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Conversations NOBODY Wants To Have
97 Plays1 month ago
Episode 74 of The Better Contractor Podcast features host Brent and co-host Alex diving into three real-world questions that contractors are facing today. The episode opens with a blunt discussion on inflation and how failing to adjust pricing can quietly destroy profit margins. They break down how to handle low-bid customers with vague scopes, emphasizing the importance of qualifying clients and bidding based on value—not desperation. The conversation also tackles managing toxic but high-performing employees, stressing that culture and long-term health of the company matter more than short-term output. The episode wraps with a broader look at industry challenges like price wars, skilled labor shortages, and inflation, offering practical advice on how contractors can break free and build sustainable businesses.
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Transcript
Introduction of New Co-Host
00:00:01
Speaker
Alright, welcome back to another edition of the Better Contractor Podcast. Today I am joined by my now official co-host Alex. This is podcast number one with Alex. It's now over. This is your official.
00:00:14
Speaker
froz all right welcome back to another edition of the better contractor podcast today i am joined by my now official co-host alex this podcast number one with alex is now over this is your official It's number two. I'm here to stay, I guess. So, welcome back.
Super Bowl and Sports Interests
00:00:29
Speaker
um So, did you watch the Super Bowl this past weekend? Of course. Did you? course. I did not watch it. Shocker. Yeah, I know. Brent's not a sports guy. I'm kind of anti-sports and then just...
00:00:41
Speaker
It frustrates me, dude. It frustrates me that people care so much about a bunch of grown men throwing leather balls around. It really, really bothers me. And then the fact that everybody pays so much attention to the halftime show and alternative halftime shows also annoys me. So I just tuned out all together this year. And I don't really like sports anyway. So it was easy for me. But... don't even know who won. I actually don't. Seahawks, baby. I'm opposite. I love sports. So all you sports fans I'm on your side. I'm not i'm not like Brent over here. Dude, I'm i'm ah working out in business. That's fine that's my life. Gotta have some fun.
00:01:14
Speaker
Yeah. We're working on that. So you moved you moved recently, right? you just moved in? did. Sweet. How'd that go? It was a pain, but I'm living here now, and I'm excited. I see those just down the street, but... ah Moving at your age is much easier than moving at my age. I didn't have a ton of stuff. probably did it in day. would take me like a year. There's two pickup trucks full and got all my stuff here. It was great. That's what my wife travels with on vacation is two pickup trucks, though.
00:01:39
Speaker
So, you're doing good.
Podcast Structure Overview
00:01:40
Speaker
So, guys, today we've got ah a simple three-question podcast, three answers. It shouldn't be super long, so... If you are driving and just going to work, this the perfect podcast listen to. So Alex hit me with question one.
Handling Low Bid Requests
00:01:54
Speaker
Okay. so we got we have a customer here that wants the absolute lowest bid, as most of them do, but they have a vague scope that you believe that that you will hold on to. They have an aggressive schedule. They want it done now. They want it done as cheap as possible, and they're picky.
00:02:11
Speaker
Do you bid it? how do you How do you get past these types of scenarios? I'm sure you've had plenty of them. We've had plenty of those. So welcome to contracting is all I will say. So the first thing I would say with this one is one thing, if you're a contractor, you've not figured this out, you will very shortly.
00:02:29
Speaker
And that is to sift through your bid request and find out if that person is a customer you even want. So as you guys are well aware, You will spend a lot of time. If you start looking at your overhead, you'll realize how much time you spend doing bids.
00:02:44
Speaker
i know it shocks us when we do it. Just for an example, we actually had one bid, I think it was two years ago, and we should have walked away and not even bid it. But we knew the customer was low bid.
00:02:55
Speaker
This bid was over a scope of work that covered, I think, five states. And with that scope, we needed to put eyes on it. When we, and they awarded it in sections, so our goal was, think it was five sections as well, maybe per state, was let's just get one.
00:03:12
Speaker
I think it's a three-year contract. if we get one, then that's awesome. If we get more than that, the merrier. We didn't get any of them. So then I was aggravated, like, hey, why do we even waste our money on this bid? stupid.
