3 Things That Only Rich Contractors Do
Building your business is about building your habits. A company can do well with a little elbow grease and a lot of luck, but consistent performance requires consistent efforts. Let’s talk about the three things that the most successful contractors do.
Businesses that make money are no accident. Businesses that do well do well for a reason. It’s because they have the methods, practices, and ongoing efforts that are designed to make a business do well.
Knowing The Numbers
The first habit that all rich contractors have is that they know their numbers. They know their business financials. They know their cost per lead. They know how much money they make when they are in their busiest seasons. They know how much that drops down to during their slowest times. They know what money is coming into the business and where it is going out of the business.
So many people that start up new construction or home services business are really really good at their trade or at sales.
If you’re starting a business, that means you have to get better at more than just that if you want to survive.
Understanding your numbers—your cost per lead, your closing rate, your profit margins—will help you make better decisions about your business. It will also help you know how your business is trending—if things are doing well and you’re going to be fine, or if things are going poorly and you need to re-evaluate your company until your numbers realign.
You don’t have to do all of this on your own.
Yes, running a business means you’re going to have to learn some new skills. Having a mentor in the trades, another business owner that you trust and who is open to helping can be a great way to get your feet wet and gain a better understanding of how a business should run from a numbers perspective.
Paying Your Business
We’re not talking about putting spending money in your pocket here.
When you work a job, the money you make at your job is yours. You put it in your pocket, you pay your bills, you buy food, you save up for vacations - it’s your money to do with what you please.
When you’re running a business, that’s different. The business has to get paid, too.
You have to separate things out here. If you’re not paying your business, putting money into an account that is only meant for your business operations and growth, then you’re putting yourself at a bigger disadvantage.
Every business is going to face an unexpected problem out of the blue at some point.
If your business doesn’t have its own money, guess what happens when an unexpected bill comes due? That money has to come from somewhere. That means it comes out of your pocket as the business owner.
Even if it is just you as a sole proprietor running a business of one. You still need to separate your money. Your business pays the costs to run itself - including your contractor marketing, advertising, payroll, taxes, material costs, equipment-related purchases, and more.
Your business should also save up a nest egg for emergency funds and have money on hand to keep things running smoothly during your slow seasons.
If you’re pocketing all of your profits and spending them without thinking about the company, your company will not last.
Improving Your Earning Capability
Your business needs to learn and grow, too. To best maintain your business’s operational budget and ensure you or your staff are paid appropriately for your efforts, you must increase your ability to take home more cash.
There are two ways to do that, and both are difficult.
Option 1) You can tighten your belt
This is only the right choice if you have identified wasteful spending and money loss in your business. If that’s the case, then cutting some of the fat can help you spend your money more effectively.
If you take an already lean business and try to make it more efficient, chances are you’re going to cut away some of the muscle that makes your business work. That means you’ll make less money instead because you’ll end up hurting the parts of your business that are working well.
Option 2) Increase your cash flow
You can increase your cash flow either by charging more for your services or expanding your services to reach new customers.
If your schedule is already booked solid and you have a high closing rate, that may mean it is time for the price to go up.
Having a 100% full schedule is great. But if you can make more money by taking on fewer higher-ticket jobs, then you could perhaps make the same amount of profit while doing less work.
That means if you fill your schedule again with those higher-paying customers, you’ll spend the same time working but make more money.
Even if you have a pretty full plate, increasing your marketing or advertising allows you to select the best customers possible.
If you’re an HVAC contractor and you have lots of preventative care appointments all day long, that can certainly have the potential to make you money. But if you’ve got the choice to do preventative care or complete system installs - one of those jobs is going to have a higher ticket and higher profit margin.
When you have more than enough work to do, you get to pick and choose the jobs that are best for you. You could even perhaps refer some of your surplus lesser leads to another contractor and make some referral fees for your business.
Rich contractors and struggling contractors all do the same trade at the end of the day. The difference is in how they apply themselves, where they focus their efforts, and how they prioritize an understanding of the numbers and a discipline for maintaining their business.
If your business needs help to grow and succeed, the pros at Footbridge Media are here to help.
"Contractor Marketing Tips And Tricks" - The Footbridge Media Podcast
About Chris Lonergan
Chris Lonergan has over 12 years of contractor marketing experience with Footbridge Media. With a background in web design, print design, content creation, and online marketing, Chris is focused on providing quality marketing and business solutions in the construction and service industries - helping small business owners to more efficiently manage their companies and grow their operations.
Chris Lonergan has previously contributed to and/or been featured in PM Magazine (Plumbing & Mechanical | Contractors x Engineers), theNEWS (ACHR - Air Conditioning | Heating | Refrigeration), Service Roundtable's blog, inPAINT Magazine, the SMB Marketing Agency Show, and the Green Industry Podcast. Chris is also a past SGI/CertainPath breakout session presenter.
