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The Ultimate Guide to Contracting

The Ultimate Guide to Contracting

As to not waste your time, this is from the perspective of a Licensed General Contractor, but a lot of this will apply to other businesses such as Painting, Plumbing, Electrical, HVAC, Flooring, Tile, Carpet, Cabinets, Stucco, Drywall, Roofing, Concrete, Landscaping, and even photography, lawyers, medical professionals, and any type of industry where you do sales. You will notice that this article differs from other online help articles as it’s written by a tradesman with over 10 years of experience managing a business and not your typical in-office SEO writer. I hope that this will help you manage your public reputation, figure out good expansion options, and save you from mistakes that I’ve made personally. Please let me know if you have any questions on this, I’d love to hear them.

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Reviews are your most important Asset

There was a time where word of mouth was a thing and whether or not you did good work didn’t matter as you could always get more customers and the word didn’t travel that far. That’s no longer the case today, the internet has revolutionized the Home Services industry has made the quality and customer experience the most important part in running a thriving business. Word of mouth is no longer a thing, why would anyone want to ask their neighbors for advice when it’s so easily accessible online? That’s where your ratings come in, the single most important asset your business owns. I’ve built several companies and all have one in common, Reviews! They have a direct affect on how much people trust you when doing business, and should be the main focus of any business as they drive the best quality clientele with highest follow-thru. So make sure to contact your happy customers and see if they would be courteous enough to leave a review, it helps a lot. And sometimes, you might even get a review 6 months after doing a job and it’s a total surprise. Make sure to always say thanks when you get them, that will help towards you getting repeat customers. Here is going to be your typical experience with 5 star reviews over the course of building your company.

Don’t be the Cheapest Contractor in Town

There’s nothing wrong with charging a fair price for a job because if you don’t, you’ll have trouble covering hidden costs that might arise in the duration of the job. Fact is, you’re doing custom work on different age homes, there’s always going to be something extra that you didn’t think of when bidding so you need to allow yourself the capital to be able to complete the job. Also, you need to consider the warranty period of 1 year for a job as a direct addition to cost, some contractors even offer extended warranties but they are experienced and know the numbers before offering them. Usually when you have a contractor that takes the money and runs, it’s because they bid the job with no allowance for errors, then when the inevitable happens, they can’t afford the extra materials and labor to continue the job, or they don’t account for an extra work required when covering something over warranty. You need to expect that if you do 50 jobs, you’ll have to warranty at least 1 of them, for FREE, on your own dime. And usually it’s something very minor that takes no longer than 30 minutes, but that’s called customer service and it’s where you earn your stripes. I’ve underbid jobs before and it’s no fun, but I honored my price and next time I was a little bit wiser. It’s better to risk overbidding a job and not get it, than to underbid the job and risk damaging your reputation.

Always Back your work

I cannot stress this enough! You’ve worked hard and you finally earned your first 10 (5★) reviews and your faced with your very first challenging customer. You should never risk damaging your reputation on 1 single job when you’ve had to do almost 100 jobs to get to this far. No matter how careful you are, over the course of doing 50 or more jobs, you’re going to have a job that you have to warranty. Don’t feel bad, this is just part of doing business and there’s nothing wrong with it. But this is your time to shine, and this is what preserves your 5 Star rating history. Typically, customers will leave a positive review on a good experience 1-3% of the time but if you did bad work, or didn’t handle a customer complaint in a positive way, they will leave you a bad review 85% of the time, so let that sink in. When dealing with an angry customer, they’re not angry at you, they’re just concerned and don’t always handle it in a good way. They’re worried that you’re just going to leave them with a mess and their only recourse is leaving a bad review. This is when you need to let them know that everything is going to be okay and do whatever you can to make them happy, as long as it’s within the scope of the project. I’ve had jobs that I thought would be winners that ended up being a total loss. It’s better to take a loss knowing that it will protect your reputation than let it affect your future jobs with a multi-paragraph review that your new customers are reading.

