Category: Contractors

Ever Wondered What to Do?

So you have this project that has prints and specs, you’ve been there to check out the project site and conditions and your start date is scheduled to have you arrive and perform your scope of work. You sign the contract, shake hands and leave. This is going to be great; you think to yourself.

You go back to your office and make all the arrangements to start the project in three weeks. You make a schedule, assign personnel, allocate vehicles, equipment, tools and supplies. You order the material and allocate the three weeks it will take on site.

Three days before you’re scheduled start date you call your client and he says, “oh yes, we are all ready, come and execute your scope of work”.

The start day arrives, and you pull the trigger and put everything in motion for a flawless delivery of your services.

About an hour after you knew the crew was starting on site your phone rings and on the screen, it says it’s your crew foremen calling.

What happens next shocks the hell out of you. Your foreman tells you the site is not ready and the area where you are supposed to perform your services is not even finished being built!

So now what do you do? You have spent a couple thousand dollars getting ready and mobilizing. You have all the material to hand, fabricated and delivered for install. You’ve spent tens of thousands on that. You made the schedule according to the info from your client. Now, your stuck. You can’t work, can’t get paid and have nothing for work because you allotted 3 weeks to do this project and your next project is 3 weeks away.

But it gets worse… you’ve got all this money and time tied up. Now you have to demobilize and return to this project when it is ACTUALLY ready. This creates a huge problem in scheduling around your future commitments. So now, extra help is required and so extra costs to you.

Well, this first thing you do is document exactly what has occurred, what will occur and why, sending it to all parties involved directly on the project. Make sure this includes all the correct times and dates, the names of the people involved, the companies they work for and exactly what was said. Make it known that additional costs will be incurred because of this.

Then, write up a change order to cover the additional costs of the demob and remob. If there is rental equipment involved make sure that’s part of the charges, and you’ll have to return it and make sure it will be available for when you can do the project.

Finally, you request to be paid the value for what you have already completed and the change order, before you return to finish the scope of work on the site. You did not create the problem and therefore you should not be paying for it. Get paid what you have invested in the project before you return to finish it. You delivered what you promised, so it is only right that your client does the same.

In closing, remember this – get EVERYTHING in writing, right from the first communication about the project. Then if this scenario happens to you, you already have every written document to back your claim of correctness in the matter, as well as helping your client ferret out who the real culprit is and get that corrected so it doesn’t happen again in the future.

How Do You Price Your Company’s Products & Services?

There is almost always a misunderstanding among contractors and clients alike when it comes to the cost of things. Anyone wants something of a certain value and more often than not, wants it as cheaply as possible. It’s the old having a “Cadillac on a Volkswagen budget” thing, if you are as old as me and remember that phrase. People want the nicest of things but shop by the cheapest costs and often settle for lesser quality just to have a facsimile of the thing.

Pricing represents value for sure. But, price and value can take on very different colors. Let’s take cabinet makers as an example. Bob, just Bob, makes custom cabinets by hand out of the best solid wood available and his craftsmanship is beautiful. He operates out of his 2 car garage and has very low overhead. A cabinet from Bob costs $300.00.

Joe has a company of 10 employees that makes custom cabinets out of a decent grade wood, has automated equipment in a large facility that can pump out many cabinets at a decent quality. There is a machine operating here that needs a definite amount of energy every month in the form of money to keep that machine (the company) in operation. A cabinet from Joe costs $250.00.

And then there are big box stores (orange or blue in color) that stock cabinets that look nice but are made out of particle board with silk screen finishes that require assembly. There is questionable quality but it IS a new cabinet, even if not custom, it will do. A cabinet here costs $100.00.

This concept can be applied to any product or service. It can also be used to back up your prices being fair and competitive in your market. As you can see you must compare what you do and provide against what the price is, convincing or showing the client the value, as well as why you are better than the lower cost bid.

People want proof of what you do and what you have done. Have samples, brochures with lots of pictures and client testimonials. Showcase your work and let that promote for you. Have a killer website which shows your work, your capabilities, your facility and your craftsmen along with their qualifications as well as their accomplishments credentials, certifications, education, etc.

