The lady says, “You don’t charge for that do you? You just got here.” Sometimes our job only takes one to five minutes.

The builder standing there watching says, “That did not take long.  Are you giving me a discounted price?”

Another lady says, “Wow! That was simple. I’ll bet you don’t charge the builder much do you?”

“It is a trip charge ma’am.”

“I am going to turn you in to the builder!”

A new contractor told me one time that they only charge $15-20/hour.

One thing all these people have in common is that they are thinking in terms of paying a labor charge.

Think about it.  There is a great difference between paying a business for coming to your home and paying a day laborer you have hired to work.  One is a business – and one is a laborer.

If an electrician comes to your house and all he has to do is change out a light bulb to fix the problem, you still pay his company’s minimum trip charge because he represents and works for a business.

Most businesses should have a minimum trip charge for work, inspections on site, or giving advice on site. For example, in contracting these trip charges may run from $95.00 to 150.00. The business charges the trip charge, and they pay the electrician or plumber by the hour for their labor, $15-25.00 per hour.

The expenses to run a business are much greater than the expenses of showing up to work as a laborer.

I have listed here some of the expenses a business has to pay for overhead.

Expenses for a business:

• Workman’s Comp Insurance
• Contractor’s Liability Insurance
• Local Licenses
• Truck
• Truck Insurance
• Fuel
• Vehicle Maintenance
• Fax Machine/Printer/Copier
• Land Line for Phone
• Cell Phone
• Computer
• Bookkeeping Software
• Other Types of Software
• Internet Access
• Office Space
• Office Equipment
• Office Supplies
• Tools and Equipment
• Supplies
• Website
• Website Design and Management
• Drive time to the job

Expenses for laborer:

• Clothes
• Shoes

So if you are just beginning the business of contracting and you have been a laborer for years, you have to change how you think. It may be a shock to your mind to now charge like a business instead of being paid for labor, but you can do it.  Many other people have made the jump.

Since you are a business and not just a worker or laborer, you may need to dress like you own a business. Think like a business man or woman, and see yourself as one who owns a business.

You cannot charge $15-20 per hour, pay the list of expenses itemized above, then hand your spouse the change and expect them to pay all your personal household expenses.  You will go broke.

If you are going to contract business, you have to charge like a business.

 # 35 Charge like a business  

• Proverbs 14:24 The wise accumulate wisdom; fools get stupider by the day.  (The Message)
• Proverbs 2:7 He layeth up sound wisdom for the righteous: he is a buckler to them that walk uprightly.

Accumulating rules that govern life are all part of The Prosperous Life.

To run a successful contracting business it is much like a game of chess.  There is a great necessity to think through how you set your business up.  You need a good set of common sense business rules to guide your decisions and your dealings with people.  Roger’s Rules for Contractors is a way of helping young contractors think about what they are doing and what they  may need to change in their dealings with people to have continued success.

# 42 Never do time and materials.

Whenever possible, do not do time and materials.  It is much more profitable to do a flat bid for a specific amount of work.  For instance, let’s say you bid a certain amount of work at $225.00 and it takes you two hours to complete.  If you bill them time 2 hours @ $100.00 each and materials for $25.00, they will probably balk at that.  No one wants to pay $100.00/hour for labor.  But they will not hesitate to pay the $225.00 for a bid job most of the time.

I realize some jobs have to be time and materials.  Many painters bid large jobs that way.  Just make sure you are paid well for what you do.

A key here is this:  The longer the job, the more hours, the less you will likely earn per hour.  Although long jobs have a sense of job security that comes with them, many times many small jobs, bid properly can produce a better income.

# 30 Avoid an expanding scope of work.

People will try to add things on at the last minute like adding another room or doing some necessary repairs along with what you have already bid to do.  They figure that you have that time set aside and rather than risk not working, you will do more for free because you will fear losing the job.  Many see contractors as being broke, begging for work and unable to feed and clothe your family.

We simply reiterate what we are doing and the price. Then we say, “If you need more done, I can price that to you now. Then you can decide before I get started, or before I come back tomorrow, if you want the additional work done.” Stick up for yourself.

Once you stand up for yourself, that type of adding on usually stops and it also makes them realize that you have a backbone and won’t be pushed. That can save you grief in other areas of the job as well.

# 43 Don’t divide out a bid.

In bidding a job, it works well to see what the customer wants done, then call them back later with a price.  After you think about it for a while in a relaxed frame of mind you will remember to add in things that you may have forgotten if you bid it right on the spot.

Sometimes when you come back with a price, the customer will ask if you can divide out the bid for him. They may say how about if we left this off, then what would you charge.  Once they have the lower price then they will say, “Well, my buddy Bob was going to do the prep work, so could you take that out also?”  Then they think they can buy the materials cheaper than what you are charging.

