Industry research shows that many new contracting businesses can trace their beginnings back to a slowdown in business. Unfortunately, the plumbing-heating-cooling (p-h-c) industry is cyclical in many areas and when a downturn in business arrives, many companies tighten their belts by cutting labor.
A newly unemployed technician remembers how much his last employer was charging per hour and "knows" he can charge less than that and still be making money hand over fist. So that technician with a pickup truck, tools, and excellent skills decides that it's about time to start working for himself. Some paperwork is filed and a new contracting business is born.
But now what? What happens during the next 12 months is critical to the long-term success of the business.
Unfortunately, the failure rate of these new businesses is staggeringly high. Often the root of the problem lies with our technician, now the business owner. He has the skills to install materials quickly and do the job right the first time. His customers love him and the service he provides. He's pretty sure he's making money because the bank account balance is going up each month.
Then he gets that phone call that stumps him and has the potential to make or break the new business - perhaps an unhappy customer, an improperly filed tax return, or even a lawsuit. When a situation arises that the new owner does not know how to handle, who can he or she turn to?
Don't forget about all the other elements of running a successful company. Did our technician turned contractor ever learn how to:
- Build a budget or calculate break-even?
- Market the business effectively?
- Monitor and maintain cash flow?
- Properly interview and hire employees?
- Manage those employees and delegate work effectively?
- Balance capital expenditures against having payroll money every two weeks?
- Get the best health and liability insurance for the price or even know what coverage to ask for?
The simple fact is that most business owners know only what they have learned the hard way. The ones who were very lucky were able to go it alone, grow their business, and make it profitable over the long term.
Others had the benefit of taking an easier path. They looked for ways to contact and build relationships with other successful contractors. They looked for opportunities to network with suppliers and manufacturers reps. They looked for ways to learn how to manage their business professionally. These smart individuals joined a trade association and actively got involved.
After joining, they knew that if they ran into something they couldn't handle alone, they could call someone they met at the last meeting for advice. They heard about and attended seminars offered by their local, state, or national chapter that taught them the importance of managing the office side of the business. They participated on a committee that produced a new product that helped contractors across the country.
Time and again at PHCC we hear business owners say, "I wish I had known all this years ago." As a new business owner, do you choose to wait and see if you can go it alone, or do you choose to belong to an organization now that can help you and give you every opportunity to be successful?
John Zink is director of education and programs for the Educational Foundation of the Plumbing-Heating-Cooling Contractors-National Association (PHCC). The PHCC Educational Foundation provides business management training for p-h-c contractors and their employees. Zink can be reached at zink@naphcc.org or 800-533-7694. You can read more business tips online at www.foundation.phccweb.org.
Publication date: 01/23/2006
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