Like other professions, there are certain truths that apply to the field of contracting. Here are 24 of them.
1. Contractors who fail to charge enough subsidize their customers. They price out of fear … that is, fear of price resistance. In truth, most price resistance is between the ears of the contractor. If you have doubts about your pricing, you are likely not charging enough. Raise prices.
2. It is a mistake to seek advice on making a profit from nonprofit organizations. This is like seeking advice on weight loss from a 500-pound man who is proud of his obesity.
3. A contractor’s total revenue reflects the value the business delivers to society, and profitability reflects how efficiently the value is delivered. A large, profitable company generates a lot of value for a lot of people efficiently.
4. It’s more important to know how to turn a profit than it is to know how to turn a wrench. If you know how to turn a profit, you can hire people to turn wrenches.
5. Every service agreement represents a future equipment replacement. This is why service agreements are a core element of a strong service and replacement offering. Plus, repeat customers result in greater margins.
6. Anything not growing is stagnating or dying. This applies to businesses but starts with people. Thus, business growth is a reflection of the people at the top of the organization. When they seek personal growth, an inevitable outcome is business growth.
7. When the industry and marketplace change, good contractors change with them. Avoid complacency. It is carbon monoxide for businesses. It makes companies sick, then kills them. Constantly challenge the way things are done today because that may not be the way they are done in the future.
8. The brand on the side of the truck matters more than the brand on the side of the box. The best equipment, installed poorly, results in misery. The worst equipment, installed well, results in comfort. Thus, the brand of the installing company is the one that matters most. Market that brand. Talk about that brand. Sell that brand.
9. Condensing units, heat pumps, and furnaces are parts, not products. A condensing unit is no more of a product than its compressor. The product is a comfort system that is field engineered and installed by a contracting company. As such, it is a product of the contractor, not the myriad of components from the equipment and parts manufacturers that contribute to the product.
10. Equipment brands matter more to contractors than consumers. Marketing research studies consistently show that consumers seek contractor brands over equipment brands by a 3-to-1 margin. Consumers select contractors and accept whatever equipment they recommend.
11. Investing in a brand owned by others is like investing in someone else’s bank account. Just as the signatory on a bank account is the only one who can withdraw funds, the owner of a brand is the only one who can withdraw the brand equity, even if it is built by others. Do not rent brands. Build brands you own.
12. Smart contractors consider the territory manager a deciding factor between one line of equipment and another. Every manufacturer produces good equipment, but a good territory manager becomes a business consultant, advocate, and resource.
13. Lead flow is the oxygen of a business. Contractors who turn the majority of their lead flow over to an internet search or review company risk shortness of business breath. Contractors who turn the majority over to a big-box store risk suffocation. Only contractors who control their lead flow control their destiny.
14. The best time to gain on the competition is during a business downturn. Most contractors hunker down and cut marketing in a recession. This makes it an excellent time for smart contractors to increase marketing and take market share, which will pay great dividends when the economy inevitably turns.
15. Trucks are a contractor’s best advertising vehicle (pun intended). According to the Outdoor Advertising Association of America, a single wrapped truck generates 30,000 to 80,000 impressions per day. Yet, most contractors continue to operate white trucks. With a fleet of well-wrapped vehicles, consumer awareness of a contractor’s brand in a local market will likely be far greater than consumer awareness of the brands of equipment the contractor carries.
16. Never apologize for profitability. Profitability is not an option. It is mandatory. Even Samuel Gompers, the founder of the American labor movement said, “The worst crime against working people is a company which fails to operate at a profit.”
17. Success generates envy. No one attacks the methods and motives of successful contractors more than their less successful peers. They attack successful contractors because the alternative is to admit that the reason they are less successful is facing them in the mirror.
18. The biggest advantage of successful contractors is execution. Ultimately, there are no secrets in contracting. There is only execution.
19. Successful contractors learn from others. They do not try to reinvent the wheel when they can join a business alliance and tap into the prior experience of other contractors who have been there, done it, have a closet full of t-shirts, and are willing to share their experience.
20. A contractor’s greatest growth constraint is butts in trucks. This is why the leaders of top contracting companies spend 30 percent of their time recruiting, craft attractive benefit packages, and create career growth opportunities.
21. Training is like exercise. Just like with professional athletes and musicians, regular training for technicians and salespeople results in better performance.
22. The easiest way to stand out is by doing what others don’t do, won’t do, or can’t do. Few contractors, for example, offer set schedule service appointments. This creates an opportunity for differentiation and greater profit.
23. The surplus of owners is greater than the shortage of technicians. Many small contractors could make more money, with fewer hassles, working for someone else. Recruit them and buy their customer lists.
24. Most contractors wait too long to create an exit strategy. Everyone exits eventually. Some exit on their terms. Some get terms dictated to them. The former approach is more lucrative and enjoyable.
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Publication date: 1/21/2019