"It’s a drug and we’re hooked!” is what I said to my brother, Richie, about the fix I felt we got from doing the really big monster commercial and residential jobs for what we felt were lots of dollars. The reality is once we learned to track these jobs better and better, we realized that they tended to generate little to no profit or sometimes even a loss.
Some of that was because we weren’t as good at getting paid for change orders as we thought we were. Also, we allowed ourselves to get squeezed on price initially because we wanted to stay busy with jobs to pay for the lights in our building and keep our staff working. After all, we figured we charged enough; there had to be money at the end of it all.
It seemed like we had to be making money because we loved how much the total sale was. However, the profit was choked off because we had little chance of adding value because we were famously stuck in the middle of a bidding war.
Middle of what you ask? The middle was between the end user (the commercial or residential owner of the property) and the general contractor (GC) who hired us. It wasn’t that the GCs were bad people … not at all. But, the harsh reality is they only made money by squeezing us on the price because they, in turn, had to win the bid away from the other GCs they were competing with who were in an all out bidding war.
When Richie and I finally sat down and thought about it, what we realized was we had to get more attached to doing install work for money versus install work for exercise. Once we saw our addiction to the big-ticket jobs working for the middleman versus the person or business who had a stake in the outcome, we instantly knew installing for money meant working for the end user versus working for the middleman.
We had to build value with the only one who’d be willing to pay for it. The only customers who would pay for our level of expertise and craftsmanship that our company could uniquely deliver were those end users. That’s because they had a vested interest in the outcome, which is why they valued what we did and how we did it as much, if not more, than just the price we did it for.
For us, the most profitable work became apparent with tracking. Those jobs were the install jobs that lasted two weeks or less. We actually become super fond of one day, two day, one week and two week jobs.
I know there’s fear in letting go of the new construction and bid jobs. I know because we also feared that there would be no work and no money to cover the overhead. However, we found that as long as we stay addicted to the big money job “drug,” we couldn’t see all the other work we should be pursuing. Once we withdrew from the fix, magically, we got serious about finding and capitalizing on the right type of profitable install job. And the work magically appeared. The reality is it was always there, but hidden by the shiny glow of big-ticket jobs for the wrong people.
Today, I do a lot of consulting with commercial contractors in the plumbing, heating, cooling and electrical industry. This type of work fits with what my company has done for years serving the commercial, industrial and residential markets. Actually, I do work with garage door companies, roofing companies and cabinetry companies because they have the same issues so many of the same solutions apply to these contractors too.
What I’ve seen with large commercial contractors is they too have felt the squeeze when doing “plan and spec” work for general contractors versus doing “design and build” work for the end user.
One client explained the way to understand the difference between doing “plan and spec” work (which they don’t want) and doing “design and build” (which they do want) as “plan and spec” stands for “pain and suffering!”
The best of the commercial clients I work for are doing profitable install work today because they too have realized that only the people who own the premises care about what they uniquely can do and are willing to pay for it.
Note: If you have a good working relationship with a GC and can get them to allow you to talk to the end user about value added subjects, this too can unlock profitability and better serve the customers.
If not, is it time you quit the addiction of doing big-ticket jobs for the wrong customer at the wrong price and wrong profit margin?