Everything You Needed to Know about Contracting You Learned in Kindergarten

Everything You Needed to Know about Contracting You Learned in Kindergarten

Paul Riddle
Contributing Writer
Success Group International

Play fair.
Treat people the way you want to be treated.
If you’re going to play the game, play by the rules.
Winners never cheat and cheaters never win.

Those are the rules, but there’s always someone not following the rules.  There are some situations where it seems the cheater wins in the short term in the business game by skirting the rules.  That’s a challenge for the true professional trying to follow the rules and play legitimately.

The cheaters bring down the integrity of our industry, and they hurt everyone.  Obviously, we can’t recommend prices because it might be construed as price fixing, but when someone purposely avoids following the law so they can charge a cheap price, it ruins our industry and wrecks the ability for honest contractors to make an honest living.

For example, many communities require permits and inspections from the city inspector when a job is complete.  The challenge isn’t the cost of the permit since it’s a nominal investment.  However, it takes time to acquire the permit, process the permit, and schedule a convenient time for both the inspector and homeowner when you can’t control their schedules.  All the while, you’re in the middle, responsible for something where you can’t control either side.

That’s the real challenge.

Often, homeowners won’t pay until the city inspector has signed off and approved the work.  Meanwhile, time ticks away, and time is money when you’ve supplied and paid for the labor, equipment, and overhead already.  You’ve completed your job and done what you were supposed to do, but you’re the one in the bind waiting to be paid for services rendered.

All of this adds to your cost of doing business.  Some contractors struggling financially may decide to avoid this nuisance and cash flow challenge by skipping the permit process and throwing caution to the wind by saying, “What’s the chance they’re going to catch me anyway?

Many contractors haven’t mastered the art of selling and differentiating themselves in the market.  They compete only on price, and they look for every shortcut to lower their price.  For them, neglecting the permit process is an easy corner to cut to lower the price and avoid the headache and cash flow challenge.  A professional contractor who understands his costs and builds the cost of the permit into the job is left competing on an unequal playing field.

Do you face this challenge in your marketplace?

If so, here are several ways to help level the playing field against those not playing by the rules.

  1. Build your reputation of good, quality work.  Put yourself in the inspector’s shoes.  They’re usually government employees who get paid a monthly salary regardless of the number of inspections they do.  Do you think he wants to do these inspections?  More inspections mean more work.  Poorly done jobs mean even more paperwork and return trips.  Make their life easier by building a reputation for quality work.  When you do, he’ll be more willing to run an inspection for you when time is a consideration since he knows there won’t be a problem with the quality.
  1. Today, many cities have the permit process online which cuts down on the time it takes to get the permits you need.  If your city doesn’t offer this, you can batch your permits together and process them in one batch.  That efficiency will help improve your profitability.
  1. Develop a neighborhood permit watch program.  One contractor, who chooses to remain anonymous, lives in an area where permits are required.  He mentioned that all of the permit information is public domain.  He uses this fact in two different ways.  First, he’ll go online to see who is pulling permits and performing the jobs in the community.  Knowing who is getting the installs, he’ll observe what they’re doing to see if there is some secret he can learn.  But since he is the dominant company in the area, few are close to what he’s doing.  He also uses the public information to make it tough on cheaters.  Being the largest player in the market, his team is on the streets all day long.  Whenever they see an install truck at a home, they call the office with the address.  The office checks to see if a permit was pulled on the job.  If there was no permit, he feels he has a right and an obligation to our industry, to the safety of the homeowners, to the city inspectors, to his company and to his employees, to report those companies that aren’t pulling permits and are breaking the law.  As a good neighbor in the community, if you noticed someone was breaking the law at the expense of your neighbor, wouldn’t you report them?  He says that’s the way he helps raise the standard in the industry.

Those are just a few methods to level the playing field for honest contractors and raise the standards in the industry.  Knowing the true costs of doing business and building those costs into the price your customers pay is how you make money every day.

About the Author: Paul Riddle, Vice President, Success Group International

Paul Riddle has over 25 years of hands‐on experience as GM, COO, CEO, and owner of service companies specifically in the mechanical and restoration segments. Throughout his career, he has personally trained the owners and employees of hundreds of businesses, including several turnaround situations.  His hands‐on training for owners and their employees has been in the areas of business planning, sales & marketing, and company culture. Paul enjoys applying his knowledge and experience working directly with business owners and their employees to increase profits, improve the company’s present value, and unlock the intrinsic value of the business when sold. Paul joined SGI in 2009 as the VP of Operations.