A friend recently asked me at what point, in terms of dollar volume or employees, does a PHC contractor stop working in the field and become a full-time business administrator? It’s a good question and here are my thoughts on the subject.
More important than any numerical benchmark is to be sure that you put down the tools as part of a reaction to more work than you can handle.
Suppose, for instance, that you embark on a marketing plan that consists of a stepped-up marketing presence and other advertising. What happens if it works? What if your ads bring in more calls than you can handle with your current work force?
Once you make the telephone ring, you can’t tell the callers, “Sorry, but we can’t get to you for several days.” They’ll just go somewhere else. No, you must have enough service techs and trucks ready to service those people.
Cinch by the Inch: I recently spoke with a one-man operator who had a spare truck and plenty of inventory who had a spare truck and plenty of inventory sitting in a garage, but resisted hiring a second man because he was afraid he wouldn’t pull a full 40 billable hours a week. My advice was that he ought to hire a full-time service tech to replace him, and use the second truck for himself to fill in. I told him that even if he only worked 20 billable hours at the start, that’s okay, because now he would have time to devote to building more business. When he got the second truck up to 40 hours, he could hire another mechanic and buy a third truck and so on.
Unfortunately, the vast majority of PHC contractors do the opposite. They wait until they are overwhelmed before they hire more people and buy more equipment. As they run themselves ragged putting out fires, they have to make decisions in a rush and under pressure. They end up scrambling like mad to hire the first mechanic available, they cut corners on the job, they neglect the numbers crunching and other administrative duties, they string out suppliers, etc. Before long they are up to their necks in employee problems, customer problems, supplier problems.
I have an old saying: “Success by the inch is a cinch. Success by the yard is hard, and sometimes financially fatal.” I have known countless contractors who went belly up because they grew too much, too fast, and simply couldn’t handle “success.”
Get Ready: One of my favorite movies, Field of Dreams, has the famous line: “Build it and they will come,” referring to a baseball field. Think of proactive marketing in the same way. Build your business for growth, and it will come – at least if your business plan is reasonable and intelligent.
There’s no guarantee, of course. That’s the risky side of being an entrepreneur. There’s always the possibility that there will not be enough business growth in the future to cover the investments you make up front. But there will be no great rewards unless you are willing to take some risks. If you are not, you probably should be working for someone else rather than trying to make it as an independent businessman.
The basic decision to be made is whether you want to get bigger. Some people are content to remain one-man operators. But if you do make a decision to grow, you must plan for that decision and prepare for growth, even if it means taking a little gas on the front end. And set your goals high.
In my opinion, once you make a commitment to growth, there is no way you can stop growing. If you’re good at what you do, the market will continue pulling you to further growth. You must have an intelligent business plan to handle this growth at every step of the way. You must anticipate the need for one, then two, then three and four trucks, etc.
As this takes place, there is a natural progression in your business operations. Along the way you’ll find yourself thinking about different things – or just thinking period! Instead of mechanical problems and code issues, you’ll find yourself concerned with sales and marketing and advertising and numbers crunching, etc. Once you evolve from a mechanic to a thinker, you’ll know you can’t afford to go out working with the tools anymore. Pretty soon you’ll find it necessary to delegate and decentralize authority, and in the process you build a management team. It’s hard to say exactly when all this will happen, but you’ll feel it as it does.
Magic Numbers: Actually, there is a guideline of sorts as to when you need to put away the tools. With many contractors, it happens when they reach three employees.
There’s nothing magical about that number, and it varies, but it seems that three is about the maximum number of people most PHC contractors can supervise and still be occupied in the field. Even that is a stretch, in my opinion. If you are really serious about growth, you’ll spend most of your time in administrative duties even with one employee.
As you grow to 4-6 employees, at that point you will need an administrative assistant of some sort to spell you. This is the beginning of delegation and decentralization and this is the point where you begin to enjoy the fruits of your labor. That is, once you learn to delegate, you’ll find time to cut back on your 60-70 hour work-weeks and enjoy some time on the golf course or in a boat.
This is not all fancy theory, my friends. It actually works for those contractors who “take the medicine” and begin to act as businessmen rather than mechanics.
One of my good friends took the medicine early last year after attending a seminar of mine last January. He went at it full bore, removing himself from the field.
Recently he sent me a copy of his W-2, showing his previous years income as $49,000. That year he was a on track to make over $95,000 – he lives in a depressed part of the country.
This is a great business we are privileged to be a part of, but too many PHC contractors fail to reward themselves commensurate with the value they provide and the hard work they put in. I find it very exciting when I hear that some of my fellow contractors around the country, especially the younger ones, are learning that this industry is about more than just dirty work and pinching pennies. There also are rewards and joy to be had in this great industry. I’ve had my share. Now it’s your turn.
The real answer to the question of when do you put down your tools is: As soon as possible.