In Oregon, required Liability Insurance is $500K minimum for General Contr. license.
In 10 years, I’ve had no claims, no late payments…Since January, I’ve been audited twice, my subs are now required to list me as “additional insured” and, instead of a flat annual premium I’m now hit with an additional premium of $10 per thousand on current projects. On a house I’m building now, that means I just got blindsided with an additonal $2000 premium after the contract with the customer was signed, based on anticipated sub costs.
A friend of mine in similar circumstances got whacked for additional premium because he was using rented help (technically, not even his employees).
My Insurance rep. says “well, fewer and fewer insurers are carrying builders and those that are have had so many claims on siding and other engineered materials that they’re just raising the rates.”
So, what’s going on? Any one else dealing with this? Is “insurance rage” a legal defense?
Measure it with a micrometer, mark it with a piece of chalk and cut it with an axe.
Replies
Sounds like the mold scare kicking in.
Don't know about the additional listings, but my premiums just about doubled.
I would say it like this. Rather than take a loss on anything all insurance companies instead make the policyholders pay the price. In many aspects the attack on america worked because it has caused economic problems. Not the ones origionaly intended, but problems none the less. I am so tired or listening to these insurance companies talk about how they are losing money. With all the regulations that are imposed on construction and business in general they are basically guaranteed a paycheck because you have to have insurance in order to get jobs. The fines and penalties are so stiff that when you get caught you will be forced out of business. Then the public turns around and says, " your prices sure are high". " Can you justify that to me". I understand the need for insurance and its importance but it seems to me that there has to be a better way of covering losses than raising the premiums of your policy holders to cover your losses. No one wins with that. People get upset and insurance companies lose customers to there competition.
So who wins if the insurance co loses money? They go bankrupt and can't pay your claims. Premiums have been supported by the stock market (when it was going up). Now that returns in the stock market are low or negative the insurance co have to make a profit somewhere. Combined with the losses suffered puts them in a nasty position. We just went through a renewal and it was as difficult as it ever has been. But with a good agent. An excellent loss history we saw our renewal stay flat to a little bit down. Our agent was expecting a large increase. I feel very lucky. The harder I work the luckier I get.
We're all in this together. My premium doubled this year. The insurance company has to cover their losses. One way or other we all pay, if they don't cover them the bankruptcy courts will.
The sad part is how hard it becomes for someone starting out today. I have 20 years experience in business, I can roll with the punches and pass the expense on to my customers. How can a new business ever get started with these tougher and tougher regulations and start up cost. Every day I hear of a business that was just getting going good. They had several years behind them and were starting to become a legitimate entity, but between insurance and government red tape they've had to fold. Where does this put the market in the not to distant future.
Is this a problem?
For me it provides opportunities. Not unlike the consolidation of the farm industry in this country, bigger may be the only answer. Is this the writing on the wall? Tabula rase
"The sad part is how hard it becomes for someone starting out today. I have 20 years experience in business, I can roll with the punches and pass the expense on to my customers. How can a new business ever get started with these tougher and tougher regulations and start up cost."
-Terry, I am in that exact boat. After working sometimes under, sometimes over the table here in NYC for the past year, I realized I needed to get legit so I would have verifiable income and possibly a home, future, etc. Jumping through the hoops has been frustrating yet strangely exciting, but Friday I got quoted $2100 for $1 million worth of liability (the bare minimum, many buildings wont let you in the door with less than 2) and the whole bottom seemed to drop out. I am home today (read:not making money) for the sole purpose of trying to shop around for a more reasonable policy. A lot of guys told me it would be this way, many of them just wont take jobs that require insurance, etc.
It occurs to me I am not really adding anything to this discussion, just bitching about insurance, which I am sure is about as useful as bitching about taxes and my eventual dirt nap.
I am not a roofer.
There....that cheered me up!
DW
D. Wood, let's look at your situation this way.
Does it really matter if you've been in business 1 month or 20 years as far as operating expenses?
