Choose Smaller and More Profitable Jobs
I started out in the pool and water features industry in the early 1980s (before some of you were born!). Early on, if there was a mistake that could be made, I’d find a way to make it. Then, somehow, I found a way to make it again. If you can identify with this, we are kindred spirits. Every entrepreneur has a built-in desire to grow their business, to increase the bottom line and to make their mark in the industry. After all, the experts said bigger is better, and I believed them.trade magazines, and at our conferences. It is easy to get seduced with the assumption that multiple crews scrambling in different directions is the only path to becoming successful. But that’s not always the case.
Picture it. One construction is crew is going north while another is going east. Your service crew is scheduled to perform two cleanouts to the south and the tech is headed west. You are out on sales calls. All at once, the leaders of three of your four crews are blowing up your cell phone with questions about service, missing parts and manpower. You can’t get to the phone, let alone get them the level of help they need. At this point, your mind races.
“What are they doing? I can’t cancel my appointments. Why can’t they perform with the system I have in place? Is it my fault? Did the tech get to that fourth call? Didn’t the crew leaders use the checklist?” (Yeah, right.)
Now you are picturing the crew members standing around, sucking up your projects. All this time, life is happening, too. Jim’s wife is sick. Tom’s child needs to be picked up at school early. Mike’s daughter’s car broke down. Someone’s sister is getting married, so they will be off for three days. And by the way, Mrs. Jones is angry. She got off work early to be home when the cleanout crew arrived, but they never showed. Now, any of this can easily happen at a small operation. But at a medium or large-sized operation? Multiply these headaches by four.
Does Spending Dollars Make ‘Cents’?
You had heard or read about an “operations manager” — also known as a savior, or a knight on a white horse who can be trained to make sure the proper materials are ordered, organized for the upcoming job and delivered to the site when needed. This person can also schedule and make the emergency off-schedule delivery in a pinch. This person is no grunt. They must have fine organizational skills and be able to use a computer and tablet. They must be able to communicate with distribution, vendors, labor and supply yards in a way that will not alienate them. They are your No. 2 guy or gal.
Let’s say they require a base pay of $50,000. Add your labor burden for worker’s compensation, your share of social security, an increase in general liability based on payroll, and (don’t forget!) unemployment insurance. This brings the annual cost of this key employee’s employment to at least $68,000.
Impact With Small Water Features
Oh yeah, the new ops manager also needs a truck. When you add in $400 per month for a used truck plus gas and maintenance, the cost comes closer to $80,000. Based on a 50% margin, you will need to sell an additional $160,000 in jobs just to break even. This is before benefits or vacation time.
In & Out Ain’t Just for Burgers
I have found that a smaller, well-trained crew can complete a really nice waterfall or medium-sized koi pond without me. We are in and out in a matter of two to five days, including some basic landscaping. Although these jobs range between $6,000 – $20,000, we have a job that starts Monday, and we see the final check by Friday. There is nothing sitting unfinished in the weekend rains that is keeping me awake. The check is in the bank. We also complete more projects in a year’s time with more happy customers talking about us. A month-long project — and I have done many — only gets me one happy customer. But I have found more jingle in my pocket by concentrating on the smaller jobs. Fewer moving parts means fewer headaches. My experienced crew needs minimum supervision, giving me time to work on the business and sales side (or play golf?).
In our industry, even our general labor must be more than grunt labor — people who not only have strong backs, but also have initiative and a sense of sharing in the accomplishment. Each additional general laborer ($18 per hour) will cost the company $37,440, or $51,000 with labor burden. Assuming they work all year, just one laborer will require an additional $102,000 in gross revenue just to cover costs. (Considering the current labor shortage, this estimate is likely on the low end.) Also remember that building up a larger operation will raise static overhead — more warehouse space, more tools that become lost or broken and more trucks and associated breakdowns. If your hourly employees do not work year-round, you may find yourself looking for new employees to train and develop every spring (and a higher unemployment insurance rate). But for a smaller company, it is a lot easier to keep a crew busy, even in the winter.
And remember, when staying with just a single excellent crew, customers will wait for you if you have a good reputation. They called you for a reason. If they won’t wait, then so what?
Two sayings come to mind: “You will not lose money on the job you did not take or the job you did not take will not keep you up at night.”
While taking a larger job may have its rewards, not every job goes as planned. Beware of the pitfalls. Too often, a business owner will take lower margins just to win a spectacular project. Big mistake. Remember, cash flow is king, but profit is his brother.
Don’t get me wrong. I am not against larger projects. I have done many projects that sold for over $100,000 in today’s dollars. If you are drawn to a larger project, be sure to break it down into smaller components and have a list of backup workers who are willing to work on an as-needed basis. You don’t need to multiply your company size for one or two major projects a year.
Be willing to turn down projects for which you are not qualified, or if you have a negative gut feeling or are just plain uncomfortable. And remember, when staying with just a single excellent crew, customers will wait for you if you have a good reputation. They called you for a reason. If they won’t wait, then so what?
Do it Your Way
At the end of the day, you have to follow your goals. My goal was to make an above-average living while enjoying what I do. It was never my plan to build an empire. But by investing good profits, one can build a nice retirement, even with a small business model.
All this being said, I am not against systematic growth. If your goal is to build a larger-scale business — perhaps one that can be sold for megabucks — then go for it! I tip my hat to you. Just do it slowly and methodically. Put a pencil to it to see if you can increase sales enough to justify adding that second crew (which will need to be trained by the current crew, temporarily reducing profits further until they can work on their own). A larger business model usually requires loans with interest, more accounting, reinvestment of profits into the business and the associated headaches if the economy were to take an unexpected downturn. When the time comes, the company may or may not sell for what you think it should. Until then, the key is to make sure you can stay profitable.
Some might feel like I’ve left money on the table by staying smaller. At 69 years old, I know I am in the sunset years of my career. I really like the free time the smaller business model has afforded me. I have no regrets. A small business model is not for everyone — but it has worked for this cowboy!