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Oct 20 2008

Joe the Plumber and Taxes

Published by Guy under Strategy

In case you haven’t heard contractors have a new political spokesperson.

“Joe the Plumber” was tossing a football in the front yard with his son while presidential candidate Barack Obama was canvassing the area where he lives. Obama approached Joe and solicited his questions. Joe is a plumber in Ohio who desires to purchase the company he has worked for for many years.

The rest is history with Joe making appearances on all the prominent talk shows and becoming a focal point of the third debate. If you’d like to see some of his interviews they are easily accessible by doing a “Joe the Plumber” search on the Internet.

First I’d like to start by saying that I think this guy “Joe the Plumber” is pretty bright and intuitive. Some pundits say that he has articulated some of the issues better than any of the candidates.

Joe asked Obama a fair question about how his policies would affect him if he purchased the plumbing business he was working for. Since that debut Joe “the Plumber” Wurzelbacher has been launched in the national political spotlight for both the Democratic and Republican campaigns.

But let’s not forget the real issue! Taxes!

Yes, I believe that taxes for small businesses are too high. However, I would never advise a contractor to stop growing their business to avoid paying more taxes.

Go out and grow your business by hiring the right people, getting the right customers, acquiring the proper tools and equipment to complete the work efficiently and profitably; and retain a good certified public accountant to help you with your tax planning.

With proper advice from a sharp accountant you should be able to retain at least sixty cents for every one dollar you earn. So go out and get more sales to make more money! By the way a side benefit is that you will stay in business longer.

The government needs to be accountable to all taxpayers for how they spend our money.

I’m not sure that “Joe the Plumber” represents the majority of contractors since he doesn’t even own a business today. But if and when Joe does by that plumbing business I’d rather that he decides who gets raises based on their contribution to the company and the merits and he puts into place rather than the government spreading his company profits equally to individuals taxes payers because they fall into a certain tax bracket.

Best of luck with your business,

Guy

No responses yet

Jul 23 2008

What Problem Should You Fix First?

Published by Ron under Business Systems

Recently, while trying to explain what my client and I had already achieved together and why we were getting ready to focus on something that didn’t appear to be a pressing need, I stumbled upon a concept that you might find helpful with your business.

What I knew, and my client was about to find out, was that despite having a six month backlog of work he didn’t have any systems in place to ensure that he would have plenty of work at the end of the six months.  He didn’t understand why it was so important to address the situation now.

After stumbling around making various points and observations, it finally dawned on me that his business was straddling two different plateaus of performance and neither where the plateaus we are gunning for.  I hopped over to the whiteboard and drew a little chart that showed the four possible stages of business.

1. The Threat Stage

2. The Stability Stage

3. The Freedom Stage

4. The Great Wealth Stage

A business will never reach the Freedom Stage while still facing serious threats. Another way of saying it is that a business must be fully stabilized before freedom is possible.

Proven systems are what bring stability and eliminate threats.

In my client’s case, we had just put the finishing touches on his operations management to reduce the odds of blown budgets and negative surprises.  So we had stabilized his operations.

What we hadn’t stabilized was his sales and marketing.  Hopefully you realize that ineffective sales and marketing systems are far more threatening to your financial health than are operations systems.

The point I’m trying to get across is that you can look at each one of the areas of your business and ask yourself “Have we put in place a system that greatly reduces our risk?”

If not, invest time to implement those systems. Working on the systems that are completely broken or missing  will pay far bigger dividends than working on systems that are already functionally okay and realistically pose minimal risk.

Food for thought.

Wishing you great success.

Ron

No responses yet

Jun 06 2008

Time to Help Repair the Reputations of Contractors

Published by Ron under Housekeeping

Our friends over at www.thecontractorsside.com are doing their best to repair the reputation of contractors nationwide. They have started a grass roots campaign to force an LA Times writer to publish a pro-contractor type article. They are making gain with him but could use your help. Please read the following letter to the editor and then email your feelings to Mr. Lopez.

Here is the original correspondence from Heather Aitken:

Please email the following letter to the editor to the Los Angeles Times (robert.lopez@latimes.com) and then send it on to ten other contractors and so on, so we can let the press know how honest contractors feel.

Thecontractorsside.com

Here is Lee Dodson’s letter to the editor:

Dear Mr. Lopez,

I read with interest your story on unlicensed contractors being busted.

This is of interest to legitimate contractors everywhere, however, I do not see and have not seen one article anywhere, in any publication, that gives favorable mention to the contractors who slug it out every day in a tough business.

Contractors already know that unlicensed contractors hurt the business, but reports of this nature tend to tar all contractors with the same broad brush. In this state, contractors operate under the most stringent rules in the country,

Contractors must not only be licensed, they must carry a bond, must carry workers’ compensation insurance or self insure, and are required to go to mandatory arbitration without recourse to appeal in the case of dispute.

Add to these facts that the codes and regulations, price increase in permits, and heavy zoning restrictions, and the cost to the contractor has skyrocketed in the past few years.

The customer does not know the intricacies of the business of contracting, nor does the customer care. He looks at price, and there is where the cheap guys see an opening, i.e. unlicensed contractors.

The licensing process (testing, evaluating, authorizing) is fairly good, but the process needs streamlining. It can take months to move forward. But after the licensing process is successfully completed, the licensing entity becomes the adversary of the contractor, rather than becoming the ally. The Board becomes solely an advocate for the consumer, leaving little doubt that the contractor bears burden of proof of innocence.

Accusations of malfeasance against the contractor weights in favor of the contractee, and the contractor bears the total burden of expense while the other party simply shows up, the State on his side.