Your OE will still be about the same as mine. Say your charged labor rate is $50/hour. That $2100 only raises your rate about $1,30/hr. if you work about 1600 man hours annually. Big deal. If you can't sell jobs at $51.30 per hour, then you will not be able to sell them at $50.00. That's charging $410.40 per day instead of $400.00 per day. While you're at it, instead of treating yourself like a 2nd rate citizen, CYA with workers comp also, or at least a good disability insurance policy.
As other businesses do, pass it on to your clients and don't try to save anyboidy money by putting your own financial future on the line. Remember, you run a business, not a philanthropic organization.
Thanks for the different POV, Sonny. I guess its just the initial start-up stress getting out of hand. I just started "Mark Up and Profit for Contractors" and it seems to be a good resource of ideas, formulas and "Make sure you think of..." items, though it is aimed at someone a bit higher up the job volume chain.
Don
When estimating, consider designing a competer generated forum and printed out taht contains those items we often forget to include. It's important for both large and small jobs. Mine includes the following:
1. Initial mat. to site (for example, carrying it to the back for a new deck.
2. Return excess material to truck.
3. Tools/equip. to site.
4. Tools/equip back to truck
5. Daily set-up
6. Daily clean up
7. Final clean up
8. Trash removl - actually carried to truck or dumspter
9. Trash trip to county dump - and theri fee
10. Obtain material (E.G., a bath total remodel is 8 hrs.)
11. Supervision of staff and/or subs (1 hr daily for staff and a trip time for subs if not on site)
12. Contingency
13. Client special needs ( start at 9 instead of 8 means I can't qit at 4.30 to get a full 8 hour day, so I divide total hours by 7 and charge for 8 each day. Also, extra time allowed for the incessant talker)
14. Time for items not used returned to suppliers.
Finally, once the total price is determined you can also add 5% for sales expense. If we had paid sales staff we'd pay them, right? Our Time is also valuable, as the busienss owner, even more so.
I understand they have to make a profit. What I don't appreciate is having my premiums set and payed up, and then getting blindsided after a job is bid and contracted and underway. My agent probably dropped the ball on this one and he's gonna hear about it.
I think what frosts me the most is that none of these pencil-pushers have ever visited one of my job sites, never talked to any of my customers...they're clueless about what kind of work I do and how I go about it.
I work hard, too. Probably most of the people participating on this forum do. And for the most part, construction is a really rewarding and fulfilling profession.
I can deal with the rain and the wind and cold. I can handle the occasional bloodblister, or the pressure of meeting a deadline.
And, for me, money's not so much the issue. It's having my fur up and nobody to really growl at 'cause I know there's not a remedy available to me. (pay up or shut up!)Measure it with a micrometer, mark it with a piece of chalk and cut it with an axe.
Whos the insurance thru?
My little $300K ploicy with a few add-ons hasn't seen much change in the last coupla years. I got Erie 5 Star. "That's like hypnotizing chickens........."
Mine's thru NorthPacific but I don't know if I'd do better elsewhere. They've been pretty consistent and reasonable in the past and my agent, a local independent has been the same.
My concerns, aside from the "after-the-fact" business with my premium, are what is driving the increases and the scrutiny? If I'm careful and use best practices and best quality materials and proven reliable subs and I vet my customers (and I try to do all of the above) and I have no claims or complaint history and I'm doing pretty much the same volume and type of work I've done in the past, why, all of a sudden my premiums jump about 200% because of one project?
I fail to see where Sept. 11 had anything to do with it, or a sluggish economy.
Measure it with a micrometer, mark it with a piece of chalk and cut it with an axe.
good questions for the agent. I'd be wondering myself....and I'd be letting him know I'm looking elsewhere at the same time. Let us know what you find out....if anything.
Jeff "That's like hypnotizing chickens........."
Notcman,
Our agent put together a big ol package when our account went out for bid. Articles on our co, newsletters, memberships, boards, safety programs, WC experience rating, etc. Everything you could think of that empasizes safety.
