The playing field

BY RICHARD P. DiTOMA, L.M.P.

contributing writer

In order to succeed in the contracting game, contractors must be aware of the rules of the contracting game and the parameters and conditions of the field upon which the game is played. The rules of the contracting game require that costs of operation be identified, correctly calculated and paid for by the consumers who consume the resources of contractors. The rules also necessitate that, in addition to recovering costs, contractors make a concerted effort to earn a profit, which is above all the legitimate costs incurred.

Unfortunately, when it comes to costs and selling prices, most contractors disregard them, incorrectly calculate them or just guess at them. They misrepresent their numbers to themselves and others to fit their flawed managerial procedures. Therefore, many contractors lose, and the overwhelming majority of contractors don’t really earn a true profit.

To describe the intent of the game, as well as field parameters and conditions, I’ll use the game of football and a football field as a comparison to the contracting game and its field.

My example field utilizes different colors than those of traditional football fields to emphasize the points I am making. But, the field has the same intent. That is to afford an area upon which the game can be played. The red area is the section of the playing field in which you incur the costs you pay operating your business. The time spent in the red area removes money from your wallet and the mouths of your family. The green area is the end zone and is the only area upon which you can put money in your wallet after paying all your costs including your own salary.

Of course, you will have to pay taxes on this money. So, you get to keep a bit less than the total amount. But, paying taxes on earned money is much better than staying in the red area and continually accruing expenses that put you deeper in debt, both financially and emotionally. The financial debt is usually obvious, as bills keep coming in and you don’t have discretionary dollars to expand or enjoy spending. Another obvious factor is that you borrow from funds you owe to Peter in order to pay Paul. But, the emotional liability you incur can be much more subtle because, although you may be moving money, you aren’t necessarily making money. Stress and frustration sneaks up on you devastating your physical and mental health.

The object of the game

In the game of football, a team of 11 offensive players face 11 defensive players. The goal of the offense is to execute each play as best possible in an effort to move the ball down the field and get it into the end zone, which is protected by the defense. By running or passing the ball, the offense has the opportunity to reach and place the ball in the end zone. While in the red section, they must gain at least 10 yards in no more than four tries to continue to have the opportunity to advance the ball down the field.

That’s similar to you, as the offense, performing your services for consumers in the contracting game. When you correctly calculate your operating expenses and choose proper profit margins, you can develop proportionate profitable selling prices for each service you perform that will allow you to recover your costs and earn the profit you deserve for delivering excellence. Just performing services and using wrong numbers will keep you out of the end zone. Performing services is only part of the method to use to attempt to get into the end zone, and it keeps accruing your costs. Using wrong numbers can only lead to wrong results. Performing services excellently and executing the right plays [correct numbers] gets you into the end zone and earns points [profit].

The offense of a football team can score six points for a touchdown. Immediately after scoring the touchdown the offense can score another one point for kicking the ball through the field goal posts or two points by getting the ball in the end zone by running or passing it. The extra points could be compared to you selling another job to your client at the same visit.

If the offense is close to the end zone but stalls before entering the end zone, the offense can attempt to kick the ball through the goal posts for three points. That’s similar to you performing a task but not making as much profit as you were originally trying to earn. But at the least you recovered your costs and made a profit, although of a lesser amount.

When the offense does not score any points on a drive, they would have expended some of their resources with no point gain. The offense fails. The defense wins that drive. That’s like those jobs where you expend your resources and don’t earn the profit you deserve for the beating you took on the field.

If you fail to perform excellently and execute your strategies correctly you don’t get to score. When you don’t score, you don’t earn the dollars need to recover all your costs and reap your reward [profit]. If you don’t try to make a profit on each job, you hinder your ability and opportunity to win each game [job]. If you don’t win enough games in a season [your fiscal year], you don’t get to play in the championship game [making more money annually than you spend in cash, credit and resources].

In your business, regardless of the number of people on your team, you are the offense. Your responsibility is to deliver excellence to your clientele, while recovering all your costs and maximizing your profits. But, while you are on the red portion of the playing field, you only incur cost. Although you may recover some of your cost by not getting into the end zone, you spent more money and resources than you received.  That’s how debt grows. The only way you can recover your cost and earn the profit you deserve for the value you deliver is to get the ball in the end zone [green area].

The defense

The consumer represents the defense. Their task is to get the best job done at the lowest price. In the game of football, the defense can score two points by pinning the offense in the end zone [green area] behind the offense. They can also score by taking the ball away from the offense, and in essence, become the offense. If you allow the defense to keep you from attaining your goal or let them take the ball away from you and score, you have not done your job properly. And, you can’t win the game.

If you run left to right and up and down the red area of the playing field all day long without getting the ball into the end zone, you will be working, but you won’t be winning. You can only win by getting the ball into the end zone [green area] and score more points than the team you are playing.

Winning requires you to be a coach who can devise game plans that can blend the delivery of excellence to consumers; the recovery of all costs incurred in the delivery; and the earning of a proper profit above those costs. The fact that you have decided to enter the playing field and anoint yourself as coach of your team by going into business doesn’t mean you’re any good at coaching. As is with any job, there are those who perform well and succeed and those who, through their own ignorance and lack of ability, stagger in their own self inflicted misery.

How to coach

Good contracting coaches make, implement and successfully execute winning game plans by:

1. Opening their mind’s eye to the harsh realities of the business world;
2. Knowing the proper way to run their businesses;
3. Having the courage to implement appropriate business protocols;
4. Possessing the perseverance to score points instead of just getting beat up on the playing field;
5. Keeping their eye on the ball;
6. Always remembering the intention of the game is to win;
7. Realizing that they might need help in order to have an opportunity to reach their goals; and
8. Being smart enough to seek help from those who know how to offer it correctly.

