Contractors Need To Be Business People, Too
by Al Heavens
I've hired a few contractors over the last 25 years of homeownership, so it didn't surprise me when a survey by Intuit Construction Builders Solutions found that contractors often short-change themselves and end up putting their businesses on the line by underestimating jobs. The results contradict the unfair reputation for over-billing that saddles contactors sometimes, the survey concluded. I really do believe that most contractors are honest. I also believe that most of them, especially the 'little guys,' that make up the lion's share of the nation's 800,000 remodeling contractors are good businesspeople. I prefer to find contractors who are good craftsmen who understand what needs to be done, then go ahead and do it. If they underestimate the cost of the job, we can talk about it, even though any properly executed contract should spell out the cost of the job. Two examples: A few years back, I hired a contractor/neighbor to build a deck. The price: $5,000, including demolition of the old porch the deck was to replace, and removal of the demolition materials, including huge chunks of stone that made up the two columns supporting the porch. I asked if $5,000 was enough. The contractor assured me that it was. It wasn't. The contractor hired a helper who left after a couple of days; unable to tolerate the July heat and the hard work. The contractor's discount he had at a struggling, locally based home center proved worthless. A three week job turned into ten weeks, pushing the other jobs, he had contracted, to the back burner. When he had finished, and I was writing the check, I asked him again if $5,000 was enough. His response: It was his fault, and we had a contract. I offered $500 more. He refused. I felt bad about it all, so I took every opportunity to recommend him to colleagues and friends, and brought him in to do jobs that I probably could have done myself. Almost 13 years later, and at another house, we decided to remodel our master bathroom to add a tub (double shower, no tub -- you figure). The contractor, recommended by two friends (word of mouth is the best advertising), was a brilliant carpenter and a careful planner who could think on his feet. He took care of the permits, found an engineer to design a way to reinforce the tub in the ceiling below the bathroom, designed a way to hide the plumbing and support beam and found subcontractors to do other work we needed to have done. He, too, was plagued by delays; his helper left, without warning, to do a job for a family member, problems finding the exact tub and sink we wanted and scheduling subcontractors, including the plumber, who ended up having to correct some water supply and drainage issues created by the previous owners. The job was supposed to have cost $11,000, which included all our add-ons. The plumber's additional work and the carpenter's successful efforts to hide that work creatively, added $2,900 to the price. Legally, we didn't have to pay it, since although we assumed there would be additional costs, the contract wasn't rewritten to reflect them, nor were we even told directly what they would be. Of course we paid the $2,900; otherwise, the contractor would have lost money, or, in effect, would have done the work for free after everyone else was paid. It was only fair. "Business growth is not simply about hiring more employees and winning more jobs," says Carol Novello, president of Intuit. "Success in today's unpredictable economy depends on uncovering costly inefficiencies and new revenue opportunities. An important first step is to bill your expenses fully and fairly." My experience reflects contractors' concerns. Asked to name the most frustrating aspect of managing a contracting business, 50 percent of the Inuit survey's 500 respondents cited scheduling labor and managing work crew productivity. Almost as many said hiring quality employees was their greatest challenge. Despite obstacles managing their businesses, the survey respondents estimated that their current gross profitability per job was 15.5 percent. They also anticipate 12 percent growth over the next five years. Half of the Intuit survey respondents said they often omit general condition costs from their job estimates. These omissions -- which include supervision, phone calls, and temporary power -- result in lower revenue and gross profit. Most respondents, however, recognized the problem. When asked about the areas of their business most needing improvement, 65 percent of the respondents cited greater job profitability and 57 percent said more accurate estimating. | 
