First off I am not trying to sound ungrateful but the phone just does not stop ringing for more work.
I work only by referal. If someone calls and tells me that they are getting a couple of bids I tell them that I am not interested.
One of the first things I hear from other contractors is raise your prices. I am already one of the highest in my area. You are not cheap I have been told on more than one occasion as the sign the proposal.
So my question is do I take on a partner/employee or stay small and just say no. I know that I can only answer this but give me some feedback
FYI
I had an employee for the last 2 years and he went off and started his own business. I sub out some work to him.
Thanks for your input.
Frank
Replies
I would say you are cheap! People come to you cause you do the job right and make them happy!
But you have to be happy too, so keep the pace at a rate you can handle. Turn down stuff if need be.
One rule of thumb I have heard is this: You should get about 2/3 of the work you bid on. You get more than this your prices are to low and vice versa.
Working at your current pace is clearly producing the kind of quality results that produce great referrals and more work. So you have absolute proof that this way works for you.
If you bring in a partner or hire more help you will need to be careful not to let the quality start to slip.
Try telling your new partner to redo/fix something that doesn't meet your standard.
I'm not saying don't expand-- no risk, no reward; just think about how you got to the level of success you now enjoy and try to ask yourself do your strengths mimic those needed to have a business partner and/or more employees?
Quoth the Eastwood "A man's got to know his limitations"
What ever your Markup is, times it by 1 1/2. If it's 30% make it 45%.
Repeat every 6 months until you find the level of work you want.
If work falls off, lower it by to 80% of what it is. If it's 50%, make it 40%.
Repeat every 6 months as needed.
Who cares what you would pay for your work, you think it's only half as good as your clients think it is.
SamT
Frankn,
i am in a similar situation.
in a similar situation here on Breaktime a few weeks ago-- I remembered that a local businessman had actually given me the solution to my problem during a conversation we had over a year ago
what i have been doing is telling callers
"thanks for calling--- I am really flattered that you had me in mind for your project------------- I have to tell you that I have been blessed with so much work that it will easily be june of 2008 at this point before I can do your project------ if you feel you can wait that long I would be happy to look at your project in the next week or so and then put you on our schedule"-----------------------
what happens is that it instantly weeds out the people who wanted something done THIS year---- but ironically it makes other people even MORE determined to have YOU and only YOU do the project. they will often tell you this straight out"Just tell us how much it is going to cost and then please put us on your schedule because we have no interest in having anybody else do the work"
someone else mentioned the "Risk/Reward" equation----which is also a good starting point---- but you may find yourself like me---quite familiar with the "risk"---and yet even more aware that the "REWARD"---( more money) is not something you are interested in
and YET--- balancing that with the awareness that times will not always be this flush
personally-- i am doing some analysis of project sold for next year--and like you the ever increasing backlog. More money NOW has no interest or relevance for me--- however retiring several years ahead of schedule DOES intrigue me----and sooooooooo, HMMMMMMMM?????????????????????
Stephen
Congratulations on your current success. I am a strong believer in referral only business. I understand some of the frustration at not being able to help everyone who calls. We are booking for January 2009 right now. I have turned away tons of work.
Like you, I evaluated my desire to grow the business, have employees, keep quality high, and figure out the systems to keep the ship running well. Some of the things I learned when we doubled revenue twice in two years.
1) Great employees-those who work in a manner compatible with your current way of doing things are hard to come by. I am not talking about whether or not there are qualified people out there capable of doing work-I am talking about someone who you will spend almost as much time with as you do your spouse. Going from a one or two person shop to multiple people will require some time to find the right people.
2) Doubling revenue requires doubling of effort on bookkeeping and paperwork management. If you currently do all this yourself, you need to evaluate how you will adapt and the expense associated with that.
3) Clients refer you for several reasons, one being that you personally are doing the work. When you grow that is not always possible. Managing that expectation takes some effort.
