Questions asked and answered
This commentary presents a sample of emails I receive from contractors about our noble PHC industry, business, my editorials, and my products and/or services related to improving contracting business results. Contained herein you will find a list of some of those products and services relating to my theories and methods, which have helped contractors improve their business’ revenue results by at least 30 to 70 percent.
KN, a contractor, wrote:
“In recent months I have been dedicating more time to reading my PHC News publication. I have even gone back to re-read segments of older copies before they make the final plunge into my recycle bin. In each case, I have found myself either reading or reviewing your article as a specific point of interest. So, after reading your most recent article about standard task times, my interest in your methods and theories has peaked. Now, I find myself looking online for a website of some kind that would capture all of your available resources, but to no avail. I guess when the “about the author” section tells us to contact you directly, it must be the truth. So, I am looking to invest a couple of bucks into your work. Could you provide a list with a brief summary of each? In the 23 years I have been in the trade, I have worked in all aspects of it. In fact, plumbing was just supposed to be a means for me to pay for college. After I graduated, I decided to stay, at least for a while, with something I was comfortable doing. Well, the opportunities kept coming. With them came new challenges and subsequent learning. What I worry about, and what has prompted my interest in your articles, is that regionally the same habits, practices and philosophies seem to be ingrained. I am looking to your work to provide some fresh perspective, and some insight.”
KN, in my opinion, the discussion about as well as the actual implementation of products and services that I offer to help improve contracting business results should be conducted in a personal and confidential manner. To that end, I ask contractors to give me a call regarding their business issues. Websites may be great advertising tools, but websites lack the personal touch of two people having an in-depth conversation, which is necessary to rid our industry of ingrained bad habits, flawed practices and erroneous philosophies.
“I enjoy your articles each month in PHC News. Like a lot of plumbing contractors, we are a small family business with five or six employees, including myself as one of the three field techs. Actually, we just lost one this week (venturing to try his own business) and now we're looking for a qualified candidate. As you know, this can be hard to find — skills, experience, honesty and an overall good person. I would be interested in knowing more about your book, “Solutions Management Theories and Methods.” We have spent the past 1 ½ years working on developing a flat-rate system. We looked into purchasing some and have used (name of product deleted), but didn’t like the fact that we didn’t know what our actual costs or materials were, or that there was no way to increase specific variables inside of the pre-selected jobs. So, the hours of learning our true associated costs being divided by what we perceived to be realistic billable hours per tech, per day, allowed us to come up with an hourly rate of $98, which later became $135. As you have mentioned so many times, this is way above the hourly rate in our area, and would make (our customers') heads spin if we tried to charge this. However, it explained why, in 14 years of business, how doing things hourly was only allowing us to just get by, and never giving us profits. (I should suggest that during most of these years it was me as a one-man show.) I have spent countless hours developing a flat-rate system based off of what I project to be reasonable time to complete a repair, plus materials. Since implementing this system for the past 1 ½ years, (I am adding jobs to the equation every week) we have seen the success. We have added employees, purchased two additional service vans, paid all bills ahead of time, opened a shop, and kept our rent paid one month in advance. We are able to purchase any equipment up to $1,000 any month, and we are able to invest around $900 a month into SEO management and still bank a couple of thousand each month. I share this to say "thanks" for your advice—we have tried to implement it to the best of our ability and want to continue to be successful. And yes, we are pleasing customers and have far less complaints now than ever before when we were doing it as time and materials. I would be interested in learning more about the materials you could offer us. Thanks.”
DJ, regarding the search for technicians, Chapter 5 in my book, “Solutions Management Theories & Methods for the Contracting Business,” should be of special interest to you. It deals with the assets you should look for in candidates for employment before you hire them. Then, it addresses evaluating the performance of those you take a chance hiring.
Price guides are business tools to make quoting prices more efficient. It is imperative that contractors know how to use these tools properly and adjust their prices circumstantially. To this end, I created my “Readily Available Pricing Information Digest,” which is based on average tech times, material allowances for tasks, your true customized labor/overhead costs, your desired profit margin, and your average travel time to your clientele.
I calculate hourly costs to any contractor for a qualified tech and vehicle in the U.S. to be between $100 and $250 at this time. Regarding your hourly cost factor, I’m not sure if you are telling me your cost, or the selling price you charge the consumer. If this is your cost, your current $135 falls within those parameters. Whether it’s correct is another issue. If that $135 is your selling price to consumers, you may be short-selling your services. I would need to speak with you to determine the accuracy of your calculations.
“What advice can you give me on calculating true cost of business? I have one tech, one helper and two vans. I work out of my house. I have been in the plumbing business for six years now. Most of my customers are commercial and some are residential. One main problem I am having trouble with is getting paid on time. I’m not sure what my options are for charging late fees; will those charges push customers away? Any suggestions would be appreciated. Also, I love reading your column in PHC News every month.”
PP, call me to order my book, “Solutions Management Theories & Methods for the Contracting Business.” If you need further help, in addition to being a contractor, I offer business coaching to contractors. The most important issue to tackle is your costs, which ultimately should determine your selling prices.
Regarding your collection problem, your email doesn’t tell me if you are performing new construction or service work. With residential service work, payment should be made at the time of service. This process can be made easier by accepting credit cards. This can also be done with commercial service work.