Buying jobs to keep busy rather than selling your services profitably will only stress you out by keeping you in the red area of the playing field, incurring more costs, and keeping you out of the end zone where you could earn more money for services than it costs you to perform.

Winning by delivering excellence to consumers and selling jobs at proper profitable selling prices will:

1. Make your time in red area shorter;
2. Make you profitable;
3. Make your life enjoyable;
4. Give you the funds to attract and keep good personnel;
5. Strengthen your ability to deliver excellence to your clientele; and
6. Build a strong, professional, top quality business.

You may need some guidance honing your abilities so you can be a skillful coach and give yourself the opportunity to reach your goals. I stand ready to consult with you so you can keep your eye on the ball and get it into the end zone.  As an interesting and informative guide and reference, my book SOLUTIONS MANAGEMENT THEORIES & METHODS FOR THE CONTRACTING BUSINESS is an easy 97-page read that can show you how to be a great coach.

Chapter 1 -- “TRUTHS ABOUT THE CONTRACTING BUSINESS” ponders the reason business exists; the major problems contractors face; the steps to removing the problems; and the deliverance of excellence through contract pricing.

Chapter 2 -- “PRICING PROPERLY AND PROFITABLY.” It deals with correcting the biggest problem contractors face in the industry -- which creates all the other problems they encounter. That is wrong numbers. It shows how to identify and calculate your cost of operation, what to consider in choosing your profit margin and how to develop proper profitable selling prices.

Chapter 3 -- “ADDRESSING CONSUMER QUESTIONS” answers frequently asked consumer questions on the phone and on the job. It also deals with your own doubt.

Chapter 4 -- “LOGICAL PROCEDURES” focuses on the game plan; service call ticket; the documentation of service calls; invoices; consumer notifications; price guides; choosing the right client; service agreements; addressing consumer grievances; and tracking statistics so you can make wise

decisions.

Chapter 5 -- “STAR TECHS” concentrates on the assets needed by technicians seeking employment with their business, as well as how you can evaluate the performances of those you hire. It also deals with upselling and increasing sales; answering consumer questions; closing the deal; proper paperwork; and the fact that moonlighting is an industry disease.

Then, after you have your game plan in place, you can get my newly formatted easily understood service price reference book, the READILY AVAILABLE PRICING INFORMATION DIGEST 2008 FOR THE PLUMBING-HEATING-COOLING CONTRACTOR. It’s a great tool that gives you the opportunity to rapidly quote prices to your clientele. It comes with plumbing, heating and/or cooling sections. You can get one, two or all three sections.

Each section includes tasks with your regular business hour costs [coded so that only you know what the numbers represent and so you can be aware of your cost before quoting a price] and four regular hour selling prices [inclusive of your cost and profit] -- one selling price is for the first task of a visit when all material is on your truck; one selling price is for the first task of a visit when some material must be picked up; one selling price is for each additional task of the same visit when all material is on your truck; and one selling price is for each additional task of the same visit when some material must be picked up.

As options in any combination, the READILY AVAILABLE PRICING INFORMATION DIGEST 2008 FOR THE PLUMBING-HEATING-COOLING CONTRACTOR offers:

• The same number of selling prices per task for after regular business hours;
• One set of discounted selling prices for the same number of tasks for regular or after regular business hours; and
• A second set of discounted selling prices for the same number of tasks for regular or after regular business hours.

The Plumbing section has 321 tasks with four regular business hour selling prices. That puts 1,284 selling prices at your fingertips. If you choose all the options the total number of selling prices becomes 5,136 selling prices.

The Heating section has 265 tasks with four regular business hour selling prices. That means you’ll have 1,060 selling prices at your grasp. If you choose all the options the total number of selling prices increases to 4,240 selling prices.

The Cooling section has 160 tasks with four regular business hour selling prices. That gives you 640 selling prices which you can rapidly quote to your clientele. If you choose all the options the number of selling prices grows to 2,560.

All the selling prices are customized to your labor/overhead costs, your average travel time to your clientele; your desired profit margin; your choice of after regular business hour factor; and your choice of up to two discounts. And, the options can be had at no additional cost.

Both of these great business building tools are exclusively sold through my companies. For information regarding them or to purchase them, call 845/639-5050.

In business it is said that winning isn’t everything, it’s the only thing. When you win by making your working time shorter, lowering your stress and frustration levels and earning the reward you deserve for delivering excellence to consumers, you don’t just win -- you win-win-win!

        

Richard P. DiToma is a business consultant and contractor with 36 years of experience in the P-H-C industry. He conducts seminars, evaluates business operations, publishes customized price guides for contractors and offers continuing support.

His book -- “Solutions Management Theories & Methods for the Contracting Business” -- deals with solving pr-oblems contractors face; identifying & calculating costs; developing proper profitable prices; addressing consumer questions; hiring and evaluating technicians; and logical management procedures

It’s also available as a “Workshop On Demand” for individual businesses (from one person to multi-person businesses); contractor groups  (organized or informal); trade associations; and wholesalers to the trade.

Date: Arranged according to your schedule

Location: Wherever you wish. Richard P. DiToma will come to you -- or you can come to him. Contact Richard to find out if there is a workshop coming to your area.

His other book -- “Readily Available Pricing Information Digest 2006” -- for the plumbing-heating-cooling contractor service price reference book is available with plumbing &/or heating &/or cooling section(s). To receive more info about his services, to order his books or to contact Richard at 845-639-5050, by fax at 845-639-6791 or via email at richardditoma@verizon.net