E A IT’S TIME FOR A BR KTHROUGH

Escaping the entrepreneur’s trap

For years, there has been a lot of content in our industry about why some contractors fail. With stats from the U.S. Department of Commerce like 29.1% failing in year one, 56% within three years, and 72% within five, you can see why it is a hot topic.

By Jim Johnson

The most concerning stats though— and the ones that really should catch your attention—are the revenue and profit stats of those who do stay in business. According to Fundera, a finance company for small businesses, a staggering 98% of home service contractors generate less than $1,000,000 in annual revenue with a net income of less than $80,000.

These numbers reveal that relatively few pros have figured out how to scale their operation in a manner that allows them to create a business that works for them instead of a business they work for—the classic entrepreneur’s trap. But the numbers also reveal that it can be done, which should indicate to you that you can do it too.

Understanding the trap

What many pros don’t realize when starting a business is that there’s an immense number of responsibilities that suck up time and put a cap on the amount of work that can be done and revenue that can be generated. These things don’t seem like much at first but, before you know it, half your time—or more—is sucked up in marketing, finance, project management, recruiting, training and customer service. Each of these aspects of business go deep, too.

For example, finance is so much more than what goes in and what comes out of a bank account. Accounts receivable and accounts payable are important but just as important is the understanding of balance sheets, cash flow, work in progress—not to mention taxes, overhead, audits and risk management.

Finance is usually—and should be—the first area we know we need help with, so we look at hiring a professional to relieve some of the burden, ideally in the form of a part-time or full-time bookkeeper or CPA. I say ‘ideally’ but the truth is, far too few business owners hire a professional. Instead, they recruit a family member or friend, which leads to not just trying to figure it out but having to work it through with someone who has little more experience than you, creating a time-suck trap that prevents you from focusing on what you do well and making money at it.

We make similar decisions in all areas of our business without realizing there is an actual sequence to the order in which we should do things in order to scale our business. Instead, we address those aspects of our business from a reactive, best-guess approach without a plan to follow, which ends up creating extra work that makes us feel like there aren’t enough hours in the day. This is the entrepreneurial trap you need to escape to not just survive but to thrive.

Getting out of the trap

After coaching contractors for several years, I realized that, despite there being an abundance of information about how to run a business, what was missing was a big-picture blueprint of what to do, when to do it and how to do it.

Without this blueprint, you end up staying reactive in your decisions and often fail to appreciate the specific sequence of actions you need to take to effectively scale your business.

Let’s say right now you’re thinking the only thing standing between you and more work (and revenue) is leads. So, you consider buying an established marketing software or hiring a lead-generating service. That’s a great step but before you invest, you need to look at the bigger picture (that is, your blueprint), and make sure you’re really ready to seize this opportunity. Ask yourself, if you get more leads, do you have a sales process that optimizes your investment? Is that process repeatable? If you convert those leads, do you have the processes in place to handle the additional volume?

If you don’t have solid answers to those questions, buying a software or service won’t solve your problems. In fact, it may just create new ones, and once again, you are falling into the trap of putting out fires instead of preventing them in the first place.

Here’s another example:

At ContractorCoachPRO, more than 90% of the contractors who contact us say they want us to help them recruit and hire an elite team, thinking this is the best way to scale their business. We can certainly do that, but we always ask: How will you train them quickly and effectively? How will you generate enough leads to support the new team members? What technology will you use to market, manage and track all those new prospects and customers? And so on … following the blueprint back to the beginning. Are you skilled enough and have enough capacity to lead these new team members in a culture that fosters growth and maximizes team performance?

Those two examples highlight just how important sequence and planning are to the operational side of your business. But to be truly successful, your blueprint also needs to incorporate foundational aspects of your business.

JIM JOHNSON is the founder of ContractorCoachPRO, the author of the best-selling book Contractor’s Blueprint and host of the Contractor Radio Podcast. Johnson and the elite coaching team at ContractorCoachPRO have helped thousands of contractors achieve their version of success through a mission-focused coaching methodology. ContractorCoachPro.com