It is important that your previous and existing clients back up the story you tell. If you do that then people will be happy to pay your price because others already have, all the while vouching for you.

In my book, The Nuts and Bolts of Erecting a Contracting Empire, Chapter 4 tells you how to properly price your products and services and how you correctly use the money to keep your company going and growing.

So, if you are having a struggle with pricing the value of your products and services, you may want to have a look at our online course just for Chapter Four.

Get the full story. www.nutsandboltscontracting.net

How Do You Handle Your Company Finance?

Money. If you have too little or no money you are frowned upon by society as well as your peers. If you have plenty of money the tax man taketh. So what’s the answer to this riddle?

There are many schools of thought on the subject of money, finance and economics. Most of them so complex they are literally not even understandable. There are however, very simple methods of handling money, so you can have some.

Chapter Four in the book The Nuts and Bolts of Erecting a Contracting Empire is titled The Basics of Company Finance. It includes all the basic principles and practices to manage money and finance not only for your construction / contracting company, but for ANY business, personal or household budget.

The very simple actions that need to be taken to insure your bills are paid on time, how to have a cash stash to get you through periods involving income shortages, and, developing a financial strategy for your future.

It may not be so easy to change the ways you thought money and finances should be handled at first. BUT, I promise you, if you execute these very basic actions, you will succeed and eventually have money.

The stress will go away and you will be able to have some more time as well.

It has been said that money is the root of all evil. And my Mom used to say, “everyone needs roots.” Truthfully, the only evil concerning money is not having any.

Many people operate with the idea that they have a salary and the salary is not enough to sustain their life the way they want. I have worked with everyday people and owners of companies who believe this and every time I reviewed their finances, have been able to show them how to get out of the soup, turn their finances for the positive and plan for the future. Every time.

You see, the actual cause is not money, it is what is done with it once you have it. It doesn’t matter if you have little money or tons of money. It matters what you do with it.

So, if you are having a struggle with money, you may want to have a look at our online course just for Chapter Four.

A Change Order – What is it?

A change order is a document one gets to perform extra work over and above the original contracted scope of work. It is almost always the result of some discovery once into the project that could not have been seen or realized beforehand.

 

A change order is also called a “CO”. Most companies require a Change Order Request, or “COR”. The COR is from the sub-contractor to the general contractor. This is where one writes up a full detailed report on the findings, why extra work is required, the work to be performed which is in addition to the contracted scope of work and the impact the extra work will have on the project schedule.

 

Then once reviewed by the contractor, the request is accepted or denied. If accepted a Change Order is issued to the sub-contractor and the sub may proceed with the work. You NEVER perform work over and above your contracted scope of work without a signed Change Order. Chances are you will not get paid for the extra work.

 

There is also another way a Change Order can be brought about. It can come from the general contractor to the sub-contractor. This is called a Request for Change Order or “RCO”. This usually happens when the engineers or architects find that what they originally wanted done cannot be done or must be done differently. In this case, you would receive the RCO, do your investigation of the actual details and price the additional scope of work. You would then write it all up and submit it for approval.

 

If you use sub-contractors, there are those out there that you must know about. These subs low-ball the bid for their work just to get the job. Their bids are very vague, and they never list out a specific scope of work for their services based on the drawings or project documents.

 

Their idea is to get the work and then change order the job to death, coming up with some cockamamie ideas on how it wasn’t included in their bid, therefore they are not contracted or under obligation to do it. This becomes a dangerous endeavor all the way along the line.

 

As the contractor you are between a rock and a hard place. Since you priced the project based on that bid, you only have that much money allotted for that scope of work. Now that your sub, or even multiple subs are beating you up for more money – or they won’t finish the project, your only choice is to go back to the owner and try to explain the cost overruns. This will of course get ugly. The outcome is never good for anybody. The owner’s argument will be that it is your fault, and I hate to tell you, it probably is.

 

Chances are you did not perform due diligence on the integrity, performance and reputation of who you were contracting.