00:03:24
Speaker
We went back through for that job, and I didn't prep because these these were kind of Q&A that were you know thrown on me. But I think we ended up paying around $25,000 just to be able to do that bid. That's office staff prepping the bid. That's somebody driving it. That's putting it into GIS, doing all this stuff.
00:03:43
Speaker
And our bid was probably by far the most immaculate bid that was presented. Actually, I almost guarantee it was. But we didn't get anything. So we had $25,000 out. Looking back, I knew probably 90% certainty that customer was never going to be a customer. Yeah, because their history is they are a low bid only.
00:04:00
Speaker
Now, they say they care about safety and quality and production. They've had all these issues with previous contractors. And, that you know, we want something different. The fact is, how they award speaks for itself.
00:04:14
Speaker
And they award by low bid. So we haven't bid that one since. I don't know that we'll bid that one again because we spent $25,000 last time and it didn't pertain anything. But I would do some digging and try to find out a little bit more about this customer. Is it someone that you even want at all?
00:04:30
Speaker
If you do get it, will that customer be someone who kills off your ability to deliver it to other people? So that's something else we've had happen. We've had kind of our customers where we take the work, we do it. It's not bad.
00:04:43
Speaker
We end up making money, but they're very high maintenance. So that one customer who maybe is 5% of your projects at the time, 5% of your money coming in, ends up being 80% to 90% of your headache.
00:04:55
Speaker
And now all of a sudden, your other 95 customers you're not delivering a quality product or service to because you're babysitting this one. Even if you make money, that's one that's not worth having because you're compromising your standards for all your other customers because that one is so high maintenance. So for me, look at are they best value or are they low bid? If the answer is low bid, we don't necessarily stop there because sometimes it's just the nature of the world.
00:05:21
Speaker
The next one we look at is how much time are you going to consume after the deal's done? And sometimes we've accounted for that in our bid, which end usually means you don't get the bid. yeah um But I would do those two things for sure.
Marketing and Client Education
00:05:33
Speaker
As far as getting around it, really it's going to come down to marketing and your delivering. So for me, for us, we try to build in all these differentiators for LandoCorp. So if a standard cheap contractor always delivers A, B, and C,
00:05:48
Speaker
What can we deliver that is going to be drastically different that the customer wants that can be value adds that can allow our price to be a little bit more expensive, but then also kind of removes those customers that don't care about that kind of stuff.
00:06:02
Speaker
So it helps us kind of weed out those type of customers. I would recommend marketing. And then as you engage and with this customer the first time, I don't mind asking.
00:06:13
Speaker
Just curious before we get deep into this, is this is a low bid award? If the answer is yes, we ask a few more questions, but typically we move on. Not always. wip And again, that depends on how long how much time it takes to bid it. If it's a bid that I can put together in two or three hours, we'll bid it and we'll try. We'll play the numbers game and see if we can land one.
00:06:30
Speaker
ah But if it's an extensive bid, probably just need to move on and save your money and go elsewhere. um But back to the marketing side, the one thing you guys have to realize, though, too, if you're marketing it and you're marketing yourself as a contractor that's worth a higher price, you got to make sure you're delivering that.
00:06:47
Speaker
Because I've seen a lot of people do that wrong as well. So they're sitting there saying, hey, I'm a contractor. I'll fix this. This won't happen with me. I'll show up. We'll deliver. i won't leave you hanging. This will be done by June 1st.
00:07:00
Speaker
Don't say it if you don't mean it. Because then you're basically lowering your ability to charge the price that you're saying you're worth charging. So that's kind of what we would do in that situation. If I could throw that bid together quickly, I'd bid it. If I couldn't, I wouldn't.
00:07:13
Speaker
And hearing you say that, it sounds, you make it sound a lot easier than it is because from a younger perspective, if you have the opportunity to bid, that's an opportunity to get a contract done. Saying no to that is tough. Oh, it is. And when I was young, I didn't always say no. So came with some experience.
00:07:30
Speaker
But it also came from realizing at the end of the day, it's a numbers game. So if I think, okay, if 80% of customers are that, and I'm going after that 20, then I need to bring in a whole lot more leads. yeah So really for us now, it comes down to a numbers game, which is hard for our industry because our industry, we don't have thousands upon thousands of available customers. We're in the oil and gas industry. There's only so many pipeline companies, only many so many oil and gas, a lot more than people realize. There's a lot of small operators, but my pool is not huge.
