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The Hardest Decisions Every Contractor Has to Make
48 Plays9 days ago
What should you do when you’re booked months in advance but customers keep calling? Are you experienced enough to start charging for your work? Should you lower your price to keep a longtime customer?
In Episode 86 of The Better Contractor Podcast, Brent and Alex answer three real questions submitted by members of The Better Contractor Facebook group.
They discuss when contractors should hire more employees, rent or purchase additional equipment, raise their prices, turn down unprofitable work, and walk away from customers who only care about receiving the lowest bid.
Brent also shares advice for newer contractors who are still building their skills and confidence. You do not need to know how to handle every possible project before starting a business—but you need to understand your current capabilities, price your work appropriately, manage your liability, and continue improving.
In this episode:
00:00 Introduction
00:33 What to Do When You’re Booked Months in Advance
01:23 Hiring More Employees and Adding Equipment
01:48 When It’s Time to Raise Your Prices
02:32 Using a Premium “I Don’t Want the Job” Price
03:07 Turning Demand Into Business Growth
03:44 Starting a Contracting Business With Limited Experience
04:29 Managing Risk and Liability as a New Contractor
05:18 Choosing the Right Services to Offer
06:19 Building Confidence and Charging for Your Work
06:39 How New Contractors Should Set Their Rates
07:44 Starting Small and Growing Into Better Work
08:39 How Brent Started Lanracorp
10:00 Gateway Dealer Network Sponsor Message
10:52 Should You Match a Competitor’s Lower Price?
11:37 When to Walk Away From a Longtime Customer
12:14 Why Contractors Get Stuck at Break-Even
13:17 The Problem With Low-Barrier Competition
14:13 Becoming More Specialized and Valuable
15:17 The “Low-Low-Low Bid” Process
16:04 Lowest Price vs. Best Value Customers
16:42 Why Some Customers Come Back After Choosing the Cheapest Bid
17:18 Join The Better Contractor Facebook Group
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Transcript
Episode Introduction
00:00:00
Speaker
Welcome back to the Better Contractor Podcast. This is episode 86, and in this episode, we went to our Facebook group, and we pulled three questions from three different members, and we're going to answer them for you. Always ask that you share the show, and if you're on YouTube, subscribe. If you're on Apple Podcasts or Spotify, hit that follow button. Welcome back to another edition of the Better Contractor. Today, I'm joined by my co-host, Alex. What's up, man? What's up? How are we doing? Good, good. And we've got Q&A today, so little bit faster pace, little bit shorter podcast, little bit shorter podcast.
Travis's Dilemma: Staff, Equipment, or Pricing?
00:00:29
Speaker
but hopefully a bunch of good nuggets of wisdom for you guys. So, Alex, we'll let you kick it off, man. Yeah, so I sent a prompt in the Better Contractor Facebook group just asking him for questions, and we chose three of them here today. So first one's from Travis. He said he's thankfully slammed with work, which is awesome. It's been a busy busy season for him, multiple projects lined up and booked out for solid two to three months, and the calls keep rolling in. Everything from basements, septic, utilities, clearing, grading, concrete, etc. So sounds like Travis is in a little bit of everything. When I tell him I'm booked months out, most tend to find someone else. If you jump on it and say yes, then it's hectic trying to fit in the schedule with equipment already lined up for other jobs. Should I hire more guys, rent more equipment? Should I sub out the work, find another contractor to do it?
00:01:15
Speaker
Do I put the I don't want to do it price on it and see if they magically take it and pay a bunch of money? Or do I just say no and never get another chance with that customer?
00:01:27
Speaker
So that's a good problem and a good situation to be in, number one. To answer the question, I would honestly lean towards number one and three, which number one was, yes, I would hire more guys and maybe rent the equipment to start with or purchase it. if if the I mean, their if your jobs are coming in,
00:01:44
Speaker
for that far out, I think you're very safe to actually purchase the equipment. So if it was me, I would 100% hire more guys, rent or purchase some equipment, and tell those people yes.
Kyle's Start in Contracting: Can Skills be Learned on the Job?
00:01:55
Speaker
The other part of this is there's an opportunity here. If you are booking, obviously your pricing is okay. So this tells you something as well. And it tells you that your pricing could probably go up. So I would use it yeah i would view it as an opportunity that you may be able to actually increase your price as well, because you're not getting told no.