 

I remember a project I was asked to bid for the US Army Corp of Engineers acting as the contractor on a hydroelectric dam upgrade project. I spent weeks working with the project manager, giving away valuable insight and information about the project, suggested better means and methods and had a slew of mistakes and missing info added or revised on the plans. There were 11 total bidders. 10 of us were around $1.3 million for the job, all within 10,000 dollars of each other. You can’t get any more accurate than that. 10 separate bids all so close is a testament to each of those companies and the fact they know the project requirements and how they will perform the project to a successful completion.

 

The 11th bidder was at $438,000, about a third of every other company. The project manager told me he had to go with that company because it was his duty to protect the taxpayer’s money. I tried on many occasions to show him the handwriting on the wall. He said he took an oath as a public servant which involves being bound to only accepting the lowest bid. No amount of review of the blatant facts could convince him otherwise.

 

I told him do not call me back when it all gets ugly. I explained that in the bid process I, without cost, enabled my company and all the other reputable companies to formulate an actual and correct proposal for the project and I was not going to waste one more minute helping him.

 

Before the scope of work even began at the site, the “low bid” company held the majority of material hostage for change orders. When they did not get them approved, they filed bankruptcy, went out of business and never stepped foot on the job site. The material suppliers went and took their material back for non-payment.

 

The project manager did call me back to say he should have listened. The project ended up costing taxpayers 2.1 million when it was salvaged, turned around and successfully completed.

 

You MUST qualify all companies before you have anything to do with them. Whether you are in the position of contractor or sub-contractor, know who you are dealing with before you deal with them.

 

 

The Most Common Problem…

We often get asked by our clients, “What are the most common problems that contractors face?” As you could imagine, the answers are almost invariably the same, only different in the sense of how one sees them in their own organization.

 

In the world of construction we have many other companies and levels of service to deal with in our operations for delivering our products and services to the client. Because each one of these operate on some other rules than you do, or even that each of the others does, it becomes a challenge to make sense of.

 

For instance – you get a contract from a GC (general contractor) which immediately puts you in the position of sub-contractor, placing you, legally, under the control and company policies of the GC. This includes payment terms, safety programs, screening of your company or its employees, schedules, insurance requirements and anti-drug policies.

 

Let’s say you sign your first $100,000 contract. You have 30 days to perform your scope of work. You start out well, get all your planning done, materials ordered, personnel assigned and equipment in place. The contract says that the payment terms are based on the amount of work you complete in a 30-day period, which in this case will be your entire scope, and the GC will pay 90% of that 15 days after, and the remaining 10% 45 days after that. So, this means that you finance the entire project, without collecting one red cent, for at least 45 days.

 

If you usually perform this size contract this is probably OK, and you can float the expense for that time period. BUT, the fine print on that contract has this little clause that says, “the GC will only pay, provided they receive payment from their client and will not pay anybody until that occurs”. This is called a paid when paid clause and is more and more becoming a part of the contract landscape.

 

Here is what this means: If the GC or another sub screws up and doesn’t perform correctly or at all as part of the GC’s contract with the client, you don’t get paid even though you delivered your scope of work on time and correct. Get a couple of these going on and you can be run right out of business.

 

Which brings us to the #1 problem – Cash Flow. How do you operate your company when you have someone else controlling your income?

 

Well, all is not lost on this. Make sure you read your contract well before you sign it. If you don’t agree with a term or clause take a nice big red marker and cross it out. DO NOT make any verbal promises or agreements as this will just end up in a he-said-she-said pissing match.

 

The most successful method I used to handle this is when I was put into a sub position, I would submit OUR company’s contract based on sane and ethical business practices that prevented us from falling prey to the other guy. If the GC, or direct client for that matter, wouldn’t agree, then they have their own unsolved problems and have no intention of paying you for your services anyway.

 

In closing, I give you this: if you cannot come to terms on a contract that will be a win-win agreement, do not sign it and walk away from the job. This will be a whole lot easier and less expensive in the long run. Avoid being forced into some sort of legal battle which will drag out for years and be way more costly than just saying, “no thank you”.

How Do You Hire Employees?