Maybe you could find someway that seperate yourself from the other GC's. If LP siding is an issue. Company policy is no LP, GP or anything unnatural. Cedar only. And you inspect it every year. Etc. Mold problems? What do you do to prevent mold? Include a written company policy.
Our agent has really done a great job. He has a good relationship w/the underwriters. This may help when a question comes up. He can spin your story to help you. But his "book" also helps. How much business he does with each insurance co helps a lot. We changed this year to a company that would not quote us last year. A different agent brought our account to our present insurer. Their "book" must not have been much w/this insurer. They actually wrote a note wanting our business. You have to tell your story. The underwriter doesn't know jack about you. And they will not visit your site. But if you can tell them through written co policies, maybe you can set yourself apart.
And I would hate to be blinsided too by a rate increase. Communicate with your agent. And shop around. I shopped this year too for agents. We actually had a slightly lower quote come in. But our relationship with our present agent means paying a little more money. Now if it was a lot of money he would be kicked to the curb. LOL
Thanks, Scrapr. I think your input is what I was hoping for when I put up this post. Part of it has probably been my fault for sitting back fat, dumb and happy. Like you, I am specific about what materials I DON'T use but it never occured to me to establish that in writing. Getting on the same page with the underwriter may help. I'll be seeing my agent tomorrow and will pose some of your proposed questions along with some of my own.
The thing is, I'm not a big player, but I do get a steady stream of good projects. I prefer to put my effort into building things and making customers happy and maintaining a decent income, but a lot of this bureaucratic paper-trail stuff is time-consuming, non-productive and exasperating!
(Thank God, Michael Dell and Bill Gates for for computers, spreadsheets and business management software!)Measure it with a micrometer, mark it with a piece of chalk and cut it with an axe.
OK SCRAPR, the price of your not posting any profile info is that I won't be able to ship you some fresh smoked salmon or something. Spent about an hour with my agent today and soon had the audience of most of his staff...all very civil but apparently my scenario was a fresh one for them too and when they saw me come in the door I got the impression they were looking for an escape route...it was kind of humorous!
Here's what was going on...Even though I've done other projects on the scale of this one, the proportion of subbed work to my work exceeded 25%. For this particular underwriter, that is their threshhold for putting my premium basis at a higher level (the theory being that ultimately I'm responsible for the product the subs provide and am the point-man of risk, so to speak).
The problem came about largely because one my agents employees saw my project projected at $300K + and made an ASSUMPTION that I would subcontract $200K of that.
The upshot is that I will still pay an additional premium, but not nearly as much, I learned a good lesson without getting spanked too badly, and along with your input, I've agreed to build a business profile with my agent that will, hopefully, prevent this kind of surprize in the future.
Thanks again!Measure it with a micrometer, mark it with a piece of chalk and cut it with an axe.
I was hoping that turned out OK. Just had some smoked salmon Sat at a tailgater. If you want to talk w/my agent I can hook you up. He is in Portland. Glad everything turned out well.
I just had an informal meeting with my agent and mentioned in passing that 50% of the time I use waterbased finishes on my floors. He looked into it and it caused my rates to drop by nearly 30%. I had to do a "self audit" and include that percentage in my review. Small wonders....
Please don't take this wrong, but I can't believe you are complaining about having to carry a $500k policy, ESPECIALLY for a builder.
In my area, as a small time repair and remodel contractor, I MUST carry a MINIMUM of $1 Million. I am small time, so the larger companies (based on # of employees and type of work) must carry more than that, sometimes as high as $5 Million. Without these policies (and we do have to show proof that the policy is existent, and current) we cannot get permits, or get inspections done.
All in all, my policy still only costs me about $650 a year. It did not go up this year, although my personal home insurance did.
