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There’s an old story about two men who drive up to a residential property in an unmarked rusty van, knock on the front door, and inform the homeowner that they can reseal the owner’s cracked asphalt driveway at only a little more than half the going rate. The homeowner, Mr. Jones, strapped for cash after taking his family on a theme-park vacation, readily agrees to pay cash for the work. The next day, three men arrive bright and early, sweep dirt and leaves off the driveway, and proceed to apply a thin black substance to the driveway. They finish the job quickly and place protective yellow ribbon around the driveway.
After packing their tools in the van, they show Mr. Jones the finished project, telling him not to walk or drive on the asphalt for two days in order to give the sealer plenty of time to harden. “You don’t wanna track the black stuff into your house,” they inform him.
Delighted to have saved money and have the job finished quickly, Mr. Jones readily pays cash for the job. He’s so happy with the results, he forgets to get a receipt. The only thing he knows is that the lead man’s name is “Joe.”
Very early the next morning, while Mr. Jones is dreaming about his golf game scheduled for that day, a wild and thunderous rainstorm awakens him and his wife. Trees bend in the storm, small branches break, and their rain gutters overflow. They give up their sleep and plod to the kitchen for their morning coffee.
Mr. Jones steps outside as dawn is breaking to retrieve the morning newspaper that is usually tossed onto his driveway. He takes a few steps and is dumbstruck by what he sees. His driveway is no longer black. The old cracks are still evident and even more prominent because of the rain. But his lawn is black and the gutter along the street is full of black goo. The light bulb goes on as Mr. Jones realizes that he has been taken. The men did not seal his driveway yesterday—they just “painted” it with some sort of black liquid.
Weeks later, after paying more than the going rate for a proper sealing job and additional money to have a portion of his lawn reseeded, Mr. Jones comes to the realization that he will either have to give up his weekly game of golf or tell the family that there will be no vacation next summer.
You’ve all heard such stories about inept, incompetent, inefficient, and sometimes downright crooked contractors. There are websites dedicated to contractor horror stories, TV news magazine shows that highlight unscrupulous contractors, and organizations like the Better Business Bureau that monitor the activities of problem companies.
So in these circumstances, why in the world would anyone want to start his or her own contracting business? Fortunately, the vast majority of contractors are honest, hardworking folks who provide valuable services to the general public. They are talented men and women who have a positive vision of the future and a burning desire to use their talents for the betterment of not only themselves and their families but also for their community and fellow citizens.
This book covers many facets of the contracting business: It includes checklists for getting started, ideas on marketing your services, and guidelines on how to price these services to make a reasonable profit. It presents ideas for hiring and managing employees and what to do when something goes wrong, either with those employees or with your customers. Along the way we’ll include valuable tips, statistics, and facts about running your own business.
The goal is simple: We want you to know how to start your contracting business and keep it running smoothly, efficiently, and profitably.
The contracting industry is both huge and varied. All sorts of people and companies call themselves contractors. On one side of the coin are thousands of profiteering contractors who made money off the war in Iraq, who supplied Americans on the front lines with everything from meals, laundry, and housing, to drivers, translators, bodyguards, and garbage collectors.
We also know of the hard-working and talented contractors who were instrumental in making the Apollo missions to the moon such a huge success.
stat fact
According to the Small Business Administration, approximately 10 to 12 percent of businesses open and 10 to 12 percent of businesses close each year. About half of those that open survive for five years; only one-third are still operating after ten years.
These are examples of the far edges of the contracting industry: major companies with thousands of contract employees at one end of the spectrum and the individual specialist on the other end.
The intent of this book is to provide knowledge to either individual entrepreneurs or to small teams of entrepreneurs who want to start businesses providing contracting services to other businesses or individuals involved in property development. These contractors may provide services to individual homeowners; developers of apartment, condominium, or commercial complexes; governments who develop public parks, plazas, and other recreational areas; or developers of residential subdivisions and housing developments.
In simple terms, there are two types of contractors who work with property development. First is the general contractor who organizes a project, hires other contractors to act as subcontractors, and is responsible for coordinating the activities of these subcontractors through the completion of the project. For example, the general contractor may be a home builder who engages the services of excavating contractors, carpenters, plumbers, electricians, and others to build a single home for a client. This operation is usually referred to as a “turnkey” because the general contractor bundles the services of several subcontractors into a single contract with his or her client.
The second type of contractor is the independent contractor. These contractors work one-on-one with their clients and do not work under the direction of a general contractor. Many projects will have both types of contractors working in conjunction with each other. A client may hire a general contractor to build a new home and also hire, under separate contracts, a landscape contractor to plan and install the outdoor spaces, a driveway installer to lay asphalt, and an irrigation company to install an automatic sprinkler system.
This book will focus on those contractors, both general and independent, who provide the services and material required to develop homes, office buildings, subdivisions, and similar projects. If you have the desire to become what we’ll call a “property development” contractor, then this book is for you. We’ll help you determine if you are the right type of person for such an undertaking. Then, we’ll discuss the nitty-gritty of getting started. A lot of time will be spent on how to profitably price your product and service. Troubleshooting problem employees and clients will be another important topic. Finally, we’ll tell you why it’s important to PANIC in order to be successful.
warning
The feds are watching you closely. If you are hiring subcontractors it is your responsibility to pay them in full at the agreed-upon rate. The rates of subcontractors should be factored into the pay applications so that when the client pays you, the money for your subcontracts will be included. Contractors