Human Resources can be a very volatile area of any company, large or small. The smaller the company the more volatile. Let me explain.

 

In a smaller company an owner or executive hires a person to do some part of their post so it is crucial to get the right person who is skilled in, and can handle that duty and obligation. This is all due to the simple fact that you can do any of it, but, since you do such good work, the demand keeps going up and you no longer can do all of it.

 

If you are a craftsman that is running your new business all by yourself all the other functions of the company require your attention and prevent you from providing the services to your clients. You may need a treasury manager or sales person to do those functions so your company can grow while still allowing you to be that craftsman and handle the demand for your work. You simply need someone to take duties off your plate. You are literally establishing an organization.

 

Therefore it is EXTREMELY important to get the right person for the task at hand. If you don’t get the right person then you’ll end up still doing most of the post, or worse, have to do it over correctly. You have to be sure that the person would do as you would do, the way that ends up in your desired results, with the same amount of diligence and care that you would take in getting that desired result.

 

In a smaller company, as you grow, you are actually establishing the organization with the people you hire. In a larger company the organization is already established for the most part and that is why and how it became a larger company.

 

In a larger organization a person is usually hired to share a portion of the work load or be assigned a new position which is part of an expansion effort. This could be an additional person to handle an increase in demand for services, such as a bookkeeper. The amount of effort required to keep the books has exceeded what one person is capable of doing.

 

As the owner of a smaller company wanting to grow and become a large company, it is paramount to get the right people who care about what goes on just like you do.

 

To help with this we have Nuts and Bolts Academy. It is, to our knowledge, the only course of its kind online, that helps you establish and controllably expand any company in the construction and service industry world.

 

Get the full story on how and why. CLICK HERE

 

Consulting or Contracting ?

I wanted to take the time to answer a question that I get very often – “ Why is the name of your company Nuts and Bolts Contracting and not Nuts and Bolts Consulting?

And by the way, that is a VERY good question. So I am going to share with you why it is that way, why we decided on Contracting instead of Consulting.

First let’s look at what the dictionary says about the two words.

Consulting means: To be employed or involved in giving professional advice to the public or to those practicing a profession whether an individual or company.

Contracting means: To enter into a contract to do work, for an individual or company, for the purpose of assessing and understanding the client’s needs and performing the work to an agreed upon and expected end result.

We are not in the business of just fact-finding and giving advice.

We are in the business of helping you discover the areas where you are experiencing stops or barriers with your company that prevent you from achieving your business goals, and then working with you to eliminate those stops and barriers as well as implement the correct systems to enable you to realize those goals for your business.

So you see, we do not just consult, we contract to deliver an exact end result that you need and want for the purpose of helping you organize and manage your enterprise with the end goals that you desire.

Whether in the areas of:

  • Finance
  • Operations
  • Human Resources
  • Project Management
  • New Business & Marketing
  • Organizational Development

Or if you are interested in:

Taking Your Business to the Next Level of Freedom

We can help with that.

We can also train your entire staff, be it managers or executives, to share and contribute to the successful management and operations of your company. You won’t be the only back that the future of the company rests on. This returns to you, time and money. Your company will operate flawlessly and it won’t matter if you are involved in the daily operations or not.

Franchise? Why Would You?

Franchise Owner?

 If any contractor can believe it, you can franchise damn near any business on Earth.

We see these franchise opportunities for compartmentalized services of a construction and contracting nature sprouting up. They are taking certain market segments of home and commercial services and packaging them up for sale, with some pretty impressive backing.

The majority of these are in the areas of space utilization (shelving and closets), restoration and refinishing. I have found a few franchises for Inspectors as well.

I have done a little research and they can range in cost from about $20,000 to $150,000 (and greater) for what they call the “minimum cash required”. And it only starts there.

One franchisee says in addition to the “minimum cash required” amount, he had to spend another $20,000 in training and his living expenses for the term of the “corporate education requirements” which was another $11,000. Plus, he had no income for that time period.

Now you go to work in your new business, partially owned by some conglomerate or corporation where you are bound by rules, that if you violate them, you could loose your rights as a franchise owner and possibly pay stiff penalties from way down in the fine print.