First, we quit doing jobs where someone else does the prep work a long time ago.  Those never work out well.  If the prep work was not done properly they will say, “Hey, I already paid to have it done once, you will just have to deal with what they did.”  Now you either walk away or redo the prep work at your cost with no pay.

If the customer was going to buy the materials, cut out a room, and have Bob do the prep work, the honest thing would have been for them to tell you that up front.  If they buy the materials, they may not buy what you are used to working with, but they will expect you to stand behind the work even if the materials are inferior.

You should be marking up your materials, too.  There is time in buying and transporting, and you are in a way financing part of the job until the materials are paid for unless they pay for the materials up front.

Once you have given them a bid, stick with that bid.  People that want the bid divided out generally are going to be trouble all the way through the job.

You will see these things come up as you work.  Just remember the principles.  The more you abide by them the better your outcomes will be.

And be prepared to walk away instead of giving in to their demands.  Many times I have been called back to do the work after I stuck to my guns in pricing.  But I had no more trouble during the job.

People will push you to see if there is any give in you.  If there is give in you, they will push on everything in the job.

So these principles have a common denominator.  Have a backbone; stand up for yourself.  Decide how you are going to structure your business and stick with it.  It will pay great dividends going down the road.

# 19 Never downgrade your competition.

Always admit that they are good, that they are just an alternative to you.

If you have ever listened to someone downgrade their competitors, it gives a terrible impression of the one talking.  It is so easy to see that they are trying to look better by belittling others.  That never works.  People know what you are doing and why.  You will seem like a small begrudging person.

You will gain a much greater reputation by being polite about your competition.

I know there are many of these rules.  But if you read them frequently and then talk to other good, older contractors about them, you will find most have learned these same rules the way I did — the hard way, by experience.  They just never bothered to number the rules and write them down.

#46 Don’t work for friends.

Working for friends can be a great way to end a friendship.  There is an old saying that “familiarity breeds contempt.” They feel like you should do it much cheaper for them since they know you, but they will expect you to deliver the moon.  If you discount the work to them, they will still want more discounts on everything.  The bigger the job the more they will want.

The only way to avoid these problems in contracting that I know of is to tell your friend up front what you are willing to do on price.

Then tell them up front how you run your business.  Any changes will come with a changes estimate and have to be paid in cash up front.  You have to stick strictly to your policies even though they are your friends.  Once they see you will not budge I suspect they will leave you alone.

I once knew a builder whose client wanted to change the can lights after they were installed.  He gave them a price and the customer said, “I don’t what to have the hassle of this over every change.  Just bring the bills to the closing, and I will pay for them then.”  The builder took $60,000.00 worth of change orders to the closing.  The customer then said, “I am not paying for that. This is a custom home; you should have calculated those changes into the price.”  That builder ate the money.

Stick to your principles.  If I were the builder, I would have refused to close and would have put the house on the market as a spec house and would have taken the loss selling their home to someone else.

 # 39 Verify  

We verify everything.  We verify addresses, who is paying, and that they are home now so we can come over. I had a builder that set up an appointment once and would not give us the homeowner’s number. I got there at the set time and no one was home.  I called the builder and asked her when she verified they would be there.  Three days earlier!  I left.  This is why we require the phone number of the person that is going to meet us there.

Many times a husband will say, “My wife will be there all day; just go on over.”  “Can I get her phone number?” “Sure.” When I call, she says, “I am not at home. I have a dentist appointment, then a Junior League meeting, and then I have to pick the kids up from school.  I don’t know why he says those things without checking with me first.” — Verify!

If you are asked to do work at one address but asked to write on the bill another address, verify with the main office that this is a known policy of theirs.

I had a foreman one time that wanted me to fix something is his apartment and bill it to a house under construction.  That can be a great problem.  It could be the company agreed to do this, but maybe not.

What happens if they catch it that you did not do the work at that address?  Do you think that foreman will stand up to what he asked you to do?  Not on your life.  It will appear that you are dunning them for work you did not do.

So I called his supervisor and asked if billing this way was their policy.  He did not get fired, but I suspect he heard about it and never asked me to do that again.

It is your business and you have to protect it like a mother bear taking care of her cubs.

If it every got out that you billed for work you did not do, you may not be able to recover from that.  I have heard stories about people that did such things and it almost took them down.

Proverbs 13:11  Wealth from get-rich-quick schemes quickly disappears;  wealth from hard work grows over time.  New Living Translation

Proverbs 21:5  Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.  New Living Translation.

A good set of rules to guide your life by is all part of The Prosperous Life!