551: Recognizing The Value Of Construction Contractors In Our Daily Lives

Contractor Success Map with Randal DeHart | Contractor Bookkeeping And Accounting Services

This Podcast Is Episode 551, And It's About Recognizing The Value Of Construction Contractors In Our Daily Lives

I was taking a moment to reflect on the challenges for the Pilgrims coming to America. They decided to make the journey with no guarantee of success. To build homes, plant crops, and take care of animals. Then, later, everyone chose to move West by wagon train, horse, or on foot. I am grateful for them! I think about my Grandparents and my Great Grandparents. What was life like when they were children? Where did they come from, and how did they get to where they were?

The family's oral history seems so inadequate. My father shared so much, but now it looks like so little. Be glad for the simple things we take for granted:

• Going to the grocery store, deli, or restaurant for dinner
• Living indoors with electricity and indoor plumbing
• Driving a car
• Crossing the water on a bridge or ferry

Modern times. I am all for living in the city with the gas station and grocery store just down the street. I appreciate reliable electricity, and tree contractors trim powerlines year-round to help prevent outages. I am grateful for the linemen who repair power lines during a storm so we have electricity.

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Thank You, Contractors, for going to work so the rest of us can stay home safe.

Thank you to the road crews, police, firemen, linemen, tree crews, plumbers, and electricians who work when the news says "Stay Home" and to all the other contractors and emergency services I have not mentioned.

Contractors Make Our Lives Better

Contractors build and maintain the things that make our lives better. They built the factories where the factory workers work. The rancher and farmer, whom you don't think about as contractors, construct and repair buildings and fences and maintain equipment. They learn to be jacks of all trades, raise crops and animals, and battle the elements. Heat, wind, rain, snow, forest fires, or grass fires – they see it first—the more remote their location, the more diverse their skills.

Why did you decide to become a Construction Contractor?

Fast money, easy work, few hours, or all those reasons? Yes, contractors can make much money in this industry. Fast, however, is a relative term.

Definition of Fast Money

Collecting a job deposit is designed to lock down the job and buy materials. While using your client's money to start the project is always a good idea, that doesn't mean you have money to party heartily, buy a bunch of tools, or buy that brand-new truck you want.

The money will fly out of the checkbooks with everyday business expenses without extra help.

If you spend your job deposits in this manner, you get into a cycle of "Borrow from Peter to pay Paul." (author unknown) This was a favorite phrase of the '60s and '70s. What do I mean? Using the deposit from the next job to pay for expenses from the last job is a slippery slope to financial disaster. Another common phrase is "Leverage Is Great Until The Stick Breaks."

It's like a child's game of musical chairs. When the music stops, someone is without a chair. The same thing happens when the economy turns, as in 2008. Contractors thought (and hoped) the recession would be a slight dip and everything would return to normal by the summer of 2009. That is not what happened for most construction contractors.

Some construction contractors had lots of work in the pipeline unaffected by the recession.

Many were overconfident and thought other contractors had a hard time because they "just didn't know how to run a business." Unfortunately, those same contractors were badly hurt when their pipeline of jobs ran out.

Definition of Easy Work

Easy work is any job that you know how to do quickly. Preparing Thanksgiving dinner for twenty or more is a simple task for a chef. However, it might be impossible for a college student living in a dorm or shared apartment.

Definition of a Few Hours

Yes, construction contractors can work a few hours every day. Usually, they work twelve hours or more every day of the week. It is only a few hours to:

• Take the call
• Schedule the appointment
• Meet the client
• Create the bid
• Present the bid
• Collect the deposit
• Schedule the work
• Make a material list
• Pick up the materials
• Coordinate any employees
• Go to the homeowner's house or job site

As you begin the job:

• Think, plan, and do the work.
• Watch out for children and pets.
• Answer the homeowner's questions.
• Be polite and make small talk as needed.

Keep working at a pace that compensates for any time spent watching out for children and pets or chatting with the homeowner. The homeowner expects work to be completed on time or ahead of schedule, no matter how many interruptions you or your employees have.

End of the day – Clean up the job site so it is ready for use this evening or clean and ready for work tomorrow. Pick up all your tools and materials (mobilize and demobilize)

Meet with the homeowner to discuss the rest of the project.

Assure them all is going well. Make notes of possible change orders or add-ons. Do not forget to price out change orders. Homeowners remember that unless you agree to a price reduction in writing, you are not obligated to reduce the price.

The increase in scope is never forgotten. You Promised To Do [fill in the blank]. If you think any changes are omitted, wait; you will hear a grownup impersonating a preschooler wanting a cookie. Water on the stone is an understatement.

Like most Construction Contractors, you feel like you are waving the money as it goes by. Rest assured, it is true in Washington State, where contractors collect and pay sales taxes. The tax money is just moving through the checking account. Borrowing State and Federal tax money is very bad.

The same applies to payroll taxes, except the company must make a company match for Social Security and Medicare, pay state unemployment insurance and state worker’s compensation, and obtain a contractor’s license, contractor’s liability insurance, bond, and other specialty licenses.

The business of being in business as a construction contractor involves:

• Keeping track of a lot of paperwork
• Filling out and filing government forms
• Paying taxes

Financials are essential for filing annual federal taxes, whether you are a sole proprietor, LLC, or S-corp. The individual reports are for the benefit of the construction contractor.

• Are you making money?
• Which job? – Did you like that particular type of job?
• Do you go into any job knowing it will barely break even?
• Are you passing out business cards or flyers to the neighbors of your current or past jobs?
• Are you driving long distances between jobs?

Final thoughts

You couldn’t change yesterday; you could only review it and think about what you could do today. And how can you have a better tomorrow? Tiny changes can make a big difference. Sometimes, taking a pause is the right decision to make.

Money makes the world go round. It is hard to buy gas or groceries with hope and a promise. It is not unreasonable to expect to be paid for your work. Contractors like you bring value to everyone's life you touched. I am rooting for your success and wish you and yours the best in everything that comes your way.

PS

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About The Author:

Sharie DeHart, QPA, co-founded Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [e-mail]