If You Own a Construction Business, I Bet You Have
Irregular income is one of the biggest struggles for self-employed construction business owners. Add in a customer who doesn’t pay on time, and things can get even more stressful. Often, these problems could have been avoided with clear communication.
Here’s a story about Gene dealing with just such a situation.
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It’s been a couple of weeks since Gene got his truck back from the mechanic, and the garage project is finished. He’s on his way to meet the customer and collect the final payment—money he desperately needs to catch up on some bills!
Gene feels good as he shifts gears, listening to the powerful diesel engine roar as he accelerates in his repaired truck. That sound of the motor makes him feel like he can take on anything. Which is great, because there are more projects and leads to follow up on.
Pulling up to the customer’s house, Gene sees the finished garage in the backyard. It looks really good, with 4-inch lap fiber cement siding and 6/12 pitch roof, both matching the house perfectly. It really looks like it belongs there.
Maybe things are finally turning around for Gene and his business.
Gene walks to the front door and rings the doorbell. Mr. Adams opens it and invites him in. After exchanging pleasantries, they sit at the kitchen table.
“So, how do you like your new garage?” Gene asks.
“I really like it,” replies Mr. Adams. “It looks great, and it’s going to be great to have a place to park out of the weather.”
“I’m glad you like it,” says Gene, handing him the final invoice.
As Mr. Adams reviews it, Gene can tell something is wrong.
“What’s the matter?” he asks.
Mr. Adams looks up, “This is more than I expected. Based on the price you gave me and what I’ve already paid, the balance should be $7,500. Why is this bill $9,100?”
“That price didn’t include the windows,” Gene explains. “After we got started, you told me you wanted a window on each side wall of the garage. The additional $1,600 is for installing those two new windows.”
“Yes, but I had no idea two windows would cost that much. I saw some at Lowe’s for $100. I expected to pay an extra $250, or maybe $300 for two windows, not $1,600.”
“Those $100 windows are nowhere near the quality of the ones I installed,” Gene says. “Each one costs me more than $300.”
After a lengthy discussion, Mr. Adams offers to pay $600 for the windows and says he’ll write Gene the check today. Otherwise, he will involve his attorney and let him handle it.
Gene feels trapped. He needs the money. Is this an honest effort to save money? Or does Mr. Adams think Gene will settle because of his situation with the truck transmission? Gene’s got a choice: take the $8,100 today or fight for the full $9,100 and risk getting nothing in the end.
Gene takes the $1,000 hit and leaves frustrated and disappointed. This meeting went from a feeling of pride and success to one of failure.
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There are a couple of business lessons here. First, the extra work should never be done without a change order. That would have clearly communicated the additional cost to the customer.
But even with that mistake aside, there are multiple situations that can cause us to come up short of money: jobs running over schedule due to weather or production issues, unexpected expenses, or higher-than-planned material costs.
So what do you do when you’re in a situation like Gene, needing every dollar of that $9,100 to pay bills?
It’s good to have money set aside for equipment and building repairs and maintenance, or business expansion.
Saving for the unexpected can help you avoid frustration and disappointment.
One simple step you can take today is checking out the 5-Minute Financial Health Review. It gives you a quick snapshot of where your business stands and highlights areas where you can improve or fix possible money problems and savings.
From there, you can take action with the Savings Transfer Tool, a spreadsheet designed to help you save money for situations like these and more.
You can get the Savings Transfer Tool as part of our Business Building Toolbox. To learn more, join us on April 15th at 10:30 CT for an online introduction to the savings transfer tool, or schedule a free 1-on-1 meeting with me to see how it works for your business.
