Solving business problems, Part 1

BY RICHARD P. DiTOMA,
contributing writer

Individually or in combination, ignorance, ego, fear and anxiety can blind you from solving the problems you face in business. Resolving problems requires that you first realize that there is a problem. Then you must identify it. Our industry is riddled with problems.

I love talking to contractors about our great and noble industry. Many of them think that the problems they encounter are unique to their geographic area. Most of the industry’s business problems, however, are pervasive throughout the industry. After a problem is identified, communication is the primary way to begin solving it.

The person you see in the mirror is the first person to whom you should communicate. If you are honest with yourself and have a logical mind, you may just solve the problem on your own. Speaking with others who can offer their opinions and ideas can also be very helpful. After all, you may have overlooked something.

I have been offering sound logical business theories and methods to contractors for over twenty years. Most of the contractors that call me have come to the realization that they need help. Some heed my advice in totality. Some partially listen. Others refuse to learn and continue to wallow in their own misery.
If you do the right thing and operate your business with a good sound business game plan, you are on the road to success, and you are a good example to follow. Your opinion could be helpful to the industry. But if you veer off the road to success and utilize chaotic, illogical methods, you are on the path to the destruction of your business. And you would be doing harm to our noble industry.

This article is the first in a series of articles based on two questions I have asked contractors. The first question: What do you consider to be the biggest problem the PHC industry has faced in the last ten years? Then I asked: What, in your opinion, is the solution to the problem? Now I am asking you those same questions. Please feel free to answer them. E-mail your answers to me at richardditoma@verizon.net with your name, business name and address, the number of years in business and the type of services you provide. Sharing your opinions can give you the opportunity to help improve our industry and your own business.

Tom Duff of Tom Duff Inc. has provided plumbing and heating services to Nassau and Suffolk Counties in New York for thirty years. He writes:

Problem

“From my experience, one of the biggest problems is that contractors are unwittingly giving away their years of experience and knowledge for a handshake. What I mean by this is giving FREE ESTIMATES! In my travels outside the Long Island area, it appears to me that no other geographic areas offer this. Look in our Yellow Pages, some ads even state ‘free estimates.’ These plumbing contractors are their own worst enemies!

Example 1: A customer calls and says that a toilet goes on and off throughout the night. The contractor tells the homeowner, ‘You probably need a flapper.’ He has given away his knowledge for free and the homeowner can just go and buy a flapper.

Have you seen an appliance repairman give a customer a free estimate? No, never! And most of the time, they know what the problem is before they even arrive.

Example 2: A customer has a leak in the basement. The contractor goes to the home and spends time locating and diagnosing the problem and quotes a price to correct it. Then the customer says “thank you” and calls another plumber for another free estimate to see whether the job can be done more cheaply. A customer who had to pay something for each estimate (which amount can go towards the job) would not be so quick to call five different guys to come look at their problem.

It costs money to give free estimates! The lowest bidder will likely get the job because they have not calculated the cost to operate their business (license fees, business insurance, truck maintenance, gas, etc.) which should get factored into a price. These contractors don’t even know what it costs to operate their business. This is what enables the customer to chisel down contractors.

Tom’s solution

The solution is a no brainer. Get paid for your years of knowledge and talent. Get paid by the ‘window shoppers.’ Stop giving away the business and dragging down the industry! Charge for estimates!”

My thoughts

Obviously, Tom has hit one of the business problems that face the PHC industry right on the head. Good job, Tom! After speaking with many contractors across the U.S, I found that the “not so free estimate” is not unique to Long Island. Foolishness has no geographic boundaries. Aside from that, Tom is right!
Diagnosing problems over the phone is a bad practice. Regardless of how good you think you are, you could be wrong, because you have not seen the circumstances related to the situation at hand. Add to that the fact that you have spent your time, at your expense, to tell someone how to avoid using your services. That isn’t smart, and it doesn’t help you pay the bills you incur serving that consumer. I’m not suggesting that you don’t talk to potential clients. I am saying, be smart. If you spend all your time giving free advice, you will soon be out of business.

Good doctors do not diagnose potential new patients over the phone. They make an appointment for an examination. The cost of traveling to the doctor and paying for the visit is the responsibility of the patient, not that of the doctor.

Since you are a doctor of buildings, and since you incur the cost of bringing the examining room and the doctor to the client, you should charge the client for the costs you incur to address their requests. You deserve to be rewarded for the risks you take in delivering your knowledge, expertise and professional services.

Dependent upon the costs you incur, every time you give a “not so free” free estimate you incur a cost to your business that cannot be recovered. When you take into consideration the expenses you incur to operate your business, the cost of not charging for estimates can range, minimally, from $50 to $150. It could be more. But it is never less.

If you think you can add that cost to the next job, keep in mind that you would be diminishing the chances of getting that job. That wouldn’t be fair to the next potential customer, and it would only exacerbate your problems. If you don’t get the next job, you would have to add the cost of two free estimates to the third potential job and so on. Obviously, that concept is absurd. If you projected those costs and only gave free estimates, the minimum annual expense to you could be from $85,400 to $256,200.

I thank Tom for his opinion, and I agree with him. Charge for estimates! I hope he and I have shed some light on this problem. If you need help resolving this or any other business problem you are experiencing, give me a call at 845/639-5050. I look forward to your call and wish you well.

Richard P. DiToma is a contracting business consultant and active PHC contractor with over
40 years of experience in the PHC industry.