00:02:11
Speaker
So make a little bit more profit, pay your guys a little bit more. Take this as an opportunity to better your business, get better equipment, pay your guys better, reduce that employee turnover, improve the retention. And then the third one was, but I put the I don't want to do it price on it and see if I take it. So that kind of goes back to what I was just saying.
00:02:35
Speaker
I wouldn't do it to everybody. If you have clients, for the most part, you know when you get a call, this is a good client or it's not going be a good client. Increase it all across the board. Increase your rate sheet so you're making a little bit better money because obviously you can do it. But number two, if you have that client, you're like, you know what, I don't really think I want you.
00:02:54
Speaker
then go ahead and put the other you know that ah premium price, extra premium price on there. And that way you're not turning it down. um But then hopefully you know if they don't like it, they'll go find somebody else. But Travis is a good position to be in. It's a good opportunity for you as well. If it was me, I would jump on this as an opportunity to grow your company. i would not I would not stay where you were at when you had this opportunity in front of you.
00:03:18
Speaker
Don't get content. You don't want to say no and turn down customers. There's always a way you can yeah grow. Like you said, just raise all your prices. Some people are going to say no, which in Travis's stance, it might be an okay thing. Some people say no, but he gets plenty of yeses and he's still booked out. It's more money. Clearly price is not an issue.
00:03:37
Speaker
So that may mean that you're on the bottom end of that pricing. So I would take it as opportunity to improve. For sure. There you Travis. All right. Next question we have from Kyle.
00:03:48
Speaker
Kyle said, hey everyone i was wanting to get some advice i recently got my contractor's license and want to start my own business i'm thinking of starting small and doing small jobs that i can do on the weekends while still working my fulltime job i don't have a lot of experience around around a year working in the carpentry industry and mostly my own projects that come up around the house i realize you have to start somewhere but i don't know if i have enough skills and or knowledge to start charging people for my work Is this something you just learn along the way? And as new jobs come up that you have never done before, you just research how to do it?
00:04:25
Speaker
How do you build confidence when
Judah's Pricing Challenge: Matching Competitor Prices?
00:04:27
Speaker
you haven't done something and charge for it? It's a good question. And I would say probably most entrepreneurs and blue collar contractors have been there at some point, especially when they first got started.
00:04:38
Speaker
I would look at to, I would look to your answer in two ways. One, a little bit liability and legal protection. So when you mentioned that you don't have the skills and knowledge, So what I would do there, there's got to be, I'm assuming if you're starting this business, you have some very basic knowledge and skills.
00:04:53
Speaker
And if so, that's where I would start. I would only offer those to start with that you can do and do well and not have a bunch of callbacks, not have a bunch of issues. And from a liability and legal perspective, something where you do it wrong, something fails at a later date, depends what industry you're in. But you know if you're building a house and you do something like really, really off, for example, you don't want to open yourself up to a lawsuit or something like that later on. So I would start. i would always advise you to start.
00:05:23
Speaker
But I would say pick four or five skills that you're comfortable with already that you know you can do as well as others. And the thing is too with that, if you look at the average homeowner, I'm trying to see what you're doing for your business. So I'm assuming some kind of general construction type stuff, remodeling. Carpentry. Carpentry. So if that's what you're doing, can you do it better than most homeowners?
00:05:44
Speaker
If the answer is yes, then you can charge for it. So view it that simply. But just don't go out there. Do I advise you to go build a house on day one from scratch? No, you don't have the skill set to do it. um But can you do some basic remodels?
00:06:00
Speaker
Absolutely. So I would go after those type of projects and and try to gather, gain that market. While you're doing that, then, you're going to learn the trade and the skill, and you're going to gradually take on a little bit more complex projects and problems.
00:06:16
Speaker
You're going to see some more stuff come your way that's going to allow you to say, hey, you know what? This project has these five scopes in it. Four of them I've already done. The fifth one, you know what? I think I can figure that out.
00:06:27
Speaker
And just gradually build your business from there. But you have to start. You had one question. How do you build confidence when you haven't done something to charge for it? You don't have to have 100% confidence, but you're not to do it for free. So the thing I would say with all of that, if the ranges per hour, and I'm not saying this is what it is, but hypothetically, for what you're doing, let's say the range is $40 to $100 an hour. $100 an hour it gets you like that super experienced, really good contractor. $40 is the most base level.
