I've been studying, constantly reading to further my knowledge as we all should, a book by Michael C. Stone "Mark Up And Profit A Contractors Guide", page 7, in which he states, and I quote directly from text:
"Reasons for Failure
When a construction related business fails, the cause is almost always poor cash flow. When the money stops, the business ends. There are six main reasons construction businesses suffer from poor cash flow. They are:
1. not charging enough for their work
2. failure to use, or improper use of, change work orders
3. failure to use, or improper use of, legal contracts
4. too many employees for the volume of work being produced
5. improper payment schedules on their contracts
6. lack of profitable sales"
Numbers 1 and 6 go hand in hand and I see it so often where we all are estimating in a maddening frenzy to guess what the other guy is charging and then cutting our own throats all in the name of "competitiveness". We do this only to end up stealing from the deposit of the next project to finish the current one. You do that enough and soon you are in too deep.
Michael Stone also explains in his book "Profitable Sales, A Contractors guide" that in a study conducted by the NAHB, price is seventh on the list of things that are most important to the homeowner. Four out of the top 5 most important to the customers is YOU, the company! So we have to ask ourselves Why? Why do we kill ourselves, and our companies, trying to sell $$$ when we can not possibly know who we are competing against much less what market or personal factors drives their reason for pricing the way they do? Sell YOU first then get around to the prices!!!
I strongly encourage anyone who reads this blog to get your own copies of Michael Stone's books and educate yourself so we can all help educate our customers and stay profitable. Below is a link to where you can get yourself a copy:
Thanks for reading,