The bonding companies, knowing they own the contractors’ business, can charge maximum fees for a “required product,’ and they do. In my investigations into bonding companies, I have found not one contractor who has received the advertised “preferred rate” for bonds. Bonding companies do an absolutely perfect “bait and switch” maneuver that nearly always results in doubling the original cost of bond.

Workers’ Compensation packages soar in expense as another “required cost of business.” Due to the overwhelming number of fraudulent claims, the snail-like pace of adjudication and settlement, the ineptitude of investigators, the onerous medical proving up, the system is burdened at more than quadruple its capacity, thereby increasing costs to the insured which, in turn, is passed on as increased cost to the end user.

Add to these facts the unending number of stories of “bad contractors” who rip off the clientele, and any story, repeat any story, dealing with the construction trades rises to a tacit indictment of all contractors, unlicensed or duly licensed.

One might ask if the licensed contractor has any recourse but to report unlicensed contractors, and the answer is no. Most contractors are loath to become involved with any authorities over any but the most egregious of violations because it does not serve their interests and because most contractors want to stay off officials’ radar. Anonymity is the best protection.

One might further ask if anything has been done to help small contractors. Again, the answer is no. Legislatures and government bodies have done absolutely nothing, passed no laws, written
no new regulations to help those whom “if you drove on it, if you work in it, or if you live in it, a contractor built it.”

Courts have been no better. In Southern California, according to the L.A. Times, seventy-five per cent of all civil actions involve construction related cases. My research indicates that the contractor may as well stay on his or her current job to make the money he or she will need to pay off the judgment because, from Small Claims to Superior Courts, eighty-five per cent of the time the ruling is for the client.

This anti-contractor attitude has evolved from a belief that contractors make a killing on every last project. The reality is that most small contractors work to a less than twenty percent markup that is rarely achievable. Most small contractors do well to reach a ten per cent profitability, if that.

Across the nation, the situation is remarkably the same. Since I launched my website:
http://thecontractorsside.com, I have heard from thousands of contractors the same series of complaints about identical issues, but the one foremost complaint is the use of official bodies and rules to either reduce payment, or to not pay at all.

Why is this complaint so common? The easy answer is that there are a lot of cheaters out there, but it could well be that cheating has become institutionalized as a product of unbalanced regulation on a business which may be the only business in our country that remains unable to be outsourced.

I heard recently from a contractor who boasted he had never been stiffed on a payment in
his twenty-five years of plying his trade. I thanked him for his call and asked if he might
have any advice to contractors who had not been as lucky. He rattled off a few well-known
practices and said if a contractor followed the rules, he would be paid. I thanked the man
and sat down to write my constituents his wisdom.

Yesterday, the same contractor called with the news that while he had played by the rules, done his due diligence, he had just yesterday been stiffed for $8000.00. He was still stunned by the event. Needless to say, he registered on the website ten minutes later.

What can be done to improve the lot of the small business contractor who has next to no power with officialdom or media?

Because the small contractors have no true advocacy aside from small publications and loosely organized trade associations, they have limited access to redress, and few speak on their behalf.
Their sole recourse is to become educated as to their market, and that means sharing information. There are business seminars and coaching institutions which can help in the “business” of the business, but these entities focus on individual practice rather than a group effort towards commercial overview. Again, the contractor is isolated, insulated from information essential to the conduct of informed practice, i.e. good customer, iffy customer, bad customer up to and including suppliers, officials, banking institutions, architects, and engineers.

No one shows any intention of taking the contractors’ side, therefore, the contractor must take his or her own side in the work of improving the business, and this means in the area of policing not only unlicensed contractors, but also in the area of policing every area of
contractor-societal interconnect, including self- and client-education.

If contractors initiate the improvements, the effect can be far-reaching and effective, but they must take action to preserve the small business venue.

If the small contractor opts out, the results for the economy can be disastrous. Prices for construction will soar when the only bidders are large companies who perforce control the market.

It is said that this country runs on small business. It employs more people than major corporations, provides more peripheral and entry level jobs, is more responsive to market pressures, is more highly creative is problem solution, and is truly the backbone of the nation.

The contracting business needs some good news and good press.

http://thecontractorsside.com is the only resource for this kind of information and the only established advocate for the contractor. If you want to know what’s happening in the construction business where it really matters and where to take action, this is the place.

I am cc’ing this message to my constituents so they can sign onto it in agreement and
send it to you so the thousands of diligent, honest contractors can finally get some credit
where it is due.

Respectfully,

Lee w. Dodson

No responses yet

Apr 06 2008

Time Cards, Your Most Important Job Costing Tool

Published by Ron under Operations

You can learn a lot about a contractor’s job costing system by looking at the company’s time cards. Those little things are an oft overlooked hurdle blocking effective cost tracking.

The first thing to look for is whether the time card has a place to write down a cost code. Stunningly, most don’t. How in the world is an estimator going to have the cold hard data he needs to build a realistic estimate when the time cards don’t break out the work activities?

The next common mistake I see is having no place to record the amount of material that was installed. A less important item to track, but valuable none the less, is the length of time equipment was run on the job.

The time card is the ideal place to capture all of this data.

Now for the really tricky part. You need to keep it as simple as possible or your crews will record garbage. The total hours will be right, if not overly generous, but the rest of the data will be useless.

Since projects vary in length and scope, the one size fits all time card is hard to find. consider using multiple time card designs. Two or three versions is usually plenty.

It boils down to this: if you don’t collect good information in the field, your estimating, scheduling, project management, and budgeting will all be baseless. Your time card is your one and only tool for getting the right information. Is yours doing the job?

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