00:08:02
Speaker
So for us, it's even more difficult. In the contrast, we're usually five to six figure at least. So to say no like, eh. So the other thing we do try to do when we ask if it's low bid and we're trying to narrow up if it's worth bidding, we do try to really bring home and sell the point that low bid does not always actually actually equal low price for you long term. now So we do try to educate the customer. And I think all contractors, you guys need to be doing that because the industry isn't going to change away from that unless we're teaching and telling people why that is an issue and give those horror stories and say, if you choose this, this is what I've seen happen. When you choose little bid, I've seen all these different things.
00:08:43
Speaker
But it's our job to educate them. Because at of the day if you go in to buy a car, we'll probably talk about this and some of these other questions. But if you go in to buy a car, there's little bit of hackling, but not a lot. If you go in to buy a Rolls Royce,
00:08:56
Speaker
You expect a Rolls Royce if you want that. I'm not going in there to dictate and try to knock that price down. We don't go the grocery store and try to talk prices down. We don't go to the gas station and be like, hey, $2.99 is too much per gallon. Can I buy that for $2.69?
00:09:09
Speaker
We don't do that anywhere else but in contracting, and it shouldn't be that way in contracting. So, you know, we've even had customers talk like, oh, your your rate sheet's too expensive, or here's my favorite one.
00:09:21
Speaker
We have a piece of equipment that we want on our job site, And then we put it, it's in the bid, it's there, it's on a time material project. It isn't used for a half a day. And I get a phone call, hey, I was just curious, you know, you're not charge us for that piece of equipment for these days that it wasn't being used. Even though we want it here, we would like it parked here to be available.
00:09:42
Speaker
So I take that back to, imagine you fly into an airport. You go to the rental car place, you rent a car for a week. You take it, you drive to your Airbnb, you park it, you walk across the street to your meetings all week.
00:09:55
Speaker
You had the car for seven days, but you only use it to get to and from. Do you go back to the enterprise and say, hey, enterprise, ah i didn't actually drive that car ah Monday through Thursday. Can I get my money back on those days?
00:10:06
Speaker
know if I'll give you your money back because you took the car. So it's no different in contracting. And that's actually an example. We use a lot to try to educate customers that that's not realistic. This item has to be paid for. And if you want it on your job site and available solely to you,
00:10:21
Speaker
you're get you're gonna charge, ah you're you're you're gonna pay for it. So exactly education goes a long way yeahp on that one. ye Let's jump into a couple of conversations that no boss wants to have ever.
00:10:32
Speaker
So your foreman, he's a killer producer or operator. He's great at what he does, but he's toxic. He's a cancer within the company. whether there's always drama, whether he's negative, whatever the issue is.
00:10:43
Speaker
How do you address that and handle it or similar situations? So been there, done that, and all of you listening, if you're in a business, you will
Managing Toxic Employees
00:10:52
Speaker
do it. yep So it is common in any industry to have someone who's been there a long time who has all the knowledge, they've got all the experience, all the expertise, they're great at operating equipment, they're maybe they're great with handling customers, orre great at sales, whatever it is, they do it well.
00:11:09
Speaker
at the the day, if that person tears down everyone around them and destroys that culture and that morale in your company, they're probably not worth what they're bringing to your table.
00:11:19
Speaker
And that is difficult, especially in this labor market where it is difficult to find really, really good quality help. And you know it's going to be very difficult to find someone with those sales numbers, maybe with that operator record or that safety record.
00:11:31
Speaker
So first, assuming you haven't done this yet, I think a very real conversation and just being honest with the person is saying, hey, you This is what you're bringing to the table, and you are killing all of that. You're awesome at it.
00:11:45
Speaker
But for you to stay employed here or for you to move up the ladder or for your next advance ve ah for your next promotion, these things have to be fixed. If they are not fixed, you have this timeline. So I think giving them that timeline...
00:12:00
Speaker
a compliment sandwich of a little bit of sorts, but also being very, very blunt and real with them that this is a non-negotiable for me. These have to be fixed, period. And I would use the word non-negotiable. These things, if if if you want to, you can stay employed on negotiables. Yeah.