Where are some of you guys at that your insurance costs are so high?James DuHamel
J & M Home Maintenance Service
"Southeast Texas"
I've never bitched about the $500K. My bitch was an unprecented and unexpected jump in premiums due to overstated sub costs on one project, which I've since gotten straightened out. I'm in Oregon and the builders liability insurance requirement is based on the kind of work you're licensed to do, and the premiums are based on your volume and the type of work you're doing. If you're a roofer, your premiums for 500K or 1M are going to be exhorbitant, IF you can find an underwriter. If your holding a "handyman" license, your liab. requirement is lower until you exceed a certain level of income. Our license is insurance and bond dependent (I'm amused by those signs and ads that say "Licensed, Bonded and Insured." A friend of mine in 'Nam used to refer to that kind of statement as a "superfluous redundancy.")
Oddly enough, the difference in premium is almost insignificant between 500K and 1M and consumer groups here have argued for higher requirements. For the builder, it is still an option to acquire more insurance and for me, if I was doing a $1M+ project, would certainly want coverage for that project. But at the same time, as a business owner, my objective is to get the most insurance with a good company at the lowest price possible.
If your doing commercial, I believe 1M is the minimum and many times the client will require more. (I did a one-day sawmill job with my Woodmizer for a logging company one time and had to get a 2M binder to even move my machine in!)Measure it with a micrometer, mark it with a piece of chalk and cut it with an axe.
>> "superfluous redundancy"
As opposed to ordinary, reasonable redundancy. I like it a lot.
James
I carry 3 million liability and a rider on tools and material, my premiums are 1400 a year Canadian. The reason I carry 3 million is because this is the value of some of the projects I work on. I also periodically work on projects where the building is worth more than 3 mil. in these cases according to my adjuster I should be taking out a short term rider to cover the extra value. At this point I have never taken out the extra insurance.
Kevin
KC,
I work in an area where the CITY requires the $1 million coverage. The insurance companies, and the homeowners don't really care how much, as long as EVERYTHING at the location I am working on is fully covered.
The city (actually CITIES) require the $1 million policy be in place, active, and proof shown BEFORE any permits can be pulled, or any inspections performed. The sad part is, I have never worked on ANYTHING worth more than $200k. TOTAL loss would be SO far under the million I have to carry. The city cannot, or will not explain to any of us WHY we must carry so large of a policy, but we do it because we have to.
All of my tools and my vehicles are covered on a rider of my home owner's policy. The rider cost me $35 a year, and is WELL worth it. Next year it's gonna go outa sight for the rider, but I'll find another way to cover the stuff. I am able to get the rider on my homeowner's policy because I am a sole proprietor, and everything (tools and vehicles) is considered my personal property, not the company's property. In reality, and technically, they can be both with a sole proprietorship. The rider is needed because of the fact I use the stuff in my pursuit of income. James DuHamel
J & M Home Maintenance Service
"Southeast Texas"
James...you sure about that tool coverage? I specifically asked our agent.....we have the house and cars/trucks thru the same guy......and he said the tools wouldn't be covered unless I did the rider thru the contractors insurance.
We have over the top full coverage on both auto and home. Home is bullet proof.......just by coincidence......signed the policy a month after my sisters place burned down....so I had a question or two prepared!
Still had to get the riders on the contractors. From what I recall......he advised thru the other policies is was possible......but collecting could be a bitch. Thru the contractors.......they just take the report and cut a check. Might be worth checking into. Jeff "That's like hypnotizing chickens........."
Jeff
The insurance in different states have policies and terms. Also different companies have different options on their policies. Where you the one about a year or so ago who insurance company did not want to cover a house that you where looking for because of the type of siding and then found that other companies did not care about that at all.
James
Are you sure that 1 million is enough? What about the people inside the house?
Bill,
For the type of work I do, I am sure hpoing that I never have to run a claim.
In reality, no matter how much insurance you carry, it probably ain't enough.
