This article is going to get into what prevents contractors from being profitable.
Check out my list of three reasons.
1. Mindset.
Your mindset is crucial to being able to hit a 50% gross profit or better. Here are three different mindsets that can hurt you:
- Most guys make the mistake of giving a crap of what the going rate is. They think, what’s the going rate to build a patio? What’s the going rate to build a fire pit, or paint a house, or whatever? The mindset of wondering about the going rate is going to kill your business. You need to do away with that mindset.
- The second harmful mindset is ‘that can’t happen here.’ I hear this all the time. ‘Tom, that might work in your area, but not in my area. It might work in your industry, but not in my industry.’ Wrong. You have got to believe that it’s possible to get a 50% gross profit ANYWHERE, because it really ain’t that hard.
- The third mindset that keeps you from getting a 50% gross profit is projecting your crap onto your customer. Over and over again, this happens. You’re working up a proposal for somebody, you’re about to hit send, and it’s $12,200 – and what do you do? You bring it down to $11,800 or $11,900 – what for? Because to YOU, it seems expensive. Don’t mind-read. Don’t project your beliefs about money onto your clients.
Mindset is huge here.
2. Not knowing your math.
I don’t give a crap what another contractor is charging to do the thing that I do. I only care about MY math, because it’s MY math that’s gonna give me the money to deposit into my bank account, cash the checks, and feed my family – MY math that’s gonna meet my needs, help me reach my goals, and get me off the debt hamster wheel. It has nothing to do with my competition’s math. It has everything to do with knowing your OWN math.
If you pay attention to anyone else’s math other than your own, it should be the math of other contractors that consistently make more money than you – then, you can look at what their math looks like. Pick their brain about it so you can get your mindset right and it can be possible for you, too.
When you don’t know your math, your numbers, or what it costs to produce what you do, you’re screwed from the get-go.
3. Fear.
Guys, I get it. I know what it’s like to feel pressure to feed your family. I’ve been bankrupt, I’ve had years of making terrible amounts of money while still having a family to feed, and I know how it goes. It’s really scary to charge what should be charged. You might think, I should charge $5,000 for something, but I’m scared, so I’m gonna charge $4,000. Right there, you just stole $1,000 from your family.
It can be scary to charge a higher rate no matter the reason – because it’s a harder job, it’s gonna cost more to do it, there’s a higher risk, and you think they’re not gonna go for the price. So, you let fear win and submit the bid for $4,000. Then, the client says something like, ‘oh man, I thought it was gonna be a lot more than that.’ You just lost 1,000 dollars because of fear.
Don’t let fear mess you up and prevent you from doing what’s right for you and your business.
I appreciate you guys. Working these tips into your life really isn’t that hard – before you know it, you’re gonna make it as a profitable contracting business.
