theBuzz

Learn how Steve Stone, Master Plumber and ShuBee® CEO, started his own plumbing company in 1979 and what helped propel him and his company into a huge success.

When I was growing up summers often consisted of me tagging along with my dad on his plumbing jobs. I knew that was the direction I was headed in right then and there. When I finished with school, I went to work for him full-time. He was in the "new construction" and I learned very quickly the downfalls of his job. New construction is all bid work, which basically means that whoever makes the biggest mistake, whoever bids lowest, gets the job. Sometimes the price to win a job would barely cover the cost and we would end up breaking even instead of making a profit.

We made a living but it was always a struggle. You see, there is always a cash issue with new contraction. Even with bid work you had to wait 30 days, turn in your draw and sometimes still wait 30 days to get paid. I'm sure if any of you reading this has done bid work you know exactly what I'm talking about. I watched my dad over the years struggle to support his family and struggle to keep his head above water.

I was convinced that there had to be a better way! So, I ventured off on my own and tried to figure it out myself. What I learned was invaluable... but it wasn't easy.

Be sure to check back next month for the continuation of Steve's story!

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Frank Blau
Contributing Writer

I've previously revealed that PHC contractors earned an average of only 2.7% net profit on gross sales before taxes. Evidently, this information shocked quite a few readers, judging by the letters I have received from contractors around the country, as well as conversations over the phone and in person. Typical comments were “sad,” “ridiculous,” “stupid,” “inadequate,” “we ought to have our heads examined,” “what can we do about it?”

What we can do about it, of course, is to educate ourselves to become better businessmen. That is the point of this series of articles, and it’s time to get down to the task at hand by learning one of the most important business skills of all – how to figure markup.

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Ellen Rohr
Contributing Writer
Service Roundtable

Do you know if your prices are right? Do you know if you are properly bidding your Jobs?

The bottom line is the bottom line. Hurray for you…if you are making all the money you want, if you are providing a real retirement investment program for yourself and your team members and if you could take a major hit to your business (disaster, disability, divorce?) and still be in positive cash flow. If so, you can stop right here.

If not, you can fix your business and get really profitable. Money buys options…for you, your family, your team and your community. I love a selling price increase because it is the only thing that you can do – mathematically – that will increase the top line and the bottom line without creating any additional expense. I always support a selling price increase. You deserve it for the wonderful, valuable, risky work you do. However, it is a good idea to also determine if you are putting enough hours into your Job bids and Flat Rate tasks.

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1. Completely turn off lights and equipment when leaving at night. Many computers and other electronics are not truly off, but in a standby mode that continues to leak power or vampire energy. 2. If possible, install skylights to take advantage of daylight and reduce lighting needs. 3. Install switch plate occupancy sensors. 4. If electricity is deregulated in your market, check to see if you could get a better rate from a different provider or could renegotiate your rates. 5. Tune-up your building’s heating and air conditioning system. You really can cut utility expense when your HVAC system is well maintained.

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I subscribe to Fortune Small Business Magazine. In a recent issue, columnist Jay Goltz wrote an article called Do the Math. He described a friend’s business this way… “My friend was running something of a Ponzi scheme, except that he was conning himself instead of clients.” The article illustrated how you can fool yourself (and your banker!) into thinking you have assets when it’s all just a house of cards. I have seen lots of balance sheets built on faulty accounting. If you are starting to sweat, read on. You can fix your financials and you can turn around a bad financial situation…if you are willing to apply some bare bones business basics.

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In the old Popeye cartoons, Wimpy never had enough money for a hamburger. He would offer to pay for today's hamburger in the future. Wimpy was trying to negotiate the terms of a fixed price sale. It seems ridiculous when it occurs in a cartoon. It should seem just as ridiculous when your customers similarly attempt to negotiate with you. When your customer compares your price to a competitor's, is the customer comparing apples to apples or a filet mignon from a nice restaurant with the taco stand? After all, both are using beef. What's the difference?

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Contractors often ask me what’s the best method to use to invoice time and material work, extras or service / repair work. It seems that many PHC contractors experience difficulty with clients regarding this matter. Most citizens shop at the local supermarket weekly and sometimes bi-weekly. As a result of these frequent visits, they become wise and prudent shoppers who are familiar with the market price of a pound of hamburger, a bag of sugar and a loaf of bread. However, not many citizens patronize a PHC contractor more than once a year, usually less than that. As a result John Q. Public doesn’t have the slightest idea of the market price for our goods and services because he simply does not purchase our wares as frequently as he does food, clothing or a “Big Mac.”

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My last couple of articles dealt with compiling job costs on the way towards developing a useful profit-loss statement. The so-called “P & L” is the bedrock of financial reports to a business owner. When constructed properly it ought to tell him at a glance how much money he is making (or losing), and why. In the course of my consulting work I have looked at hundreds of contractor P & L statements, most of which were developed by the firm’s accountant. Unfortunately, many CPAs don’t understand our industry and thus do not properly construct a P & L suitable for a contracting firm.

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Ellen Rohr Contributing Writer Bare Bones Biz When I was a college student, I got an ‘A’ in my Accounting 101 and 201 classes. Then I entered the “real” world and almost SUNK the family business because I had no idea what I was doing with the “real” accounting. You see, the examples in the college text book used financials that were correct. That means, the dollar amounts in the accounts could be trusted, and were assumed current and accurate. The “Real” World… Well, when I took a swing at entering my accounting data I made a big “Slinky knot” mess out of my Peachtree accounting file. Ooops. I didn’t learn how to FIX my accounting in college. That would have been useful! I learned what I know from falling in holes and climbing out of them.

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Are you building a budget without a revenue plan? A revenue plan defines all of the activities and improvements to attain a desired budget. Take into consideration your call counts, revenue, billable hour efficiency, ect.

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