00:12:15
Speaker
You just may not get a raise. Non-negotiables mean for you to stay here at all, past our next review, or before these have to happen. So I think laying that out, so assuming that doesn't work, at that point, I would cut the person.
00:12:29
Speaker
And that is difficult and that is hard, especially if someone's been with you a long time. But at the end of the day, that one person, let's say crew of five. And we've seen this happen. You put four people with this person, and maybe they were all positive when they arrived on that person's job site or with that foreman, the seminar foreman.
00:12:47
Speaker
All of a sudden, you start noticing when they come back in, like, man, so-and-so's got a bad attitude. Man, Alex used to be chipper and fun, and now he just has a bad attitude. Or you hear that, hey, these three people were mouthing about this other foreman. You have all this tension. Well, that tension and that attitude, that lowers production.
00:13:06
Speaker
It lowers safety. It decreases your customer, or I'm sorry, your employee retention rate. So you have high turnover. So now you have all these other issues. And I can guarantee you, even for just two or three people, that one person's valuable aspects that you love about them does not outweigh all of those negatives. So for me, i would cut them as hard as that is.
00:13:30
Speaker
You'll save your culture. When you cut them, obviously, from a legal HR standpoint, you don't want to go out and diss that person by name. But I would not be afraid to talk about why Use it as an opportunity to specifically go back over your core values.
00:13:46
Speaker
This is who we are. This is what we stand for. Again, you don't want to a lawsuit in your hands, so you've got to be careful about all that. But I would just remind everyone, this is who we are as a company. This is what we stand for, and this what we do not tolerate, and then leave it at that. This is a good learning moment for others, and it's an opportunity to re-engage on your core values.
00:14:03
Speaker
is tough to do because a lot of times those people are good people. They're hard to be around. yeah But when they're a cancer, it starts with them and that spreads oh yeah to maybe the entire company. Oh, yeah. Yeah. That's that's very tough, but it has to be done.
Industry Challenges
00:14:18
Speaker
What issues do you believe are plaguing the con the contracting world right now and how do you break free from those? So we talked about low bid on some of this already, and I think that's one of the biggest issues in the contracting world is low bid situations.
00:14:33
Speaker
So i the answer there is going to be very similar to the first part we talked about in question one. But I think in a nutshell, I think we have to stop playing that game. And I think a lot of us believe that that isn't in our power to do so.
00:14:47
Speaker
There will always be cheap. So even like when i referenced the car industry earlier, there's always going to be cheap cars. However, most car brands aren't cheap. There's only a few that are actually cheap.
00:14:58
Speaker
And there will always be buyers for those. Majority of people, when they have their house built, remodeled or whatever, I'm assuming they would like it to be done well. And I think with contracting as a whole, there's such an availability issue right now. So contracts are getting so like, hey, I i can do your work, but I can't do it for several months.
00:15:19
Speaker
There's a labor shortage. So when you think about marketing and selling, when you have that scenario, normally you don't have price wars anymore. Because the availability is not there, but the demand is still there. So I don't understand why there's still so much price warring and just cutting each other down in this race to the bottom.
00:15:39
Speaker
I don't understand why it's there. but I think a lot of it is it's because we're willing to negotiate. So like I said in the first question, you don't walk into the gas station asking for a discount. You don't walk to the grocery store asking for a discount.
00:15:52
Speaker
When I bought this Yeti cup, I didn't ask for a discount. I didn't want to pay that for it. To me, it's worth $5 less. You don't ask. We allow people to ask, and therefore they expect that I can, hey, Allie sent this bid, Brent sent this bid.
00:16:06
Speaker
I'm going to play them against each other and see if I can get 10% safe. We've got to stop doing that, but we've got to educate on why that is bad and why it's not going to get them what they ultimately want. I can think of so many examples in contracting where a contractor bailed.
00:16:23
Speaker
A contractor did a really crappy job. They said, hey, I'll show up starting this date. They showed up, and then they all of a sudden just didn't show up anymore for a while. And then they came back. And what they're doing is they have a whole bunch different jobs.