I do not do any commercial work, so I am limited to the type of work I can do around here. I have a friend (well haven't seen him in a long time) that did some a/c work on a IHOP restaurant. He was real busy, so he hired an electrical sub to wire the new a/c unit up. The idiot wired that sucker direct, with no breaker or on/off switch of any kind. Took about a week, but the unit shorted, overheated, and burned the restaurant to the ground. His sub had noinsurance, so he got nailed for it all. Because he was not carrying the amount of insurance that the RESTAURANT required of contractors, his insurance company refused to pay. He stayed tied up in court for about a year, and finally won. After attorney fees, he was out about $20,000. Then the crap hit the fan, and the employees sued him for loss of wages, loss of their jobs, etc... The restaurant never rebuilt or reopened, so these people were out of a job. Collectively, they sued him for about $2 million. His insurance company did not cover ANY of this type of claim, so he was basically screwed. He went bankrupt, and lost everything he had.
All because he didn't follow the rules of the game.James DuHamel
J & M Home Maintenance Service
"Southeast Texas"
James
It's stories like your friends that make me carry 3 mil. in coverage and after reading that it makes me wonder if 3 is enough, I never thought of the employees coming after us to. Something to keep in mind in the future. On another note I once had an apprentice (plumber) worked for me for six years. Prior to working for me he had worked as a helper for another plumber I think he was 17 at the time anyways he started a fire that burnt a condominium project to the ground, the condo was built in two phases the first phase was already completed and occupied and they were working on the rough in of the second phase. The fire destroyed the whole building as well as some of the residents vehicles. The insurance companies covered all the damage luckily. The apprentice was the best employee I have ever had and the carefullest as he knew what could happen. The fire started when he was doing a change on one of the units and to save time he took the abs glue and the torch up the ladder together instead of making two trips. The glue was ignited by the torch and then spilt as he was getting down and the rest is history.
kevin
Jeff,
I am absolutely sure about my tools being covered. My rider is for coverage "off premises". This means that if they are at my house and someone steals them, I am covered by my home policy. If someone steals them out of my truck or van, my rider covers them "off premises".
My premium is pretty low, but my deductible is pretty high ($500). I pretty much would have to get hit hard before I would claim anything. AND... they do depreciate their value when processing a claim. That $250 tool would probaby be worth about $50 to them during a claim, but I cannot replace it for $50. I could not get a complete replacement cost rider on the tools, but heck, every little bit of protection helps. Thank goodness I live in an area that I really don't worry too much about theft, although I do take precautions.
My insurance company is Germania, and from what I understand, they only sell policies in Texas. They were originally set up (in 1886) to cover rural areas and farmers. James DuHamel
J & M Home Maintenance Service
"Southeast Texas"
Well guys, something is definatley in the water. Its real. I have ten rental houses and I shopped every one in the yellow pages. Most of them didnt even call me back. I had to keep calling them to get a response. Sounds like the contractor story people tell. For a while the prices I got were so high that I thought I was goingh tobe put out of business. The company that had me cancelled me for the reason of the agent not doing his job to their specs. The company completely left that agent and pulled out. I learned later I wasnt the only one. I didnt really understand since I hadnt had any claims. I learned a whole lot from the other agents I talked to. Most didnt want my business because a renter could andalize a house . I could get a policy with my personal house every where I looked. But sept,11th, was blamed every where . I finally found an agent that put me on a commercial policy , but the strange thing is ,its been months, and I havent recieved a policy or been billed for service. Yes, Im worried . I did get binders from him after the morgager threatend to cancel my loans !!!! Seems they never got the binders. I need to check on this very soon.
Tim Mooney
I agree, there is something changing in the insurance industry.
General Liability rates went up about 300% here since 1999, and have doubled in the last year.
Despite no claims and no problems my general liability carrier just cancelled my policy, along with everyone else in the state. They're just pulling out of construction insurance all together.
Why? Well, according to my agent, it has something to do with the book she has on her desk, written by a couple of California lawyers. The title is something to the effect of "How We Earned $400 Million For California Consumers And How We Can Do It For You."
That, in my opinion, is reprehensible.
I wonder if we as an industry will ever go self-insured?
My rate is for a million of coverage and I pay about $900 or so per year. I know that if we were working in a basement and a painter started a fire, in the homes I work on, it would easily be a million in smoke damages for antiques and art.
