~~ Contractor Best Practices Newsletter ~~

by Ron Roberts
The Contractor's Business Coach



Volume 2 - issue 12

March 21, 2007


Tip of the Week:

Pay yourself the minimum salary that the IRS will consider fair and reasonable for your business.

All other income should be paid out as a distribution/dividend. That minimizes the 15% FICA you pay on your personal salary.

By the way, not paying yourself any salary is a red flag to the IRS.

Today's Article:

How Contractors Get Rich

Management gurus (can you say Michael Gerber) frequently implore business owners to "systematize your business if you seek wealth and freedom."

What we "experts" are trying to tell you is that you need to know why and how you do the things you do in your business...then teach employees how to do those

Few, if any, consultants give you the laundry list of systems you need to get in place and manned by your employees. Why don't they share the exact list?

Because it is HARD work to systematize every part of your business and until you do, your company is unlikely to make you rich. Getting rich is hard.

Today, I am going to share the list of systems we "experts" refer to when we tell you to systematize your business. I hope you appreciate the honesty.


Your Business’ Success Rides on the Performance of Six Systems


If you want to make a lot of money, you must get all of these systems up and running smoothly!

» Marketing
» Selling
» Staffing
» Planning
» Tracking
» Financial Control

You need to be able to teach your employees how to perform each of the following subsystems. Once they can perform the subsystems for you, you have maximized the value of your company, freed yourself from the daily grind of the company, and positioned your business for explosive growth.

Let’s look at each system and the subsystems that make it up.



The purpose of your marketing system is to produce a flood of qualified sales leads. You need systems for:

» Generating leads from new customers.
» Generating leads from existing customers.
» Prodding referrals from existing customers.
» Collecting testimonials.
» Staying in touch with your customers.
» Publicizing your business.
» Developing new advertising pieces.



The purpose of your selling system (and you need to think of selling as a system) is to get commitments from buyers to hire you. The selling subsystems are a combination of sales tasks, motivation, and development. You need systems for:

» Assigning and prioritizing leads.
» Qualifying leads.
» Following up with prospects.
» Creating proposals and presentations.
» Processing orders.
» Following up with customers after their project is finished.
» Motivating the pursuit and procurement of profitable sales.
» Improving salesmen’s selling skills.
» Networking.
» Strengthening your customer relationships.



The purpose of your staffing system is to get the right people in your company and get them placed in the right jobs so that they are successful individually and as a group. You need systems for:

» Advertising job openings.
» Interviewing.
» Creating and updating job descriptions.
» Communicating performance expectations.
» Monitoring market wage rates.
» Dismissing non-performers.
» Developing employees’ skills
» Rewarding good performance.
» Selecting the right people for promotion.



The purpose of your planning systems is to eliminate negative surprises by proactively addressing problems before they arise. You need systems for:

» Determining which markets you are going to pursue.
» Creating your annual budget.
» Creating a cash flow budget.
» Increasing your bonding capacity.
» Planning project completion.
» Scheduling your work crews.
» Determining when to buy equipment.



The purpose of tracking systems is to make sure your business is performing as you need it to. Your tracking system should be monitoring the following items:

» Expenses vs budget (job and company)
» Revenue vs budget
» Gross profit vs budget (job and company)
» Labor productivity (job and company)
» Advertising effectiveness
» Selling effectiveness
» On-time completion
» Employee performance
» Equipment costs
» Labor time by primary tasks
» Receivables outstanding
» Sales backlog
» Safety efforts and lost time injuries
» Estimating accuracy
» Market-up success
» Re-work



The purpose of financial control systems is to make sure that your business is on solid financial ground. You need systems for:

» Developing relationships with bankers.
» Developing relationships with bond and insurance agents.
» Qualifying and evaluating your CPA.
» Getting the proper business licenses.
» Processing payroll.
» Making scheduled federal and state tax payments.
» Managing your cash.
» Verifying money is not being improperly removed from the company.
» Ensuring suppliers' bills are legitimate.
» Collecting late receivables.
» Paying bills on time.
» Paying employees appropriately.
» Filing liens and claims.
» Collecting employee information.
» Sending out 1099s.
» Getting the proper insurance coverage.
» Verifying lease terms and payments are proper.
» Building and managing your credit line.

Quite a list, eh? Heck, I'm sure I've left a few out. Nobody ever said running a business was easy.

One final comment. You can’t prevent problems if you don’t have a system or process installed to prevent them.

If you have a problem in your business, check to see whether you have created the system that should be preventing it. If not, create the system, then test it to see whether it permanently resolves the problem. If it doesn’t, improve your system.

Until next week, good luck with your business.

Ron Roberts,
The Contractor's Business Coach

P.S. Share this with your contractor friends. They will thank you for it.


Independent Lease Review, Inc.
Experts in equipment lease negotiation and contracts.
Synthesis, Inc.
Construction accounting, lead generation, and customer relationship management software consultants and trainers.



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