00:06:58
Speaker
You should not charge the $100 because that's not who you are and it's not where you are yet. But I would advise you to start super, super cheap on the low end because it's going to be hard for you to ever increase enough to you get to the 100. So if you think your skill set is a 40 or a 50 on that range now,
00:07:15
Speaker
You know, go for that 50 or 60 price point and start there, knowing that you're not charging the most. That'll help you grow your business. You'll get more jobs. But then the goal I would give you, though, is to always be learning, always be trying to advance that business. And as your knowledge and your skill set grows, then start to charge more for it as you go on. But there's nothing wrong with starting a business, especially in this industry, where you're a little bit new to it, but your rates reflect it.
00:07:44
Speaker
It does kind of hurt some of us who have been in it for a long time. But to be honest, what typically will happen is the companies like like us, we will grow away from those basic services. So, for example, like when we first got started at Lanta Corp.,
00:07:59
Speaker
we were basically doing kind of minor mowing projects, easy stuff that I knew how to do at 23, 24 years old. Well, that's not what we do today. So I would, and I can think of multiple different industries where maybe even in yours, maybe someone started out doing some very basic remodel work, but after they're 20 years in, maybe they're building fully custom homes at that point and charging a premium for it. So recognize that what you're doing you You just need to start. But what you're doing is you're building towards that 10-year, that 20-year, that 30-year. And this is going to be a process, and you're going to increase, you're going to improve every single year as long as that's what you want to do.
00:08:34
Speaker
How did you do this when you started LanderCorp? I mean, you were 23. How did you go in with confidence and charge for it? like um So i've I'm very much one of those, like once I decide – to just go and I'll figure it out. ye but My brother's the same way. I'm that way. um Confidence.
00:08:57
Speaker
I knew that I could figure it out, but again, I kind of did what I just said here. We, we, we didn't charge very much in the beginning yeah because I knew i had old equipment or borrowed equipment. Some of it was, I knew I did not have the complete skillset to do it as well as some. So we didn't charge as much. And as time went on, now we charge,
00:09:16
Speaker
A lot more than I used to charge back then. The other day I had ah an old ah quote that i found in my one of my folders. I was looking for something else and it popped up and it was from 2010. I was like, I just i just opened it to see see what was in it.
00:09:30
Speaker
Blew my mind how cheap we used to be and how little we charge per hour for even just labor and some of the equipment. And I know there's been a ton of infl inflation since 2010, 2011, but, man, it was drastic. But we're a lot better now than we were back then. So, again, you're going charge for what you're worth, and obviously you're going to want to try to improve every single year. That makes sense. There you go Kyle. Good luck on starting to
Competing on Quality vs. Low Bids
00:09:56
Speaker
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00:10:28
Speaker
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00:10:39
Speaker
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00:10:53
Speaker
Question number three came from Judah. Let's say a customer you you've worked with for years asks you to match a smaller competitor's price. By matching this price, you know you'll break even or potentially even lose money if anything goes wrong.
00:11:08
Speaker
What do you do? Do you take the job that keeps that last that long lasting relationship with this customer? Or do you walk away from that customer you've done business with years feeling disrespected that they'd even try to go to somebody else?
00:11:21
Speaker
So I'm going to hone in on the comment about try to keep that long lasting relationship. More than likely, the customer's already made that decision for you. So if they're already telling you, I need you to match this and you're saying I'm only going to break even.
00:11:35
Speaker
They've already actually made that decision and that call for you. So I would say at that point, you walk away or you simply just tell them, hey, I can try to match that, but I can't because if I do it, I'm only going to break even. And I'm assuming you don't want that. See what their response is. Maybe they're saying, hey, I just want to see if there's any wiggle room there.
00:11:56
Speaker
I'll use you. And if that's the case, keep going with them. But if they fully expect you to match that price, even if they know that you're going to lose money, then I think the very, very easy answer is to walk.
00:12:07
Speaker
So the thing is, Especially this type of work. Again, this one here is more of a remodel construction type work. Dude, those projects are a dime a dozen. So just because it's a customer, there are hundreds of other customers out there. And just because it's a customer that maybe gave you a shot in the beginning, that's awesome. Maybe there's a chance they just gave you a shot only because you were cheap.
00:12:31
Speaker
And you were the cheapest back then they found. But what you don't want to do is become that contractor contractor that is always chasing that chasing those type of customers. You're not, well, what you'll do is you'll always end up right there at that break-even spot. You'll never, ever surpass it. You'll stay stuck there because you're chasing never, ever losing a client out of, i don't even know if that's pride or what it is, but it is okay to lose a client once a while, especially if you're going to replace them with a better paying client. So, This is something you'll deal deal with all the time in contracting and a lot of industries as a whole.