Offer a Warranty on your Services

Even if you have good reviews, the question in the back of every customers mind is: Will this person back their work if it’s not done right or it fails? Warranties give added faith to customers, especially if they’ve ever had a contractor leave them with bad work before. People aren’t always looking for the cheapest price in town. They want work that they will enjoy for the next 5-7 years until they sell the house or decide to move, something that they’re proud to display to their friends and family. A warranty helps by increasing your customer confidence and it raises the value of your company as not very many competitors advertise that they offer a warranty. You should be proud of offering this step, it means you’ve officially arrived in the contracting industry and you’re one of the winners that won’t leave them hanging.

In California, I believe the minimum time for warranty is 1 years for Contractors, but I’m not a Lawyer so do your own research.  I’ve personally known people that give 2 year, 5 year, or even 20 year warranties and they have the most unbelievable rate of repeat customers I’ve ever seen. There’s even some companies that offer a limited-Lifetime Warranty, and there is clause that it is limits it to the person you did work for and does not apply if they move out. This is playing the odds that the average person lives in their home for 7 years, so even though statistically you’re giving a 7 year warranty, it sounds a lot more grand having a limited-Lifetime Warranty. Usually there’s also a clause that might limit the timeframe to 5 years for commercial or rental properties. You would need to price this into your job so whatever warranty you decide to offer, you would have to charge a given percentage to take on the liability. You’d have to figure, if you do 1000 jobs, how many people need fixes, what the cost is, and how many people need major fixes, and that cost. People Love Warranties, especially in an industry that’s seemingly like a modern day wild-west, so why not offer it and advertise it to your customers.

Here’s the Math:

Over 1000 jobs in a 10 year timeframe, and you can adjust this to your own number, but I recommend 1000 jobs for accuracy and I wouldn’t go any lower than 500 jobs.

[ (total $ major repairs) + (total $ minor repairs) ] / 1000 = $ added cost per job

I would typically add an allowance for the unexpected, so if your added cost is $300, you might make that $500 or whatever you deem to be an acceptable amount, and that would typically cover you.

Hourly Rate vs. Fixed Pricing and Change Orders

As a contractor, you have the ability to choose any of these pricing models but each one has their specific pros and cons.

Hourly Pricing
Lets start with the Hourly Rate pricing model. With an hourly rate, It’s very easy to hire employees because you can upcharge what you are paying them and it’s very easy to control and profit from. This is by far the simplest pricing model and it’s very effective for some companies, but it has a major drawback, Customer Irritability! When a customer doesn’t know how much the overall cost of a project or job will be, they are constantly watching you, expecting you to be superman when you’re doing your job. They will constantly push you and provide a high-stress environment as you must constantly appear like you’re running whenever the customer is present. On top of that, let’s say you have 3 crew members that you price at $75 per hour a piece, which totals $225/hr. Customers will instantly compare this with their hourly rate, which will almost always be less, and you will seem very expensive which is stressful for them, and will lower the amount of jobs that you get. This model also tends to cause a lot of mistakes on the job because the high-pressure to do a task quickly causes you to overlook details and the end result on your quality will suffer. I once got stuck on a job with a crazy person that kept following me around with a Parakeet on their shoulder. They were yelling at me to go faster and faster, and even the Parakeet started yelling at me, first time I ever got yelled at by a bird, and the total cost of the job was way cheaper than I would ever charge today. The end result, I mounted a cabinet too high because a micromanager got in the way of me double checking my measurements and I was focusing more on them than the task on hand. It last time I ever did a job on hourly, and it was the best thing to ever happen because I immediately started doing fixed pricing and my income doubled.

Fixed Pricing
To do this model, it requires someone who is good at bidding that can accurately assess the amount of labor hours needed and the overall cost with materials to complete the job. This model if done correctly can be very profitable, and frequently is more profitable than the hourly rate model. Customers tend to prefer this model because they know exactly how much something is going to cost, and they can let you do your job when you are working instead of turning into a micromanager. To be successful at this business model, it’s important that you keep a log of all prior jobs with a profit/loss per job so that you can use them later when bidding similar jobs. This will help you become more profitable in the long run and make bidding and ballparking jobs much easier.

