will respond immediately. Let them know that you are a professional and will behave in a professional manner, and expect the same from all your customers. Explain that you will not respond to nasty phone calls, mean e-mails, scathing faxes. If there is a problem, you will come over and get it resolved immediately. (And do it! You can't give this talk unless you follow through!)

Now, they may or may not hear you, so it is possible they will get upset during the job and come at you with a nasty attitude. Your next stop is dead center in front of them. Politely remind them of the conversation about treating you with respect, just the way you treat them, and that if the nasty stuff continues, you will shut the job down until they clean up their attitude.

Now, you must also have a clause in your contract that states that in case of any disputes between the customer and you, or if the customer treats you in an unreasonable manner or does not abide by the letter of the contract, you have the right to shut the job down until all issues are resolved.

Conduct yourself as a professional at all times, and expect the same from your customers.

APPOINTMENT TIMES

A nice young fellow wrote in recently asking about appointment times. It seems that most of his potential customers want to see him in the evening or on weekends.

That is going to happen in this business. Part of the reason is the belief that contractors should be at the beck and call of their customer. But since most of your clientele needs a job to pay for their home, it's not unusual for them to not be available during business hours.

Try this. If someone asks for a late appointment, respond with, "We try to set our appointments during normal business hours." Now, that will work sometimes and they will pick a time that is good for you. If they say they can't get free during the day, ask if they can meet you during the lunch hour? But be prepared, because if you set that appointment, you will have to cover a lot of ground quickly (in an hour or less) and make a decision if you want to spend more time pursuing that job.

You also might want to consider changing your market. Write down your perfect customer and focus your advertising on that customer. You will see a difference in the calls you get. You might also want to read about our advertising manual. It will help you determine your perfect customer and how to advertise to them.

But sometimes you just have to take inconvenient appointments. It's part of the business. Be flexible

Disclaimer: Nothing in this newsletter is intended to be, or may be construed as, legal advice. I am not an attorney. You must consult an attorney before using any suggested language or any other information contained in this newsletter to determine if it conforms to your state laws or your particular situation.