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New contractor on the block

Aug. 6, 2014
My complaints were: 1. Cash flow is almost non-existent. 2. You can’t seem to get paid on time from any of the contractors you do work for. 3. You claim to be continuously underbid by other contractors, no matter the size or scope of the project.  

A few years ago as I was struggling to make it as the “new contractor on the block” it seemed that all the good advice and encouragement given to me seemed to be only that; good advice or encouragement. At the time, when money was as tight as could be, and I had little to no knowledge of how to run my business, I had nearly nothing to offer in the way of advice to any person just starting out on their own.

After all, nearly half of the business decisions I made were poor or dumb, take your pick. Now what I’d like to say is that one day I had a premonition or that everything just fell into place, but that wouldn’t be close to the truth. No, instead I continued to make poor decisions only as time moved along they became less and less. As it turns out, we really do learn from our own mistakes and if we pay close enough attention, from the mistakes of others. In the interest of your time, and my own, I’ll fast forward some.

After about five years of just barely getting by I found myself considering a career change. At this point I had finally figured out that all the good advice I had received early on had really just gone in one ear and out the other.

This realization came one day in a conversation with a close friend in the hydronics contractor training business; I’ll call him “JB” for the sake of anonymity. On this particular day (there had been many similar conversations around that time period) JB had alerted me to just stop and think about all the problems I was complaining about. Only this time I had enough intelligence to actually listen as he recounted my complaints one by one.

1. Cash flow is almost non-existent.

2. You can’t seem to get paid on time from any of the contractors you do work for.

3. You claim to be continuously underbid by other contractors, no matter the size or scope of the project. 

You might imagine it took a lot for me to sit on the other end of the phone line and not argue that there was little or nothing I could do to change any of the three things JB had insisted I write down as he recited them back to me. Oh, it did take a lot, but to this day I am grateful he was so insistent, because what he said next was what changed everything for me.

JB had been a contractor at one time himself. I joke that it was a time when dinosaurs roamed the earth and his duty was to just build proper fires in order to keep people and their houses warm with the occasional installation of a cistern for some rich guy on the other side of the tracks. But none of that is true and, while things may not have worked out for him at the time, he’s not doing so bad these days and has way more to offer me or others like me, so I pay close attention when he’s willing to put me in my place.

Now, back to JB’s advice. His focus was immediately drawn to my number three complaint. The one where I claimed being constantly underbid by others; only he wasn’t buying it and it took some explaining, but I soon realized I shouldn’t buy it either.

JB explained that this was a problem that would never go away (at this point I was not encouraged…) unless I realized that it was me that was directing those customers to the other guy and that it was most likely not my pricing or theirs.

In fact price has little to do with it, he explained, because in the hierarchy of the five most important buying considerations price comes last on the list. JB’s explanation cited the book “How To Sell At Higher Prices Than Your Competitors” authored by Larry Steinmetz. He pointed out the list of buying considerations in order as: delivery; professionalism; service; quality; and price.

I can remember thinking there was no way price was less important than at least three of the four other items on the list, but as JB continued the light-bulb in my head started to get brighter and brighter.

I’ll give you the crib notes of the rest of our conversation, mostly in statement form as JB delivered it to me: 

Delivery: Your customer can love everything about you, your company, your products and your service, but if you can’t do the job when they need it done they will have to look elsewhere. They have no other choice.

Professionalism: Would you spend your hard-earned money on someone who looks, acts or believes neither he nor the product he’s offering are worth it? No, no you wouldn’t and neither would your customer.

Service: Are your buyers in any way equipped to tell the difference between a good boiler or a very good boiler? Nope. Are they equipped to tell if one installer is significantly better than another? Nope again. The deciding factor here is service. It’s the simple stuff like warranty, what’s included and which competitor is actually defining specifically what to expect before, during and after the sale.

Quality: If there’s one person in the entire chain that cares most about quality, it’s the contractor. If a product is junk, they’re the one dealing with the problem and the angry customer.

Price: Your customers will always complain about price….because they can. You can pretty much be sure that price isn’t their biggest concern if they tell you that they have three other prices that are lower than yours, and that they’re still talking to you!  Instead it has more to do with the other four things on this list that has them wanting to do business with you!

So you’re probably wondering about the other two complaints on my list. Although the solutions weren't easy and it took time to solve the problems I was having, all I really had to do was think back to all that “good advice” given to me way back when I started out on my own. Cash flow was a problem, but it’s mostly because I refused to go to the bank and secure a business line of credit for those times when not getting paid on time was an issue.

At the time I had been playing banker to all my general contractors instead of leaving that up to the pros. Oh, and the whole not getting paid on time situation, having a solid legal binding contract in place for every job is the only way to avoid the long drawn out waiting times for a paycheck. I simply do not and will not work for someone else on their terms. None of the players I owe money to will play by my rules, so I too have a set of rules for those that owe me.

Thanks for reading my column each month. Your feedback has been nothing short of amazing and as always, I welcome any continued conversations on the subjects I write about. I hope you find some useful information here. Good Luck!  

Eric Aune started Aune Plumbing LLC in 2004 and specializes in residential and small commercial hydronic heating systems and service. He is a graduate of Dunwoody College of Technology and Plumbers Local 15, Minneapolis Apprenticeship Training Program, and is currently a United Association Instructor and teaches for the Plumbers Local 15 JATC. Aune is also founding partner and vice president of Contact him at: [email protected]

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