00:16:35
Speaker
And to keep everyone at peace, they're showing up to everyone for a few days a week, making you feel like, hey, I'm getting stuff done. But they're not finishing your projects. And now all of a sudden, your actual three-week project It's now drawn on to month three. So you have all those issues, and then they leave, and maybe you find other issues. Maybe it's a drywall, and the tape starts to crack and peel. Just little stuff like that. You pay for what you get in every aspect of life.
00:17:01
Speaker
Contracting is no different. I think it's our job as contractors to push back against that. And we've got to market and sell it differently than what we do. So I'd say low bid price wars is part of it.
00:17:11
Speaker
Skilled labor is obviously a huge issue in every industry. In contracting, I think what we have to do is elevate the blue collar industry as a whole, which is basically, you know and even in ours, I'm trying our hardest Atlantic Corp to pay the most and actually then also, but I have to pass that cost on.
00:17:32
Speaker
So that means the customer has to be willing to also do the same. So educating the customer that, hey, you say you want this operator with ah whatever, a thousand hours already, you know, under his belt with that specific piece of equipment, or you want this operator with this good safety record, or you want my crew to have at least three years in the industry on the job.
00:17:52
Speaker
We have, these are all legitimate things that were requested. That doesn't happen for $20 an hour. So I have to specifically educate my customers that all these things that you say you want are not possible anymore at that wage. So my labor rates need to be this in order for me to attract that.
00:18:07
Speaker
So I think we've got to do a lot better job at educating our customers that the wages for blue collar aren't quite high enough. And then we've got to get more for those guys. And then when you find those people...
00:18:19
Speaker
I think the the people are out there. i just think they're not going to do it for that low price. So for you as a company or as an owner or entrepreneur or manager in a company, You've got to be able to charge the rate high enough that you can make money as a company and attract that type of skilled labor.
00:18:37
Speaker
So I think we have to get that out there. I think once you get them, you have to keep them. So I think having some kind of incentive or bonus structure is key. I think culture is key. a lot of people now, it's not enough to just like my job, enjoy the actual work.
00:18:52
Speaker
or to make a decent wage. They actually want to enjoy going to work. So I think the more as business owners, entrepreneurs, that we can engage with them, create that culture, make an environment where like, hey, I like Alex. I like Noah. I actually enjoy coming to work.
00:19:07
Speaker
And I like what Brent stands for. That kind of stuff is key. And I love that about the newer generation is that they're demanding more from people like myself yeah of things that are actually important.
00:19:18
Speaker
Because at the end of the day, I don't know the statistics, but you're going to spend more hours at work probably than with your own family. So for me to think about it in that way and think, you know what, I'm going to spend all this time with all these people. i don't even like them anyway.
00:19:31
Speaker
How much cooler is it if you actually liked to everybody you worked for, you all stood for something, and you engaged and showed up, and you worked your day like, hey, this is our core values. This is what Landon Corp or whoever stands for.
00:19:43
Speaker
That's a completely different environment, one that I don't want to leave. So i think you've got to create that. um The last part of that I would say is inflation, which kind of ties back to the low bid. yeah So I think a lot of contractors feel I'm already squeezed.
00:19:59
Speaker
I'm already maxed. don't know what i can charge. Inflation is eating me alive, but I'm not bidding that into my projects. We have to because that's eating at your profits. So if you think...
00:20:11
Speaker
hypothetically, your profit margin was 20% before, but you've not adjusted for inflation. Gosh, look how much stuff has went up. The equipment you buy, your labor, what people are wanting to be able to to attract talent to even come to you. Look how much that's went up.
00:20:25
Speaker
It's well over 10% for us in just like two years' time. It's crazy. Well, if if I don't add that to my cost of you know of doing business and my bids, I took my 20% profit margin to 10%.
00:20:37
Speaker
10% is not enough. So I think in that regard... I think you've got to know, again, you'll hear me talk about it all the time, you've got to know yourre overhead. You've got to know your cost. got factor that into your bid. and inflation has to be accounted for, and a lot of people are not doing it. So I think those three things, low bidding, skilled labor, inflation are probably the big biggest
Low Bid Issues: Customers or Contractors?
00:20:56
Speaker
three. Not that there's not more. I just think those are probably the ones affecting, especially the first two.