For clients to whom you have decided to extend credit due to the fact that they give you a great deal of work, you must decide the level of credit you are willing and able to extend. A customer who utilizes your services and your resources related to that work, but gives you no money, isn’t a good client. Pushing them away may earn you more money because you won’t have the expenses associated with their workload. But, before pushing them away, sit down with them and have a conversation. If they are worth having and you explain you cannot afford to perform for them without payment, you will come to a solution. If your selling prices have a large enough profit margin, you might consider giving them a discount if they pay by a certain date. But, make certain you do not jeopardize your ability to make a profit. However, if you sell your services at or below your true cost, this discount will do more harm than good.
“Hi Richard D, I started receiving PHC News, and the information you point out in the June issue sounds like me. I'm interested in your book, "Contractor Profit Advantage." What is the next step to have your book? Please answer me at your convenience with info. Thanks, TM."
Contractor Profit Advantage is not a book, but rather a methodology. However, my Contractor Profit Advantage programs do include books as well as live telephonic seminars. After reading this article, the next step is to call me for further information and/or to order.
“Richard, hello, I enjoy reading your articles in PHC News. They are insightful and informative. I believe it may have been you who said, “It takes more than talent to run a business." Anyway, the reason I am writing is to see how I can get a copy of your book,"Solutions Management Theories & Methods for the Contracting Business."
KW, just give me a call and we can get the ball rolling.
Thanks to these contractors for taking the time to write me.
The following options are available to you. If you do not see something you are looking for, just call me. I may still be able to assist you.
The tools you need to succeed
Solutions Management Theories & Methods for the Contracting Business, by Richard P. DiToma.
This book deals with the fundamentals that must be addressed in the contracting business. It can also be obtained with one two-hour (maximum) phone consultation with me about the book. Most contractors, if not all, take this option, because together we can address their expenses to arrive at their true operational costs, which should be the basis of their selling prices.
Chapter 1 deals with truths about the contracting business. Chapter 2 shows you how to identify and calculate contracting business costs; choose a proper profit margin; and develop properly profitable selling prices. Chapter 3 gives intelligent and honest answers to questions consumers ask. Chapter 4 deals with logical procedures to more easily address business management. Chapter 5 indicates what must be known to hire and evaluate great technicians.
Readily Available Pricing Information Digest, by Richard P. DiToma.
A pricing guide customized to your labor/overhead costs, profit margin and travel time. It is available with up to three sections: plumbing (over 325 tasks), heating (over 260 tasks), and/or cooling (over 160 tasks). It shows task descriptions; included material and material cost allowances; average task times; average travel times; break-even cost to you, the contractor, dependent upon the percentage of hours you sell at 100 percent and your choice of two other percentage levels (such as 75 percent and 50 percent); and four selling prices per task: one for the first task of a service call visit when all material is on your vehicle; one when material must be picked up; and one each for additional tasks of the same visit with material on truck or picked up. And, if you want prices for after-hours services, discounts or service agreement clientele, it can offer three additional sets of four prices. That’s up to 16 selling prices for each task to help with specific variables.
Problem Solvers Club
Initial membership offers accessibility to me for continuing business coaching support; 25 percent discount on consulting/coaching products and services created by me; one copy of Solutions Management Theories & Methods for the Contracting Business; and one two-hour (maximum) phone consultation with me. Membership is in effect for one year. Renewal memberships are discounted and do not include book and consultation.
Contractor Profit Advantage Program 1
Offers one copy of Solutions Management Theories & Methods for the Contracting Business; two copies of the Readily Available Pricing Information Digest; a 25 percent discount on consulting products and services offered for one year; one phone seminar (maximum four hours) on one of the following subjects: identifying your true costs of operation; choosing a proper profit margin and development of your selling prices; addressing consumer questions rapidly and intelligently; logical procedures to make administrative duties easier; Star Tech for top quality technicians.
Contractor Profit Advantage Program 2
Offers all benefits of Program 1, but instead of one phone seminar (maximum four hours) there are two.
Contractor Profit Advantage Program 3
Offers all benefits of Program 2, but instead of two phone seminars (maximum four hours each) there are three.
Contractor Profit Advantage Program 4
Offers all benefits of Program 3, but instead of three phone seminars (maximum four hours each) there are four.
I sincerely hope that you, my readers, have gleaned a contractor profit advantage from my theories and methods. The consulting/coaching products and services I offer can only be attained by contacting me directly.
As I was putting this article together, I received a phone call from a contractor seeking my assistance. He said he had been putting off calling for quite some time. But now, he was ready to start running his business properly and profitably. Don’t wait. Time is money. Many contractors shortchange their businesses by at least $210 per tech, per workday. That’s over $50,000 per tech annually. I await your questions. Feel free to call me to discuss your business concerns. I promise I won’t bite.
Richard P. DiToma has been involved in the PHC contracting industry since 1970. He is a contracting business coach/consultant and an active PHC contractor. For information about the Contractor Profit Advantage or to contact Richard: call 845-639-5050; e-mail email@example.com; mail to R & G Profit-Ability, Inc. P.O. Box 282, West Nyack, N.Y. 10994; or fax 845-634-7236.