Contract profit advantage: Solving problems to make money

For-profit businesses are founded for one reason only – to make a profit. True profit can only be realized after all operational expenses, including employee salaries as well as yours, are paid. Then, after paying the taxes owed on the profit, you get to keep the remaining monies as the reward you deserve for the delivery of excellence to your clientele and the risks you take in the delivery. 

In order to recover the costs you incur for your services and earn a profit, your task prices must obviously be higher than the cost you incur to perform any particular task. It doesn’t get any simpler than that. 

Unfortunately, contractors often do just the opposite and prove to be their own worst enemies. By utilizing flawed business protocols, they actually create the problems they face. Let’s look at a few of those business obstacles. Then ask yourself if you have experienced those troubles in your business.

Problem-Solution No. 1

“How much should I charge?” 

The wrong answer to this question leads to flawed selling prices based on which way the wind is blowing; the rates competitors are charging; the type of car in the consumer’s driveway; etc. The focus should be your true legitimate operational costs and proper profit margin. Incorrect pricing is the biggest problem you face in the PHC contracting business.

Cause: This problem arises from not knowing your business’ true operational cost; not applying a proper profit margin to your true operational cost; not having faith in your pricing protocols; fearing the loss of work; etc.

Problem result: You shortchange your business of revenue you should have brought in to recover your true operational cost, and give you the opportunity to meet your goal of making a profit.

Solution: Identify and calculate your true total operational costs and proportionate cost of each task before quoting prices. Apply a proper profit margin to your costs. Have faith in your pricing because it is based on mathematics and logic rather than guesswork. Then, sell your services above your true cost. 

Problem-Solution No. 2

Not addressing consumer questions properly leads consumers to not believe they can get the best bang for their buck by using your business for their requests. After all, as a consumer I’m sure you want to know if you are spending your hard earned money wisely. So does your clientele. 

Cause: When you or your employees do not think in a logical and honest manner before answering questions, the answers will be perceived as incorrect, and thus not trustworthy. 

Problem result: You won’t get as many jobs as you should have gotten which in turn, brings in less revenue to your business and hinders your ability to recover your cost and earn a profit.

If Solution: If you properly meld your professional wisdom, common sense, and the same honesty you would like others to give to you, while selling your services above your true cost, you will sign up more work for your business at prices above your cost.

Problem-Solution No. 3

“I can’t get good help!” is a complaint I have often heard from contractors. 

Cause: You don’t know how to seek, entice, and compensate good technicians for your contracting business.

Problem result: You can’t get good help. Mediocre technicians do not have the ability to represent your business well. That means less revenue for your business. 

Solution: Candidates for employment can be found at trade schools or by seeking people who are running their own PHC contracting businesses in a failing manner. In either case, you must know how to interview candidates correctly and choose only those you believe will represent your business in an intelligent and caring manner. For their delivery of excellence to your clientele and assisting your business to earn a profit, they should be compensated in a commensurate manner. 

Problem-solution No. 4

Inconsistent administrative procedures make for much stress and frustration for administrative personnel, as well as inequity for your clientele. 

Cause: Haphazardly addressing every day duties and customer dealings in a mishmash manner.

Problem result: Inconsistency causes low morale for management personnel while allowing consumers to distrust your ability to run an organized and honest business which means less work for you and in turn brings in less revenue.

Solution: Whether your business is a one person or multi-person operation, the administrative procedures you utilize must be uniform. Develop a systematic and consistent set of logical procedures which will help to expeditiously, consistently and equitably take care of your clientele. 

Problem-solution No. 5

Ignoring problems one through four will lead to business failure. 

Cause: 1) Fear of losing work, which actually costs your business more money than that work brings into your business, defies the logic needed to recover your costs and earn a profit. 2) Ego or stubbornness, which keeps you from changing your ways for the better. 

Problem result: You can’t achieve your goal which only hurts you, your family, employees, creditors, and clientele. 

Solution: Keep in mind, shame cannot be attributed to ignorance since all humans are ignorant because no one knows everything about all things. However, there is shame in ignorance turned into stupidity. Brain surgeons know little, if anything, about the way in which their heating system works. As intelligent as they are, they are subject to the old adage, “a little bit of knowledge is dangerous.”

If that brain surgeon decided to plug a leaking relief valve outlet rather than properly addressing the cause of the leak, his/her action would be extremely foolish as well as dangerous. Similarly, if you have fantastic technical skills, but, lack business acumen, your business would be managed by a foolish person. Remember, before you achieved your PHC technical abilities, someone had to show you how to do things correctly. Running a business requires a different set of skills than those necessary to perform plumbing, heating or cooling tasks. Seek help from someone who knows how to solve the trials and tribulations you encounter as a PHC contractor. Understand the advice given and properly implement it into your business. 

Contractor profit advantage

Everyone entering the business arena will encounter those obstacles. The way in which you address those problems is your choice. Ignoring the existence of those problems by putting your head in the sand like the proverbial ostrich leaves your butt exposed to be kicked by those hindrances and any passersby.

The solutions I outlined can give you the opportunity to 1) recover your costs, 2) earn the reward you deserve for the delivery of excellence to your clientele, and 3) relieve the stress and frustration levels associated with addressing consumer needs.

If you are not quite sure how to implement the solutions, I can help through consultations, coaching, seminars, books, customized price guides, etc. My Contractor Profit Advantage (CPA) packages can give you affordable help in understanding the complexities of PHC contracting business ownership. There are four different CPA program packages available to fit your needs.

Each CPA package includes one copy of my book “Solutions Management Theories and Methods for the Contracting Business,” which deals with the fundamentals you must know to face the aforementioned problems; two copies of my “Readily Available Pricing Information Digest” (RAPID), which is customized to your labor/overhead cost and profit margin factors for plumbing, heating and/or cooling service tasks (additional copies are available); two to four hour (maximum) telephonic seminars addressing the aforementioned problems dependent upon your package choice; and a 25 percent discount on other consulting product/services purchased in 12 months following your enrollment in a CPA program. 

• Package 1: Includes one copy of “Solutions;” two RAPID price guides; one telephonic seminar regarding your costs and prices; and the aforementioned 25 percent discount. 

• Package 2: Includes one copy of “Solutions;” two RAPID price guides; one telephonic seminar regarding your costs and prices; one telephonic seminar on addressing consumer questions; and the aforementioned 25 percent discount. 

• Package 3: Includes one copy of “Solutions;” two RAPID price guides; one telephonic seminar regarding your costs and prices; one telephonic seminar on addressing consumer questions; one telephonic seminar on technicians; and the aforementioned 25 percent discount. 

• Package 4: Includes one copy of “Solutions;” two RAPID price guides; one telephonic seminar regarding your costs and prices; one telephonic seminar on addressing consumer questions; one telephonic seminar on technicians; one telephonic seminar on logical administrative business procedures; and the aforementioned 25 percent discount. 

With my CPA programs and your willingness to expedite and learn, it is possible to get your business on the right track complete with price guides in as little as 30 days from start to finish. For details, give me a call. 

Richard P. DiToma is a contracting business consultant and active PHC contractor with over 41 years of experience in the PHC industry. To receive more info about his contracting business coaching, consultations, business books, seminars with solutions, customized price guides, business forms, etc., contact Richard by phone at 845/639-5050, email, fax 845/639-6791or write R & G Profit-Ability Inc., P.O. Box 282, West Nyack, NY 10

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