BTW, I just read an article that State Farm was refusing to write any new homeowners policies in California for the time being because of escalating mold claims.
Excellence is its own reward!
Dave,
"Why [are ins rates so high]? Well, according to my agent, it has something to do with the book she has on her desk, written by a couple of California lawyers. The title is something to the effect of "How We Earned $400 Million For California Consumers And How We Can Do It For You.""
Remember, your agent works in the insurance industry. There is a natural antagonism between the insurance industry and the legal industry. You're getting only one side of the story.
Talk to any litigation attorney and you'll hear lots of stories of insurnace co's screwing their customers.
The truth is probably somewhere in between.
Don't forget, a major part of the ins co's income comes from the stock market investments they make with the premiums we pay in. (Not a complaint, just a fact of life; they certainly can't stuff that cash under their collective matresses!)
During strong stock markets, rates drop as the ins co's make their income from their investment portfolio and drop their premiums to compete for business.
Stock market sows down. Ins co's have to show consistent (or increasing) profits to keep their stock price up (and thus sr executive compensation high!) and since the profits aren't in the stock market, they have to jack their premiums up.
Of course, the ins cos want to limit their liability, so they're going to claim its the fault of those damn lawyers and try to get laws passed limiting their liability.
Limiting liability goes a long way to keeping costs down of course. Just look at HMO's. They've had no liability for years and look at how reasonably priced they are! Ah......
Guys,,I cant belive it,,the Staffing Co, are the only way to go,,you dont buy workers comp,no 10 99s,no one has to do the payroll,,if you have a calim you fill out one form and thats the last you here about it, they are legaly not your emploies,,you hire them and all that, but it is a brezze,,it costs me about 24% for this sirvice,,,I use TMG Staffing,,,it is great,,call in pay roll,,they fedex it over,,I love it!! John Hyatt deckmastersllc.com
John, don't get to comfortable with a leasing arrangement. Have your attorney read both your contract with them AND what's stated on the Certificates of Insurance they fax to those asking for them.
We had ours make a change when we found out our rear ends were hanging out the way they were typing out the certs.
The best thing I ever did was to hire an Insurance "Risk Management" specialist, the guy that gave a seminar on insurance I went to for our mandated continuing education annual courses here in Fl per our licensing regs. He doesn't sell insurance, just reviews all coverage for all policies and makes suggestions. Cost us about $300 but make obvious several deficiencies we had that were missed by each agent that wrote up the policies.
Ditto on staffing contracts. the contract I signed was so full of requirements that I had to do this that andthe other and couldn't allow the workers to do this that and the other that it allowed them a dozen loopholes to exit through. I am still on the hook for liability. They help with comp, taxes, and paperwork is all.
I'm about to up mine to 3 million I guess.Excellence is its own reward!
Piffin,,there is no contract,,,,!!!!! this is a service,,so much payroll,,so much cost,,its just that way,,god I cant belive you guys have not goten into this!!! John Hyatt deckmastersllc.com
John, if you have an agreement wit them, thee must be a sritten agreement between you and them. Before I sold my business to my sons 3.5 yers ago, we went thru three leasing companies. Same thing, only they dropped of the checks each week and we gave them a company check. They covered W/C, paid all IRS forms and taxes, etc.
Please, for your own benefit, and before you have a contastrophy that leaves your rear end out to dry, at least have your attorney go over it with you, both the agreement adnd the Certificates they send out. Ours never had our company name on it, just their name. That was when we found out that they acted as our "agent" which left us high and dry had a "situation" occured. After bitching a lot, we had our company name listed as well as theirs on each Cert.
Also, if they go under and didn't pay the taxes due from all of the companies they represent, and you didn't know about it until mnonths later, via the IRS going thru their papers and realize your existence, and relationship to them, guess who the IRS goes to for, in legal terms, "Satisfaction" - you. How much of a gambler are you with your entire financial future?