00:13:03
Speaker
The issue, I think, with contracting on this on this front is you think about like, OK, let's say we're going to sell a car, for example. So when we you sell a car, there's only what maybe 10 different big companies that you're competing against.
00:13:18
Speaker
Most of them have their prices set, and there's a reason a lot of those places have a set MSRP and ask dealers and their and whoever sells their stuff to not go below it. That's because they're trying to control this.
00:13:29
Speaker
The contracting world does not have that. The other thing about it is if I know how to swing a hammer, if I know how to operate equipment, technically speaking, I can start a business pretty easy. So what does that mean? That means you have a bunch of competition that's willing to do these more basic jobs.
00:13:43
Speaker
So I think in this situation, to fully answer your question, you maybe have that conversation. If they are wanting you to meet that price or else, then I think you walk. But I also think this is a good learning moment where you say, you know what?
00:13:57
Speaker
I have to improve my skill set to where I get to a point to where someday I'm ah just specialized enough or I'm just that good that I stop having so much of this, that they are booking with me because my work is that excellent or whatever I have to offer is just that much better than 90% of my competition. And I can think of a custom home builder that I follow on Instagram and like his homes are absolutely insane. If that's what your market is, and I would push Judah, for example, if that's what you want to try to get into something more specialty like that, because it removes a bunch of this. But anyway, my point with that guy on Instagram, you're not, if you, if you want a house like that, you were specifically hiring him.
00:14:43
Speaker
Like you're asking him for the price. You're probably not trying to negotiate because he's about one of the only companies around that's going to build a house to that caliber. Now, I would say dream for that, but find something at minimum that's in the middle of that. So walk away from this customer, most likely.
00:15:00
Speaker
Continue to learn, continue to specialize, replace this customer with someone who at least wants you to make money, who at least is saying, okay, you know what? It's okay for you to be average. I don't need you to be low bid. And that's one thing we kind of follow internally is for the most part, if a client comes to us, we had one, this is no joke. We had one the other day, blows my mind.
00:15:21
Speaker
They actually put it out for auction. So it's what they call it. So you you they they send out an RFP, request for a proposal. All of us different companies go in and we all bid it. They then select the three lowest.
00:15:33
Speaker
And then they have you compete again in a round two. I'm not done. Then they narrow it down to two and the final two compete again for round three. So ah I call that the low, low, low bid.
00:15:46
Speaker
So we're not going to mess with that for obvious reasons. so um So I would say you you, you will realize there's contracts and people like that, and you're going to walk from them internally. Like I was saying earlier, we have some, and we've gotten to the point now where we just ask point blank, are you little bit, or are you best value? And best value means, Hey, I have these three things that I say I care about for our industry. Maybe it's safety, maybe it's quality, maybe it's landowner relations.
00:16:13
Speaker
And are you actually willing to pay for those three things that you say you care about? If the answer is yes, then we're probably for you. But if the answer is, yeah, I'd like to see all that, but we are going to only award by low bid, we're probably not for you at all. So we have stopped wasting our time as much as possible on bids specifically like that. so Kind of comes with the territory. You'll learn it as you go.
00:16:35
Speaker
But in this specific occasion, they're probably not going to be a long-term client if they're already doing this to you. I don't think you're probably
Maintaining Pricing Integrity
00:16:42
Speaker
overcharging them already. Also, if Judah's work is as good as he says he is, he loses them now, they go to another contractor, and they're not. And and we've had that happen before, too, where somebody has done exactly that, where they've left and went somewhere else for a year or two, and then we get a call back saying, hey, your your price wasn't actually that far off, and we had these issues, and those issues cost X amount.
00:17:04
Speaker
puts you back in line. Because your price is that for a reason. Yeah. Yeah. For the quality. So that's the three questions we
Community Engagement and Future Plans
00:17:11
Speaker
had. Like I said, we pulled all of those from our Better Contractor Facebook group. So if you go to Facebook, you go to groups, you look up the Better Contractor right there, you will see our group there. It's over 3,000 contractors who...
00:17:23
Speaker
Just in there to network, to learn, to teach, whatever whatever you want to do in there. um Or if you can't find that, go to our Instagram, Better Contractor. The link is right there. Go to that link.
00:17:34
Speaker
Hit the Facebook group, and you can join through the link. We make it easy on you. So if you want to ask questions like this, we'll do these once or twice a month probably and just answer whatever questions you guys have.
00:17:46
Speaker
Awesome. Thank you, Alex. Guys, share the show.