The Secrets to Successful Contracting: How to Start, Operate, and Grow a Successful Contracting Company

The Secrets to

Successful Contracting

How to

Start, Operate, and Grow

a

Successful Contracting Company

A Step-by-step Guide for

any Trade

Joe Catinella

Copyright © 2008 by Joe Catinella.

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

This book was printed in the United States of America.

To order additional copies of this book, contact:

Xlibris Corporation

1-888-795-4274

www.Xlibris.com

[email protected]

49357

Contents

Acknowledgment

Introduction

PART ONE

GETTING TO KNOW YOU AS

A BUSINESS OWNER

Chapter 1

WHY CONTRACTING?

Chapter 2

LEARN TO KNOW WHAT YOU DON’T KNOW

PART TWO

UNDERSTANDING THE CUSTOMER

Chapter 3

MARKETING YOUR NEW BUSINESS

Chapter 4

CUSTOMIZED SALES PITCH

Chapter 5

The Value Triangle

PART THREE

MAKING MONEY IS NO ACCIDENT

Chapter 6

UNDERSTANDING YOUR COSTS

Chapter 7

CONTROLLED GROWTH

Chapter 8

PROFIT

PART FOUR

THE ANATOMY OF A PROJECT

Chapter 9

ESTIMATING A JOB

Chapter 10

THE SCOPE OF WORK

Chapter 11

PROJECT SCHEDULE

Chapter 12

CASH FLOW, CHANGE ORDERS, AND TRANSPARENCY

PART FIVE

THE ART OF BUSINESS SUCCESS

Chapter 13

BUILDING YOUR TEAM

Chapter 14

ORGANIZATION AND TRACKING

A Few Final Thoughts

Dedication

I dedicate this book to all the people willing to do

what it takes to improve their lives and the lives

of others by being professional contractors.

Acknowledgment

I wrote this book from my heart with a goal of giving something back to an industry that has been so very good to me in every way.

I would like to thank and acknowledge the people who really made a difference in my life in terms of business and personal achievement. Without them I would have never been as successful or able to share this book with you.

I especially like to thank and acknowledge my beautiful wife Gina, for always supporting and encouraging me when I need it most and throughout this project, as well as my parents Joe and Gloria, for my upbringing and for instilling the moral values and work ethic that allowed me to achieve what I set out to do.

I would also like to thank and acknowledge: The Di Lauro brothers, Joe and Gus, for taking a chance and hiring me when I had no experience or formal training and giving me my first opportunity to learn a trade. To Jack Hughes for mentoring me and showing me what being a professional means in business, and Rick Treml, for showing me what being driven is all about and also how to set and achieve goals successfully.

Most of all I would like to thank God for leading me every step of the way.

Introduction

I wanted to write this book to help people who know their trades and want to become professional contractors. So you are assumed to already know your trade. If not, I recommend you start with a trade book before going on with this book. I have found through the years that so many people have a wealth of trade experience and expertise but don’t know how to parlay that into the professional business sector. I’ve geared this book toward the residential and light commercial market. Hopefully, I’ll shed some light on various issues to help you get past any uncertainty of how to start, operate, and grow successfully and maybe explain some things you may not know you needed to know in the world of professional contracting.

I also intended for this book to be used as a guide for any trade. The principles I use are designed to be learned, practiced, and mastered so the reader doesn’t have to understand and do a thousand things to succeed. My intention is just the opposite—understand and do just a few things and do those a thousand times. Like learning the fundamentals of a sport, five hundred free throws a day if it’s basketball, a thousand golf swings in a day if you’re a golf pro, swing at two hundred pitches a day if it’s baseball. Well same holds true with running your contracting business. Learn these few principles as fundamentals, and practice them until they are second nature. Then you can proceed to take on bigger and bigger projects and explosively grow beyond your wildest dreams.

I am not going to give any legal or accounting advice because it is neither what I know nor what I do. Examples I give throughout this book are from my experiences or are hypothetical. They are not to be construed as the be all and end all of any given situation.

Who am I?

Well as I write this book, I currently hold a senior-project-manager position with a large commercial mechanical company. But, all in all, I am a contractor with twenty-eight years of industry experience holding various positions from gofer to helper, worker, journeyman, president, estimator, project manager, operations manager, director, and contract executive. Twenty-four years of the twenty-eight I have been in a management position. Just recently, I am proud to say, one of my projects was awarded the 2006 National Excellence in Construction Award from the Associated Builders and Contractors Association in the category of mechanical projects in the two-to-ten-million-dollar range.

Earlier on in my career, I had started an HVAC/electrical company with $600 for the purchase of a 1968 service van and a partner, who happened to be a coworker at the time. I had attended a night school certificate program for heating, air-conditioning, and refrigeration and was in the business only four years before I started that company. At first I was doing pretty well, I was supporting myself by earning a living, and I was making ends meet. I was self-employed for ten years, and in those ten years, I found myself on a rollercoaster of financial positions from feast to famine. But in the end, I was working a lot harder to make those ends meet, and it seemed as though I was making less money. Nonetheless, I held the company long enough to set a solid foundation, but I just could not get it out of the ground. I was working hard and earning a living. But I was only earning a living, not making money. Basically, I was slowly and painfully going broke. Then I hit a brick wall. I needed to grow the company. I was to grow or work to death. So I asked myself, how do I grow? How do I afford people to do the work that I do? How do I price jobs to make money, a profit? I did not know the answers or where to get them at the time. So I decided to get educated in the art of contracting by selling my portion of my business to my partner. I then took a position with one of the largest mechanical/electrical companies in the country. That’s where I learned how. There is where I learned what the best performers in the biggest companies did to be where they were. I learned what made them who they were in character, effectiveness, and efficiency. It wasn’t long before I found myself to be one of them—selling, estimating, and managing all sorts of projects from a few thousand dollars to tens of millions.

