Why do some contractors seem to almost effortlessly rake in millions of dollars in revenue while others struggle to just get by? What is the secret to perfecting the art of making money every day?

There is so much disparity between contractors because everyone falls into a different level of competency when it comes to running a business. My friend, international speaker Tom Hopkins, describes these four levels of competency as:

Level 1: Unconscious Incompetent. This is a state where you don't even know what you don't know. If you're in this level, you're struggling and you don't know why, or you may even be struggling and not even know it yet.

Level 2: Conscious Incompetent. At this point, you know there is a lot that you don't know. You're aware of questions that you have about your business. You know you should know what percent of sales your labor should be. You know you should know what you should pay for equipment as a percent of sales. You know you should know the right amount to charge per hour. At this level, you know there is a lot more you need to be successful, but you don't know where to find it.

Level 3: Conscious Competent. At this level, you know what you need to do to succeed. However, success is not yet second nature. This is the level where you may be very successful, but you must work very hard at achieving success. You know the numbers you need to watch, but figuring out if you're hitting them requires time and effort.

Level 4: Unconscious Competent. This is the highest level of competency. If you are a business owner at this level, your success is second nature. This is the level of Michael Jordan, Tiger Woods, or Jeff Gordon. They are at the top of their game and seem to operate on pure instinct. You know exactly what to do and when to do it to succeed.

What level are you in today? When you look at your financials on the seventh of every month, do you know the three numbers that will reveal your financial health? If you don't get financial statements at all, you're in the unconscious incompetent stage. If you get them and don't know what they mean, you're in the conscious incompetent. If you get them, know where to look but have to think about what it means and how to solve your problems, you're consciously competent.

When you reach the stage where the numbers you need seem to jump off the page at you without even thinking about it, and you immediately know what needs to happen, you're in the realm of the unconscious competent. You know what you need to do by pure instinct.

How about when a customer calls you to complain, do you know how to handle the situation instinctively? When you're faced with an employee breaking the rules, do you know what to do to ensure your company's success without a second thought? That is the level of the unconscious competent.

How do you reach that level? How do you learn those answers? To reach that level, you can either learn by accident or learn on purpose.

Ways To Learn

When you learn by accident, you're going through the school of hard knocks. This is a strong way to learn because you'll never forget these lessons, but it can lead to disaster along the way. After all, imagine trying to learn to fly an airplane by accident. There's a good chance you would wind up a casualty.

Running an HVAC company won't have consequences that dire, but learning how to successfully run a business by accident can lead you down a path of agonizing, stressful situations and financial disasters.

To avoid that scenario, you must learn on purpose. The best way to learn on purpose is by finding a mentor who has achieved great success. With a mentor, you'll not only learn from their success, but from their mistakes as well. You'll see the setbacks they had and you'll be able to avoid them on your path to success.

One of my mentors in the industry is HVAC legend Jim Abrams, perhaps the most knowledgeable man in the field. In my career, I've learned from his success and his mistakes, and so have hundreds of other business owners.

Here's just one example of what Jim's expertise could mean to a business owner. An acquaintance of mine, whom we'll call Egotistical Ed because he thought he knew it all, wanted to expand by acquiring another company. He had never acquired a company before, and he decided to buy it for $230,000 as a stock purchase.

After the acquisition, the first month went well. In the second month, he started getting calls from creditors. In the third month, bills piled up, and the calls got nastier. He had learned by accident. When you acquire a company as a stock purchase, you assume all liabilities.

He hadn't done due diligence, and this company was loaded with debt. He didn't know what to look for in the financials and got burned. His mistake, though, was making a stock purchase, which made him responsible for all of the company's debts. That acquisition wound up costing him $487,000.

If he'd only had Jim Abrams as a mentor, he would have known:

  • How to properly read financial statements.

  • How that owner was hiding debt in the statements.

  • The proper way to purchase that company was as an asset purchase only, which could have been done with only a slight change in the paperwork.

    That lesson cost Egotistical Ed an extra $257,000, but it was a mistake he could have avoided altogether with a mentor.

    Don't make the same mistake as Egotistical Ed. This is your life and your business. It can be on accident or on purpose. The choice is yours.

    Find a mentor like I did in Jim Abrams, and you'll reach the level of the unconscious competent where making money every day is pure instinct.

    Terry Nicholson is president of AirTime 500. For more information on AirTime 500, call 800-505-8885. Nicholson can be reached by e-mail at tnicholson@venvestinc.com.

    Publication date: 07/11/2005