Most franchises that you buy into for their brand or label also have “maintenance fees” of 10% of all your income, or in some cases much higher than that.

But here is my argument: WHY? Why would you line someone else’s pockets with your hard earned money? If you already are a technician or a craftsman why wouldn’t you just start your own enterprise?

Just the other day I talked to a very good friend and associate whom I will call Barney. He is a retired long haul trucker. His son said he wanted to start a business, so, after identifying what that business would be, they spent a lot of money on a franchise. In 4 years they have grown up to 7 service trucks, 11 techs and Barney and his wife, as well as thier son and his family, help operate the business.

Barney told me that if he had it to do over again he would have started from scratch. He said that while the business can support and expand with the help of the franchiser, and the family can make a living, there is no real profit in it because what would be profit all goes to the parent franchise company.

Well, doesn’t all this look like you are still working for someone else and not building your own business and your own reputation and your own brand? Building a business today is easier than ever if you get to know and use the basic nuts and bolts principles to establish and operate your company. There are basic, proven, plans to follow which teach you how to be successful.

I am not bad mouthing these franchise outfits, as they do deliver exactly what they promise. And a person could do well with one of them, but, you are essentially working for someone else.

Control your own destiny. Take charge of your own future and the future of your own company. You can learn how to do it and you can do it.

It’s All in the Prints… Or Is It?

For those of you who have been in the contracting game for some time, you remember blueprints. Simply called, nowadays, prints. Probably because they are no longer blue. Duh.

Anyway, prints were done by very skilled technicians, be it an engineer, architect or detailer, by hand. I know, I actually took mechanical, architectural and structural drafting in high school for all 4 years. You had to know how to make angles, curves, a radius and circles to the exact scale. In fact, the straight lines too! And ALL the correct dimensions were on the prints.

The person making the drawings was required to have worked in the field as part of their qualifications. The architect helped build a house, the engineer a bridge or tunnel, the detailer some sort of mechanical contrivance. By the time they were employed as drafting types, they already knew what would work or not and how it had to go together. Every detail was covered.

Making these prints involved thought, the ability to use mathematics, vision, time and care by the draft person and best of all, you could read and understand what was drawn right down to every minute detail, and therefore you could SEE what you were supposed to be building and how to do it. The prints were your instruction manual.

If you had any question about anything it was drawn in the prints exactly how it was supposed to be built. Material specs were there, as well as sequence and layout of construction.

So what happened, how did this crafty art devolve? Computers and drafting software and digital storage of your work… that’s how. I can’t really blame AutoCAD or Tekla, but, it did make it so everyone’s work appeared the same. The ART of design was gone. And that is what happened. Everything became the same as everything else. And rarely do you ever see an architect or engineer or detailer ever step foot on a jobsite anymore, except maybe to get accolades for being a big wig.

It all became a game of cut and paste from one job to another and the best detail you could get on a print said “typical”, meaning ‘do it all this way’. There started to be pages of plans that had nothing to do with your project but they’re typical to construction so they get put in the plan set anyway.

And then there is my personal tick me off to no end: you have to be able to read 9 pages at one time to figure out how that corner column went together at the top and bottom. Page S3 says see detail 4/S6. 4/S6 says see architectural drawings. You find what your looking for on A17 and it says see detail 6/A23. 6/A23 says see structural drawings. Are you swearing yet? This is why we have this relatively new thing called an RFI. Request For Information, because there is not the information you need to see how the thing is supposed to be constructed.

OK. So what’s the point of all this? Why am I on this rant? Well, because I see too many building contractors I know get into trouble ONLY because of bad or incomplete or even wrong plans. This usually results in taking on a project leaving too much to “assumption”, not enough to fact and underbidding, making the project a loss, before you even start it.

When bidding a project make sure the plans are at least complete enough to know what your building, visit the site, ask questions, query anything that you think may be missing or wrong. Get all the answers to your questions before you bid.

A lot of guys tell me they don’t want to look stupid asking too many questions. You can either think your being stupid or know your being broke.

Well, what’s it going to be?