Change Orders
Change orders are the Number 1 thing that irritates customers when done improperly. When you have a big job and there’s some very small changes that don’t take much time to complete, it’s important to note that assigning a change-order for these increases the likelihood of the customer assuming you’re over-charging them and they are more likely to leave a lower review. Now I’m not saying change orders are not necessary, we do them all the time! But it’s important to note that reviews are your number one priority because they always pay off in the long-run. I typically allow myself enough margin so that if there’s some minor changes, I just include that into the job with no extra charge. Obviously if there’s a major change, you always do a change order, but for every 20 minor changes you get, you might only get 1 major change, so the minor change orders should be your focus as they have the highest probability at landing you a lower review.

Get Social Profiles Created ASAP

One of the biggest mistakes I made when starting out is that I didn’t break into the social media as early as I could because I didn’t think I would ever take this company this far we were just a small services company trying to put food on the table. This caused a lot of problems down the road, as every company who does good work will grow overtime. The important part I missed was getting usernames for the Big-4 social companies, like Facebook, Instagram, and Pinterest, and Tiktok, Twitter is disregarded on this articla as it’s not very good for home-services companies at the time of writing this. So once I finally got our name trademarked, it was a monstrous task to acquire those branded username handles. So instead of [facebook.com/HandyGuy], it was [facebook.com/HandyGuyCo]. And yes, the Handy Guy started out as a home services company, you can read our story HERE. It took years with dozens of attempts to successfully secure those usernames, and it was very disheartening knowing someone could potentially obscure our brand name with that handle or try and sell it back to us for a ridiculous amount because they now see the username is of great value because a well-known company has interest in it. Plus, I missed out on a lot of likes and follows that I would have gotten naturally due to 5 years of no social media.

I have social accounts that consistently keep growing followers, and I’m not always pushing them that hard, it’s really amazing. Right now, at time of writing, we have over 60% of our traffic coming from social media, so it’s definitely something you want to look into. This is natural growth from doing jobs, talking to customers, or even just having a conversation during a night out. Natural growth is the best type of growth you can have for your social media because you acquire high quality followers that will likely use your services in the future. These social accounts always grow overtime when potential or existing clients search for your brand and “like” your company. The larger your following gets, it acts as a primer for more growth going into the future. This is because the social media algorithms heavily weigh the amount of views vs. the amount of likes for each post, if you have a high viewership that “likes” your content early on, it catches the status of “trending” and gets to the top of the list on your selected hashtags, driving more likes/followers, and eventually customers. This will become very important when running ads in the future because you can target your existing followers, which will give you a much higher return on ad spend.

Take Before, After, and During Pictures of your Jobs

People love to get insider pictures of job sites and what your Before and After work looks like. Most people might have an idea of what they want, but they don’t always have the vision on exactly what kind of Before and After your company can accomplish. Sometimes a customer thinks they need way more than they actually do to take on a new look in their home. Things like refinishing existing cabinets vs. building new cabinets. Or making slight adjustments to the home vs. a full remodel which might look just as good and save them 30-60% in total costs. This will help you sell more jobs that have lower dollar thresholds, and don’t discount these jobs as small because when times are slow and you need work badly, these might just be the jobs that you depend on to keep your employees working while you wait for the larger jobs to come through. This will also help by getting your customers a closer look at your operation to see if your company is a good fit for them. Example: I’ve had customers look at pictures from my job sites and they chose me because I took the precautions of protecting other areas of their home and they had elevated confidence that there would not be any unnecessary damage to their flooring or surrounding areas.

