How Contractors Build Businesses That Last (And Avoid Becoming Employees Again)
For contractors, the economy can be brutal. One moment, you’ve got more work than you can handle, the next, nobody wants to know you. Thanks to the ups and downs of the economy, it can be difficult to keep a contractor business afloat. The moment the economy starts to tank, all your clients suddenly become a lot more conservative with their money and choose to go with the larger, more established players rather than taking a chance on you. Many contractors ultimately find themselves becoming employees again – exactly what they don’t want.
So what can people do to build their contractor business so that it lasts? Here are some ideas that will not only give your company greater longevity but make it more lucrative too.
If Staying Small Makes You More Money, Do It
Many contractors hold on to the notion that that larger the company, the bigger the profits. But just simple economic reasoning proves this false. Large corporations can make big profits, but they can also make bigger losses, and often do.
Contractors are sometimes tempted to take on extra people to fulfill orders. In most cases, this is a wise move and allows your business to expand into new markets and develop its brand. But for some contractors, especially those that do not benefit from scale (and can even lose out) profits can be lower after the expansion. Thus, all of your effort to hire people and find new work is for nothing. At the end of the day, you don’t make any more money. What’s more, when hard times come, you have less of a buffer to shield you from the economic storm, potentially putting your company at further risk.
So what’s the bottom line? The bottom line is never to expand unless it results in greater profits and increased security. If all your additional revenue from extra work goes into wages and administering your workers, then there’s no point continuing with the expansion.
Look For Bargains On Capital Equipment
Aside from wages (usually your own), your biggest costs as a contractor are equipment costs, particularly vehicles. Wherever possible, you should reduce your exposure to financial risk, and that means reducing your exposure to large outlays, unless absolutely necessary.
Online truck auctions are a great place to find discounted vehicles for use in all kinds of trades and agricultural settings. Prices are often many times lower than buying new, and it is often possible to bag a bargain. Lower capital costs mean fewer interest payments and greater overall profitability.
Double Down On The Best Customers
No business advisor worth their salt would ever tell a contractor to turn away a customer – at least not at the outset. But sometimes it can be worth turning somebody down if they might get in the way of a more lucrative deal with another business.
As any seasoned contractor will tell you, there are a lot of deadbeat customers out there – people who desperately don’t want to part with their money while at the same time demanding impossible results. According to Pareto’s law, these customers make up 20 percent of your profits but take up 80 percent of your time. As with everything in business, there’s an opportunity cost: the time you spend with problem customers is time you could have spent with clients willing to pay you more money for less work. You have to ask yourself, does that sound like a good deal for you?
Be Super Available
Contractors tend to think that the main reason people choose them is because of their track record, quality of their work and expertise. But in our on-demand economy, there’s value in sheer availability too. Perhaps the girl with the workshop down the street is better than you. So what? If your customer needs help on a Sunday evening and they’re not available, you automatically win the business.
If you don’t have the human resources to be available 24-hours a day, 7 days a week, at least give the impression that you’re available or will get back to customers as soon as possible. Things like automated emails and voicemail recordings telling clients that you will be in contact at the first available opportunity can work wonders. So too is doing things like getting your office calls forwarded to your cell phone.
Investigate Industry Best Practices, And Put Them Into Action
In general, the businesses that survive the longest are those with the best internal processes. Although industries usually agree on what constitutes “best practice,” few companies within those industries hit the mark on every point. In short, there’s always rooms for improvement.
Take a look at things like your scheduling, customer relationship management, and workflow and compare it to the industry benchmarks. How is your company faring?
Once you’ve done that, implement the new processes and practice them until you and all of your associates are confident with them. Once that’s done, it’s time to start growing.
Stop Relying On Word-Of-Mouth
Word-of-mouth marketing is usually sufficient for solo contractors. But if you want your business to grow and last, you need to go a step further. While it’s true that some businesses really can grow large because of word-of-mouth marketing, it’s the exception, not the norm.
There’s no reason why contractors can’t behave like any other business when it comes to marketing. Just like other businesses, contractors need to interact authentically with their target audience through video, blog posts, and social media. The work that contractors do is unusually suited to the type of content people want to read online: things like self-help blogs, technical manuals, and e-books.
Contractor businesses need to start off advertising locally. That means dominating local search for your particular keywords. The next stage is to get in touch with the local online and offline communities by involving yourself at regular community meetings, sponsored events or the local press.
Paying for advertising on social media and search engines can also help too, especially if you target people in a particular region. These adverts can have good ROI, and help you establish a brand, which is exactly what you need if you want your contracting business to have longevity.
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