Now, after fourteen years of commercial contracting, I can share those answers with you. So for those of you keeping track—four years plus ten years plus fourteen years is, yes, twenty-eight years of experience. Now, enough about me, let’s talk about what is in this for you!

You may be wondering, Is this is about the HVAC/electrical or mechanical trades? I want to open an XYZ contracting company, I need to find a book about XYZ contracting, and you know what? You’d be wrong. What I am going to teach you goes for any contracting company because, like I said, you are assumed to know your trade. I am not (nor should anyone) tell you how to do your work. I am simply going to share what I have learned about the contracting business through my experiences.

The principles in this book are going to teach you how to be a professional contractor.

You will learn how to act and treat your customers professionally, how to be the contractor of choice amongst your competition, how to be an employer of choice, how to grow, how to plan, how to price for profit and how to justify and cost changes, and the all-important—how to gain credibility through the art of transparency.

As stated, I have worked on all sizes of projects from a few thousand dollars to tens of millions, and you know what? It does not matter what size the project is; the principles are the same. The players are all the same. There is a customer, a plan, and a project to do; there is a budget to spend for the project and a schedule for the work to be performed, and, of course, a contractor or contractors to do the work. In a nutshell, whether a small renovation or a skyscraper, the project flows in the same manner. The only difference is the numbers.

What I cannot teach is the desire to put the items in this book into action. I cannot teach you to be disciplined enough to take action or do what I teach you in this book; however, if you do, I can tell you this, you will succeed.

Customer service and your performance as a contractor will set you apart from your competition.

PART ONE

GETTING TO KNOW YOU AS

A BUSINESS OWNER

Chapter 1—WHY CONTRACTING

Chapter 2—LEARN TO KNOW WHAT YOU

DON’T KNOW

Chapter 1

WHY CONTRACTING?

Can you answer that question? The best way to answer the question is to ask yourself this question: do I enjoy the work that I do? If you do and seeing your work makes you feel good and it makes you want to show someone, then yes. By all means I recommend you go forth and fulfill your dream. Work for yourself doing what you love to do, and be the best contractor you know how to be.

If you noticed I said be the best you know how to be. Not just be the best contractor you can be.

Because you knowing how is based on the knowledge you are committed to acquiring and what you learn from your experiences. If you choose to acquire as much knowledge as possible, you will be the best you can be. We all know you can be anything; however, what you will be is up to you.

Oh, trust me, there are going to be times when you will need to remind yourself of your answer, but at the end of the day, you will feel as though you conquered the world and solved its problems; and it’s true, you have—at least for that day in your world.

In the beginning, there will be people in your life and even some of your own inner voices that for some strange reason find it necessary to tell you: Contracting is a lot of work. People stiff you. Owning your own business is a lot of responsibility. Owning your own business requires a lot of hours. You have to this, it’s too much that, and whatever other yadda, yadda, yadda they can conjure up to not support you and your decision to start a business or be self-employed. I am here to tell you, listen, but don’t pay attention. Follow your dream.

Someone once told me—and I know this to be the absolute truth—when you are doing something you love and you are grateful that you get to do it, you will never have to work again.

So to sum it up, the shortest way to your working freedom is to do something you truly love. If that happens to be creating, building, performing a service for people, or seeing the face of someone who now sees their vision come to life, guess what—you, my friend, are a contractor at heart. Now all you need to do is answer the question, why contracting?

So if you have your answer and you know, why contracting?

Let’s get started!

In the next few chapters we will go over

• How and where to begin

• How to market your new business

• How to cover your costs

• How to price for profit

• How to build your team

• What to look for in subcontractors

• Building a relationship with suppliers

• Getting the most from a labor force

• And more

Chapter 2

LEARN TO KNOW WHAT YOU DON’T KNOW

During my years of experience, I have talked to many people who learned their respective trades through all sorts of means and methods. Some through recognized apprenticeships, others learned one-on-one through individual mentors, and some were completely self-taught through books, TV, and watching others. Nonetheless, all of these methods had their share of positive and negative outcomes. Some had picked up specialty crafts like cabinetmaking or control wiring. Some went on to learn multiple trades. Some discovered that learning a trade as a profession wasn’t for them, and in the long run, they would be best suited for do-it-yourself type projects around their own homes.

Sooner or later, for some of these tradesmen a light turns on, and they say to themselves, I am damn good at my trade. I could do this for myself. I can be my own boss and make all the money. BAM! I am going to be a contractor! I know all there is to know, so why not? I say go for it! But do it right.

A hard fact is that 56% of businesses fail in the first four years. And it seems as though it is basically due to the new entrepreneurs’ lack of information on the how-to end of operating a business. This is especially true in the contracting sector, where, according to the U.S. Department of Labor, Bureau of Labor Statistics, the survival rate for new construction companies after one year is 33%. And in my opinion, if they are not going out of business, most of the owners are just getting by, which by the way is just another way of saying going out of business slowly and painfully. They are on a mission with no plan, afloat with no direction.

Contracting is not only about making all the money or you and your job skills, work ethics, or workmanship. It’s about providing a service for another person. Believe it or not, the services you provide during the project are more important than that of the actual finished project itself. Again, I am assuming you already know your trade. It’s about taking the step from tradesman to businessperson.

Professional contracting is also about building teams of crafts people, professionals, suppliers, and subcontractors who can perform at the level you perform. By doing this, the quality of your work speaks for itself over and over, consistently providing a level of service required for success and longevity. We will get into building your business and teams later on in chapter 13 of this book.