Getting to the top of Google through Search Engine Optimization (SEO)

This is something that you should consider as it will be the second most valuable asset your company owns next to Reviews. SEO is the building of web presence by getting other sites linking to your website, aka Backlinks, and writing articles on your website with unique keywords, and good content that is applicable to your business. Example: water heater install, tile flooring, and full house painting. The most enticing benefit of SEO is that once you stop paying for it, your web traffic doesn’t stop. It acts as an asset because those links and article never go away and will continue to drive results for years to come. But starting out, don’t expect this to be your main traffic driver as it takes a long time to get results, typically a minimum of 6 months, and as long as 3 years, but averages 1 year. While Getting to the top of google sounds like an extremely challenging task it just takes consistency, plus, google has made it a lot easier in the last few years by allowing local companies get better rankings without the unlimited price tag it takes large companies to accomplish.

Before the local listing addition made by google, which was done through maps in 2005, and in the search results somewhere around 2013, you would have to write thousands of articles to get to the top of google and you were competing with larger franchise companies like Roto-Rooter, Grout Smith, and Junk King, so your odds of competing as a startup company was low. Google started to realize that they needed to cater more to smaller local companies because that’s what most of their customers were seeking out. This was an Incredible Game-Changer. Now you can get good rankings in google with an investment of as little as 1-2 articles per month.

But here’s the deal, American SEO can be expensive. It typically starts at $2000/mo starting price and the first month is has zero gain because they are researching a keyword strategy and not writing articles. I’ve heard of some cheaper alternatives with people going through websites like Upwork or Fiverr and finding SEO companies in cheaper countries. Just keep in mind, some countries write better English than others, so you will have to find a writer that doesn’t sound foreign when writing articles because it could cheapen your brand. You could also write your own articles which is sometimes the most straightforward solution and to do that, follow these tips.

When writing an article for your company, the most important part is keyword research. Lets say that you are a plumber, and you want to grow your presence. First thought would be to start promoting the keyword “Plumbing”. WRONG! There is something called barrier to entry which is very real when entering the SEO arena, this keyword would be quite expensive to gain traction on. When starting out, You would typically benefit much more by considering easier keywords like “faucet install” or “valve replacement”, but you can very easily decide what keywords you want to target for your business by using a keyword planner, just google it, there’s tons of them. You want to focus on the most profitable keyword with the lowest amount of competition, but this can get quite complicated and there’s all kinds of algorithms that try to do just that, but this would be a topic for another article.

The Crazies

These are pretty rare, typically you will encounter them once or twice a year, but you will encounter them. These would be the people that no matter what you do for them, even if you did all kinds of free work for them, done as specified, they will still complain about it. Usually when I get these phone calls, they will tell me about how their last contractor was a terrible experience, and the contractor before them was awful and no matter how many people they call, everyone ultimately does the worst work they’ve ever seen. A lot of times, this is because they have an unrealistic standard as to the quality of custom man-made work and they usually don’t understand that there is no such thing as a perfect-quality home. This is not your fault as long as you’re doing your best to product good quality work, but usually, almost no one will make these customers happy. I’m not in their shoes so I can’t give a 100% answer on a case-by-case basis, but it’s usually a good idea to steer clear when you start hearing red-flags from an unrealistic customer. Sometimes it’s better to wait for the next job.

 

I really hope you found this article informative. The best things you can do for your business is to focus on your reviews and manage your online reputation to keep it looking good. If you’re looking to increase your business, we do offer good performance for contractors and we charge per job, so there’s Zero-Obligation for memberships, clicks, or leads. Just guaranteed jobs with no upfront cost. We have a video about leads that you should watch if you’re considering them, or just for entertainment, as a lot of Contractors tend to despise leads, clicks, and subscriptions, it might give you some good insight on what you’re faced with when trying to expand your business, you can find it HERE.

The Truth about Leads

We’re currently an invite only company and expanding in Southern California, but we’d be happy to check out your company if you send us an email. Please note, we only accept companies that are 5-star rated with a minimum of 10 ratings, this is to protect our reputation as well as the reputation of every company in our site, but if you’re a quality company, we’d love to hear from you. Handy Guy is a family of contractors that supports our local family businesses and our communities to encourages a better contracting experience.

support@thehandyguy.com

 

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