Spend the $200 - $300 and run it buy an attorney, especially one who specializes in "labor" problems and labor contracts - or don't.
hey sonny,,,thanks for the heads up,,after a few phone calls,this insurance is a gamble,,there have been some major problems,,one thing in OKC where I am,,they just passed a law( bless there little hearts) the they have to be licanced,and trun in 1/4 lies,uppers leees,,so thats a good thing,,I am listed on all my contracs and checks, the Co name is there as well as thers,,,I have had one claim and TMG staffing did everything but put a mint under my pillow,,the guy knocked his two frount teeth out with a post hole digger if you can belive it,,he just got the permanent ones in this week,and everything is going fine,,,I think a man can Lawer your self to death,,the only other thing is the state workers comp,,and man I just cant pay for those guys,,,your rates go up all the time,,they will pay anything just to get it off the desk,,it would be like 1/3 of my business expence,,it just cant happen,,so what can a man do???,,not just do his job the best he can,,o noooooooooooooo thanks man,,,John Hyatt deckmastersllc.com
John, that was clear as mud. Maybe after it dries...Excellence is its own reward!
Guys,,,I dont think I am making my self clear,,,,,,I hire the people,,,the staffing Co. just pays them,,,I hire and fire as I like,,its a great aragement,,I dont know like where you guys are coming from,,,there are no requirements or duties that you guys are talking about,,,they pay the workers comp, do the 1099, do all the paper work, I call them on thursday,,the checks are here or friday,,its a done deal! I pay 24% for this,,,Like they dont have this where you guys are from or what? john,,,deckmastersllc.com
Jack the book is mainly directed toward sales reps, but much of what the author says applies to us as well.
The fees I charge are agreed to only because of the reputation or "brand", or rather, what my name evokes. Again, this is why I've maintained that the #1 priority of any of us is to do whatever it takes to create the feelings in our potential clients when our respective name is mentioned. I'll take: 'Expensive, but worth it" every day. Build a Brand name of yourself. It does not happen over night, and ceating it eas not easy or free.
I just got off the phone with a prop. mgr. about a condo association with two P.T. bridges about 8' x 80' each that go onto a small island. They wanted a price to pressure wash and paint them. Earlier today I faxed a letter to that mgr. stating that they were not in a good enough condition to paint due to the numerous splitting of all of the wood on both the decking and railing assemblies. I suggested total replacement of the railing assemblies and deck boards using a composite like Trex. I also suggested that if the condo Board wanted to go that route I'd do some research and investigate 2-3 options for the Board to consider along with ball park prices, at a fee of "X" amount. He returned my call to state that the Board Pres. was excited about my letter, what it contained, and my suggested route, and authorized spending the monies (my fee) to produce my "report and SCA."
Perhaps, not always consciously, I always place myself in a position of being an "agent" for my clients to provide the best solution for them. That important attitude eliminates me as just another contractor in the "perception" of the client's mind, and instead, they perceive me as an ally. I even put in the letter that I would remove myself from the bidding and they could just hire me to write up the specs and manager the job once they awarded it to another contractor. The Pres. said No, that he wanted me to do the work as well, and they know I'm not cheap. I was up front and told them that, being 60 and it's summer time here, I would prefer too subcontract the project which they agreed.
We are salesmen 1st. Sure, we own businesses that just happen to be in the construction industry, but, we can never forget what we really are - sales people. "Consultative selling" has been around for probably hundreds of years before it acquired that term, but the concept, sincerity of helping others solve their problems puts more money in the bank without competition. It helps that through this particular prop. mgt. company, I have already proven my ethical standards, guarantees that were validated when we screwed up, and without even so much as a wince, and my penchant for making sure my suggestions are the right one's for my clients. To do that I must know their priorities and I make sure I find that out if I don't already know.
I do not sell what I want to sell. I listen, and "provide" what the client needs and wants. And sometimes their "wants" change during the consultative selling process as they are educated as to the pros and cons of this and that, and the what ifs. See, in this case, this Board president wants "his" bridges (as he calls them) to look really nice. The Board as a whole is interested in none or mimimum maintenance budget breakers. Since they are in the process of creating an assessment for the entire association, he wanst to include this anticipated $20k or more in it, and get it scheduled before season starts agan this fall.
