Steve Payne
"33 per cent gross margin? Lean and mean is the flavour of the day"
Canadian Contractor BusinessNickel N. Dimeless divides his jobs, on paper, into two parts: (1) His real cost to do the job (2) The hoops and hurdles he will have to overcome from government and regulatory agencies.
Here’s a reply to our article on the importance of hitting 33 per cent gross margin, at least.
Nickel N. Dimeless pulls no punches. Great post this.
“It is all great to play contractor and businessman on paper, but in the real world where the boots have to hit the ground running, lean and mean is the flavour of the day, and the idealistic “paper boys” never even get close to the table. We live in a world that believes that all bids are created equal in scope, materials, and workmanship. The lowest bid gets to sit at the table. The biggest problem is that we do not allow tradesmen to be tradesmen and allow them to do what they do best. The system demands them to be contractors / businessmen / hoop jumpers first and foremost, and a producing workforce dead last. Government has no lack of energy or appetite for creating hurdles and roadblocks for contractors. It use to be that a work day was 8 hours long and generally meant 7 1/2 hours on the tools. This was a fair relationship for the tradesman and the customer paying the bill. Over the years the business and hoop side of the exercise have become ridiculously out of balance and mathematically unsustainable. The underground contractor is thriving in this weak economic climate and meets the strained budget of the ever shrinking middle class. When I take any project or job, and draw a line “on paper” separating it into two parts; one part being what my real cost is to do the job, the other part being hoops and hurdles, there is sadly more pencil lead on the latter side of the page. I can try and add more pencil lead – but the whole page turns into a lead zeppelin and will not fly.”
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I think you are exactly right. I see and have seen many a good tradesman decide to become a “Builder”. They know how to frame really well but cant put together a decent spreadsheet let alone make a presentation explaining the pro’s and con’s of an estimate. They have a pick up and five grands worth of tools, and 8 or more years experience in the field but none in the office.
Lets face it as a small business its a very tough. If you don’t have enough gross margin you end up doing payroll, correspondence, site supervision, sales marketing and general admin all by yourself, how long can that go on. Then there’s the government and that’s another conversation
Here is the deal people! Do what you do the best and sub out the rest. You can’t be great at everything, no one is. If you want to be a builder …be a builder. If you want to be a accountant be one of those. The reason the 33 % is important is that you make enough to covers the accounting, payroll and HST cost to your business. Customers don’t hire us for our accounting skills, they hire us for our ability to build stuff. Read the e-Myth book and come up with a system that works for you. Merry Christmas and have some fun!
When I decided to start a company I had a chance to take some business courses. One instructor/mentor said that any company is broken into 3 parts. One the doing of the work, for us as tradesmen you know what that is. The second is the managing of the business, who to hire, fire, pricing, admin work etc. The third is accounting. Realisticly you are good at one of these 3, some are OK at a second but none are good at all 3. So pick what you are good at and get someone else to do the rest. My weak point is accounting, so I have someone doing that. I can work an extra few hours a month and that pays her part. If I were to do it, it would take all day and more at least once a week. Easy leap here for me.