I’ve observed an interesting phenomena regarding behavior in the management teams of a lot of companies. Anything having to do with production qualifies for education. Whether it’s estimating or working in the field, education is available. The companies that I see being successful in today’s market are the ones that are adjusting to the changes in the marketplace. Most people hate change, and as a result, they go kicking and screaming when they’re told they have to change or if it appears that they need to change.
So what parts of the company need change? Well, let me suggest some areas:
- Leadership training for the management team.
- Sales training for those responsible for selling people to work with your company.
- Accounting training for those responsible for job cost of the different types of work that the company does.
- Business training for the management team to learn how to use the information gained from points 1-3 above.
Let’s talk about an example going on in the restoration industry. Contractors are being told by a few insurance companies what profit and overhead rates they will pay to have their policy holders loss repaired. I’m not a lawyer, so I’ve asked around as to whether or not this is price fixing. The response has been that when the price for a loss is discussed prior to a job being signed, it is not price fixing. The lawyer explanation that I’ve received is that you can walk away from the price if you do not want to do the work for what is being offered to you for payment to repair the loss.
This is a good time to talk about what happens when a frog is put into a pot of frog-friendly water sitting on a stove. The frog is put into the pan of water at a temperature that it’s very comfortable swimming around in. The next step is to turn the stove burner on so that it will slowly raise the temperature of the water to a boil. As the water temperature slowly rises, it will go unnoticed by the frog. Indeed, it will cause the frog to relax and enjoy the comfortable warmth of the ever increasing temperature. But as the water starts to boil, the frog realizes what is actually going on and it is unable to get out of the now boiling water. The entire point of this story is that you must be looking down the business road you are on, deciding what is best for you and your business as to whether or not you need to change the road you are on.
Most companies I know are willing to take the payments that they are currently getting from the insurance companies that they are working for. It’s easy to go with the flow, to not be combative or hard to get along with. You keep saying to yourself, “I have to take the good with the bad and they will take care of me on the next job.” Maybe they will take care of you in the future and maybe they will not take care of you. Let me share some cold hard facts that you may not yet know (or don’t want to know):
- These types of jobs are coming in a lower profit than what the company is getting in their other types of jobs.
- These program jobs are requiring your best person to monitor and manage them.
- The re-inspections are becoming more and more difficult to deal with.
- The prices being paid are decreasing the longer they are in operation.
- You are being told that if you don’t like the program, they have more than enough contractors that they can replace you with.
- It’s much easier to just wait for the job to come in electronically than going out and getting work the way you used to get work.
So what’s a contractor to do? Well, it depends on what road you are going down and what road you want to be going down!