If you don’t know where you are headed, any road will get you there. It’s an old adage, but it applies in planning for future direction of your business. I see three choices affecting how much money you can make and where you will end up.
The first option: Leave it all to chance and see where your business takes you. The other options require you to determine your desired role in the future and how you’d eventually like to exit your business. You need to make another choice: Do you want to be a contractor, or do you want to be a construction-business owner. Either is an honorable choice, but the path you choose will impact your role in the business as well as your retirement.
Before you sell too much additional work, decide your future role. Let’s say you have been scoping, pricing, selling and managing very complex work types so far: work that challenges your thinking; work few other contractors in your market can handle. That is fine for contractors who stay involved, hands-on in the day-to-day of a business. However, to establish a brand known for that work type, an owner must remain hands-on in the business forever unless he or she can find someone else to manage those jobs in their place. If you want to become a construction-business owner able to step back from daily requirements, consider simpler, production-style job types like pull-and-replace kitchen and bath renovations, or even repeatable jobs like windows, siding and roofing.
Business systems are key to managing time and protecting profits. As a contractor wearing many business hats, you are often the person who performs most management activities. In other words, many systems only exist in your head and whether they are to be followed or not is up to you. To be a construction business owner, however, requires formalizing systems in a way employees are both empowered and managed by those systems, not supervised and micromanaged by the business owner. If you choose to be a contractor, taking time off for an extended vacation may not be practical. If you become a construction business owner with the right systems and people in place, your business can make money while you’re away. If you remain a contractor, you will need to be in control.
Many contractors tell me they started their own businesses because their bosses drove them crazy by being unorganized micro-managers. I often hear, “I figured if that idiot could do it and make money, I can do it better.” However, many admit they are now doing the same thing to their employees. If you remain a contractor and hire good employees who want to grow, don’t be surprised when they eventually leave for a better opportunity elsewhere; plan for it. On the other hand, by choosing to become a construction-business owner, it will become your responsibility to find, attract and keep the best and brightest at your business. If you think finding such help is tough now, just imagine what it will be like 10 years from now.
Remodeling businesses make money by selling things, not by building them. This requires you know your numbers and the right markup to use to price profitable jobs. Most contractors have no idea what their numbers are or what they need to be. They try to produce jobs as inexpensively as possible so they might make money. Whether you want to be a contractor or a construction-business owner, you need to know what to charge so your business makes money, your employees feel well compensated, and so you and your employees can save enough to be able to retire someday. As a contractor working in your business day to day, you can earn a great living, but your potential earnings will be limited to personal capacity. As a construction-business owner with good systems and empowered self-managing employees, you can earn a lot more money due to the increased volume as well as the economies-of-scale that can be achieved.
Time is wasting away, and retirement will eventually arrive. Decisions must be made. Will yours be a planned retirement, or will you have to plan to work until you die? Even if you plan to retire at 65, if you still have to wear your tool belt every day, will your body make it that long? On the other hand, are you really cut out to be a construction-business owner? These are tough questions. Although you can seek help regarding your options, only you can answer them. I suggest you stop worrying about how to get started and decide where you want to end up. Once you have done so, I think you will be amazed at how easy it will be to begin. |QR