00:21:01
Speaker
So back to the low bid. You said it's plaguing. The low bid is plaguing the industry. Do you think that's the customer's fault? I mean, customers want cheap. Customers are sometimes impatient. They don't see the long term of getting a quality company to do that work.
00:21:16
Speaker
Or is that on the contractor for going in? They know if they low bid it, they can get that that contract completed, but they might not do the best work. yeah So do you think that's on the customer or the contractor? A little bit of both. I think mostly contractor because I think we've allowed it to happen.
00:21:33
Speaker
yeah So we've played the game back. So if you don't play the game, eventually that stops. So I think because we've played that game so long, we've allowed that to be the expectation. So I've even noticed in the car industry that has changed. i remember when I was younger,
00:21:47
Speaker
You always, it was like a badge of honor. If you were buying a car, you negotiated. And sometimes you would talk that car down fair amount of dollars. I've noticed the last several cars I've bought, the price is the price. Take it or leave it.
00:22:01
Speaker
So that industry pushed back on that. And it's working because i I have not negotiated a car in a while. i'm not not very Not enough to make it worthwhile. yeah um But it worked. And it didn't take that long for them to do it.
00:22:13
Speaker
Contracting has to do the same thing. You bid it where it needs to be. You know your numbers. You need a 20% profit margin. That $10,000 is $10,000. It's not $9,000. It's not $8,000. It's definitely not any lower than that.
00:22:26
Speaker
It's $10,000. Take it or leave it. If you guys are booked, which a lot of you in a lot of these forums I'm in, you guys talk about how busy you are, then why are you taking a project? for any less, you're booked, you can say take it or leave it. If all of us are pretty booked out two or three months, we can all say take it or leave it and we're going to be just fine. And eventually those customers are going to get tired of being told no, I can't do your project. And they're going to have to accept that $10,000 price.
00:22:52
Speaker
So I think partially it's us. um I think the other thing in contracting It's an easy business to start, some of them, depending on what type of contract you're in.
00:23:02
Speaker
But I could be a foreman somewhere and say, you know what, I'm going to do this on my own. I'm skilled. I have a pickup truck. I have tools already. i have all this stuff. I could be a one-man show, a solopreneur.
Solo Contractors vs. Established Businesses
00:23:13
Speaker
I think that, because that person has no overhead, really. They already own their truck.
00:23:18
Speaker
They're a sole proprietor, typically. They don't have an office building. They don't have a staff. Maybe their wife helps. Maybe they're doing the books. or Maybe they're doing wearing all the hats. That person can work a lot cheaper than a lot of other contractors.
00:23:29
Speaker
I think that's the other, and not necessarily an issue in this industry, but it's very easy in certain contracting initiatives to get into. And I think with that, then you just have this huge varying degree of overhead.
00:23:40
Speaker
So what I may need to charge 80 bucks an hour for for labor, maybe that person's like, it's just me. Yeah. I don't i got a little bit of insurance. I don't even have some insurance because it's just me. If I get hurt, I get hurt. Maybe they're charging 50. Well, that's a huge difference, and and especially over the course of a multi-week project, that 30 bucks an hour, and that's just the labor. yeah So stuff like that, that one's harder to combat.
00:24:01
Speaker
i think with that, you wouldn't have to sell. Maybe you allow those type of contractors to go off after small jobs. Maybe this is not ones that you bid. You just say, hey, this is an entry-level job. A brand-new beginner contractor can handle this.
00:24:16
Speaker
I got to go after something that requires crew size of 5 to 10 plus. That's where my niche is at. So I think that's how you have to kind of work around that. And if you have a bunch of other differentiators and things you can bring to the table, you got say it. Yep. So.
00:24:30
Speaker
For sure. Well, that's all the questions I had
Closing Remarks
00:24:33
Speaker
for you today. It's quick podcast. That's a good podcast. A great one for a short drive to work. So Alex, glad to have you on. Podcast number two for you. Number 74 for me. It's fun. So guys, if you like this podcast, please do share it.
00:24:46
Speaker
If you found value in it you're like, man, I know... I got this friend that's going through one of these questions. He's going through it right now. Send this podcast to him or her, help them out, and hopefully we get a listener out of the deal as well. So, Alex, thank you, guys. Love you all. See you next time.