April 4, 2024

Creating a Sustainable Small Businesses

For years, I have been witnessing the struggles of small owner operator type businesses within residential construction. Some of those struggles have been experienced first hand, and some have been through the words and stories of others. Many conversations that I have had with other people have conceded to the notion that the only way to truly make a living is to grow your business, scale your business, and create an environment and industry made up of larger companies. I have spent countless hours and days trying to find an avenue for this to happen in my lifetime. The fact of the matter is that it may not. 

The reason that our industry is composed of small one to three man (or woman) shows is simple yet deeply rooted. Most people start working for a contractor or a business and cap out with what they can make financially. They gain experience, get married, have a family, and realize that a helper’s or assistant’s salary will not cut it any longer. They need to make more money and our industry and our customers oftentimes will not bear the cost of the overhead associated with more pay, benefits, and costs associated with larger companies. These individuals end up going off on their own. For years the goal for me has been to determine how we can change this standard. How can we change the industry to value what we do enough to pay people more money. How can we create businesses that are financially healthy enough to offer benefits, paid vacation, retirement, etc. For the bulk of our industry this is an impossibility. The structure and composure of mid-level renovations and builds make it nearly impossible to do.

Lately I have been doing a lot of consulting calls for small owner operator type businesses. I have also participated in a handful of speaking engagements and presentations regarding how I make a living, manage customers, and structure my business to make money. I realized that people value my insight as to how to remain small yet profitable. How to grow a sustainable business without having to have a dozen employees or do two-dozen jobs a year. My business model may not be scalable at the moment within my market, but the principles are similar to the standards in which the bigger firms operate. It is my opinion that with time and as the industry progresses, this model will absolutely be scalable if that is what you wish to do.

I have created scarcity within my market. The way that I operate guarantees profit and guarantees that I do not have to work eighty hours a week to squeak by. I can take time off, save for retirement, focus on one project at a time, and best of all, I do not have to competitively bid projects. I have realized that what I am doing is helping change the standard within our industry. At the moment my model may not justify having multiple crews or scaling, but if we all do our part to create a higher value for what we do, these types of jobs, customers, and markets will be the standard. Once we create an industry that focuses less on price and more on customer/contractor fit, we will be able to grow larger businesses that are more sustainable. Similar to many businesses that are currently only viable for high-end markets, or volume-based contractors. The fact of the matter is that these types of businesses are the outliers. Most of our industry is mid-level renovations for middle class people. We are putting all of our resources into a demographic that values our price rather than who we are and what we do.

Most of my recent consulting calls have been providing insight as to how I have marketed myself and created demand for what I do. We dig into how I structure my business, my pricing, and how my contracts afford me my current model. Most small businesses are working for 50-60 hours a week on the tools and spend another 10-20 hours a week on the back end business tasks. Trust me, I did the same thing for nearly a decade. This by no means is helping or strengthening our industry. We are hurting ourselves in order to make a quick dollar. It is short-sighted and foolish to be honest. Most of my consulting clients (even one-time callers) are running a business similar to mine when I first started in 2010. You are not charging a fair rate, you are cheating your numbers to appear profitable, you are entertaining every lead that comes your way, and you are robbing Peter to pay Paul. This is not sustainable. Not for you or the industry. 

Adopting methods and principles that I have put into place will not only help you and your business, but the industry as a whole. If we are an industry made of small 2-3 man companies, and we are all barely squeaking by, then that is the standard that is set forth. It is what customers witness and what they expect. It is not until we understand how to adequately market ourselves, create a demand, vet customers, understand our numbers, and find a way to create value for what we do outside of an inexpensive price that a change will happen. 

Every time that one of us is hungry and we sharpen our pencil, sell something that impedes industry growth, or choose to be more competitive; we are further exacerbating the issue. It is not until companies like myself, the small companies start to implement changes and become profitable that the rest of the industry will benefit. We cannot continue to concede our time and our lean business models to get a foot in the door. We as small businesses owners offer many benefits to a potential client and it cannot be because we are less expensive than other outfits. Learn to create value and market what you can do differently rather than finding ways to be more competitive.