And above all, be humble. I try to come across as very knowledgeable without seeming arrogant. I also don't push one option or another (unless asked), simply offering them and their pros and cons. It's their money to spend per their priorities and druthers.
Be neither a contractor nor a salesman. Be an agent for your clients. It's more fun and profitable - if, you've branded yourself postitively and properly.
Edited 5/9/2002 7:02:49 PM ET by Sonny Lykos
Sonny, let me say up front that you are one of the few posters on this board who seems to understand that the profit in this business comes not from the work but from the sale of the work.
One of my friends from the navy is a pretty senior manager with the St. Paul co. ( a pretty big insurance company) according to him the insurance companies are really in a squeeze right now. Most of them buy reinsurance from companies like Loydds of London. So the in the event of really serious loss they don't go broke.
Well according to him it used to be a certain way to get rich by being an underwriter for Loydds. You put up a portion or all of your wealth to guarrantee against losses. Then sat back and collected your percentage of the insurance policy. Since the funds were so well underwritten that all losses could be taken from cash flow rather than impacting the underwritters. That started to change in the 70's and the really big money moved out of the underwritting busines. Several losses from tankers running aground etc. scared them off. So Loydds started looking for other underwritters to fill the post. The ones they selected were far less able to withstand the losses and many were forced to liquidate everything they owned.
Now the pool of underwritters is much more aggresive about the quality of insurance they underwrite and are comanding higher premiums, much higher premiums for the underwritting. Some one else pointed out the recent downturn in the stock market which was the real source of income for them. The premiums they collected were used to leverage a position in the stock market and that profit went to their bottom line. They kept only enough of the premium to cover their operating costs and cash flow needs.
With no income from the stock market, higher reinsurance costs from Loydds, and severe competition from other insurance companies. most are operating at a paper loss and evan some of the best companies show only a marginal profit to their share holders by liquidating assests.
Since the world trade center was insured by a group of companies those are in a severe cash flow squeeze with only marginal recourse to Loydds. However Loydds has been hurt so badly lately that they too will need some quick infusion of cash to cover their position. Expect a sudden raising in rates, quality of risk, and the attending slow down in the economy.
Buy thye E-myth contractor and study it. Listen to what it has to say. You will be smarter, wiser and a little richer. You must always be learning and expanding your knowledge if you want to be successful at this business. Also sounds like you should hone your sales skills. Not bashing you just trying to help. The hardest thing that there is to do is self evaluation. Be objective and be willing to admit the things that you do well and not so well and then improve those things that you do not so well. Define your goals and follow them.
Carl
Buy and read Bob Burg's "Winning Without Intimidation" then get it on with the insurance agent. Like I will with mine on Tuesday on a different issue.
For you guys having a difficult time creating a sales system at your price, what to say, how to say it, and when, actually even while you work on jobs, I strongly suggest two additonal books that should make light bulbs go off: "The Experience Ecomony" - making every sale, during the sale, and while it's being produced, "An experience" for your cleints. The other one is; "Permission Marketing" - explaining how the public gives us "permission" to sell them something, and how to read that in them, adn why they do it . We do it ourselves whem we make a major purchase. We either turn the salesman off, or give them permission to continue to sell us.
Those two books should be in everyone's library.
I just bought "Permission Marketing" at a yard sale. Have 4 books ahead of it so will be 2 weeks before I get to it. I read 2 books a week. Sometimes I read the same book twice in a row.
Wet Head, reading them twice is smart, because it's known how we quickly forget what we read.
I always us a highlighter during my 1st read. Then a couple of weeks or a month later, I go back and read those highlighted areas and they reminds me of the concept being talked about.
Anyway, I think you'll enjoy the book.
Jack, same author, Michael E. Gerber, ISBN 0-06-621468-8, $23.95 retail