4)The most challenging task for me was making sure that our quality level stayed high. It takes alot of time and effort for me to train a new employee about the way we do things and the level of quality we strive for.
5) It is nice to know the company is making money even if I am not wearing the bags on a given day.
6) I feel personally obligated to make sure I take care of the people who work for the company and their families. As such, having more employees has allowed us to provide a real good health insurance plan to all our employees. I hope to start a retirement plan soon.
7) Increasing the amount of work you take on makes it more challenging to maintain your profit margins. More employees means more overhead. You need to adjust your rates accordingly. Remember that the time you take to do all the things above now impacts your overhead and you need to pay yourself for that effort.
8) Go slowly. I grew too fast and found out I was not having fun anymore. I went from a two man crew to 10 employees in two years. It is probably doable if you do not want to put your bags on. I found out my passion is in the building and doing of the project, not in the management of staff. I also found out that I was the limiting factor in the equation. I was not willing to give up a certain amount of control and hands on the wheel that was needed to successfully grow at that rate.
Best of luck on whatever path you chose,
Bruce
As a homeowner, I can only say that you should take it as a compliment. We are currently "on the calendar" for a contractor. We only called him and accepted the estimate despite a bit of sticker shock. His reputation and the long wait is well worth the money.If that is the case for you, then perhaps some customers will be happy to be scheduled for slower periods, which allows you to get the jobs done that must be done soon.Jason
Jason,
Yes, I am truly blessed and grateful for all the great referrals we receive from past clients. The frustration is not being able to help all the folks who call wanting our help but cannot wait over a year.
We are growing slowly to meet the demand, but it still is tough to pass on the number of projects we have had to pass on.
Best of luck on your project
Bruce
You sound like a incredible boss! There is a flip side to that first coin, Hard Working employees that are easy to get along with all day every day seem to be just as rare as Hard Working Employers who don't watch you make them money
I know that I am not an incredible boss-I have much to learn. I have been blessed with many great mentors who have taught me a great deal about all aspects of business and I have seen what complete jerks can do to a company as well.
Running my company, and all the aspects associated with it has been the most challenging thing I have ever done. As I progress through this process, learning to build the company in way that I do not have to be involved in all aspects has been my greatest challenge. Finding great people to work with has been my second greatest challenge. Most potential employees who have limited trade experience have a romantic notion about carpentry and the more experienced guys have a list of will do and won't do's. Ninety five percent of what we do as company is grueling, tiring, dirty, tough hard work-day in and day out. Most folks are not interested in it.
Thanks for the compliment-I hope to live up to that some day
Bruce
With respect to the comment of "more employees means more overhead". I'm not sure I totally agree with this (unless I misunderstood the context). In this business, more employees will not mean more overhead since their wages are not overhead. You bill their time out, so they will not be an overhead. If they are, don't have the employees and just sub out the work instead.
If anything, having more employees should actually make it easier to attain higher profit margins. If you have a certain amount of fixed expenses / overhead, then the more employees you have, then it should be easier to cover these expenses off since you are earning more revenue.
Your other comments are very true, and these are often not considered carefully enough when people expand their business.
In total dollar amounts, having more employees increases your overhead if your overhead includes health insurance, workers comp, general liability, allowance for clothes and boots, and adminstrative dealings such as time sheets, quarterly reporting etc. Granted I recover all of these in our labor rates, but they are in my books overhead costs and as I have increased employees, my efforts associated with these items has increased as well.
These increases in costs should not be an issue assuming your profitability on a percentage of revenue remains the same or increases, but could become an issue if you lose some profitability due to lower production rates, more call backs or other possible issues associated with becoming larger.
I have a similar problem right now. I'm so busy I cant see straight, but i'm not always like that so i'm not sure I can hire someone right now.
As far as bringing on someone else.....NO NO NO NO NO PARTNER!!!!!
You'll regret it.
If you can find an employee, the big problem will be finding someone to work up to your standards. If you cant find someone that good you'll be shooting yourself in the foot.