Ever wondered what it takes to truly scale a general contracting business? Discover the critical steps and strategies that can transform your company from just surviving to truly thriving. In this episode of Carolina Commercial Real Estate Connection, I share my journey from obtaining my general contractor's license in 2007 to building everything from residential homes to large-scale commercial projects. You'll learn why relinquishing control and effectively delegating tasks are pivotal for growth, and how assembling a top-notch team can set the stage for long-term success.
We also tackle some of the most common hurdles faced by new and aspiring general contractors. Learn how to navigate the tricky early stages of securing work through friends and family, and avoid the costly mistake of underpricing your services. Emphasizing transparency and clear communication with clients, I provide actionable insights on setting expectations and managing relationships to achieve satisfaction and earn valuable referrals. Whether you're just starting out or aiming to scale your contracting business, this episode is packed with valuable lessons to help you reach your goals. Tune in and equip yourself with the knowledge to elevate your business to the next level.
To learn more about Tony Johnson and Timeless visit us at:
https://timelessci.com/
https://timelessco.com/
https://www.linkedin.com/in/tonytimeless/
If you would like to discuss investing in Commercial Properties create a profile and schedule a call:
https://timelessci.investnext.com/
Reach out to us directly at:
info@timelessci.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to another episode of Carolina Commercial
Real Estate Connection.
Today I just wanted to talk alittle bit about general
contracting and if you'relooking to get into general
contracting or if you're ageneral contractor looking to
grow and scale your company, youneed to start putting critical
pieces in place and startthinking ahead and setting the
(00:23):
proper goals in order to growthat company.
So you know, I kind of want togo through just a couple of
things that we've discussedbefore and would love to get
feedback and comments of whatelse I can do to help aspiring
or newer general contractorslooking to grow or expand or
(00:43):
maybe just looking to keep theircompany afloat right and get to
the next level.
I've started as a generalcontractor, got my license in
2007, and I've been buildingever since then.
We've built everything fromresidential homes, done
residential remodels, done fire,water damage, mold.
(01:08):
Then we went on to do tons ofdifferent commercial work for
local government, school systems, private entities, national
franchises, built industrialflex office, anything under the
sun.
Now we're into sports fieldsand site work.
So we've got a plethora ofexperience and what I've noticed
(01:31):
is, for the first many yearsgoing through, I tried to do
everything, be everything forthe company, which hampered me
from really growing.
Once I started to let go ofthings and find people to help
was when I really started takingstrides as a company and
growing as a person.
And now my focus is on buildingand developing the right people
(01:55):
and then putting them in theright seats in order for my
company to continue to scale andgrow and get to the next level,
to continue to reach mylong-term goals, and so what I
would like to do is help peoplereach their initial goals or get
to the next level to continueto reach my long-term goals, and
so what I would like to do ishelp people reach their initial
goals or get to the next levelon their goals.
So please reach out to me downbelow and give me some feedback
on what you're looking for me todiscuss so I can bring that up
(02:18):
in future talks.
So quickly going through, justsomething that I've thought
about multiple times is manycontractors go out there and
they're looking for work, so thefirst place where you look
typically is friends and family.
You know to get an opportunity,just to get some work, to get
(02:39):
your name out there, but youdon't want to stick with that
too long because typicallyworking for friends and family.
You're not going to make anymoney on those jobs, right?
So you're doing those at adiscount just to get work.
So you can do jobs for otherpeople at a discount, just to do
work.
And those you know willprobably give you more
(03:02):
experience than working for thefriends and family aspect.
And either way, if you're goingto do them, you're probably not
going to make money in thebeginning because you don't have
a great reputation out there.
You don't have any reputation.
But what you will learn iswhenever you do a job,
especially in the beginning as ageneral contractor, in the
(03:26):
beginning as a generalcontractor, do what you commit
to and be as clear as possibleand set the expectations as
clear as possible with theclient when you're doing that
job, so their expectations aremet at the completion of the job
and you know then you can get areferral.
So you always want to completethe job with them, get a
referral.
So one of the biggest problemsthat you run into is the gray
(03:48):
area, especially when you'restarting out in smaller jobs.
There's a ton of gray areabecause sometimes you don't have
drawings.
If you do have drawings,they're very lackluster.
It's just basically a glorifiedpicture.
Right, it might have astructural amulet that's
detailed, but typically on asmaller job, you might not have
engineered drawings forelectrical, plumbing, hvac.
(04:09):
So it's your interpretation ofwhat you need to get done and
then the client's interpretationof what needs to get done.
So your interpretation, theirinterpretation.
There's a lot of gray area,that's there and so that's why
prices can vary and if yourprice is really low, they're
thinking that they're getting adeal.
You have to make sure you'redelivering on what you're
(04:31):
pricing and you need to set thatproper expectation so when the
job is done, they're not askingyou to do 15 other things for
the price that you quoted, thatyou quoted, and then you're not
asking for more money, gettingan upset client and creating an
issue for yourself where youcan't get a recommendation.
In order to step up and getmore work, you need that
(04:52):
recommendation from the client.
So, going through and beingcompletely clear with the client
, that means you need to askquestions from them to get
feedback on exactly what they'relooking for, and then you price
it and write out everythingthat you're including, anything
that you're not including, putit as excluded or not included,
(05:14):
right, or this is an adalternate for me to do this or
that, but make sure you're asdetailed as possible.
I have looked at so manyestimates over the years where
you'll have a contractor justthrow together one page, have no
details and here's the priceright.
And so either one thing oranother is going to happen.
(05:35):
Either you're going to get intoan issue with the client and
you're not going to get paidbecause they're going to tell
you that you didn't do what youwere supposed to do, or you're
going to do half the job and theclient's going to want the rest
, and then you're going tocharge them for the rest that
you didn't include, and thenthey're going to be an upset
client.
So it's critical to detail thatestimate.
(05:58):
Use any type of estimatingsoftware, don't just guess.
So taking an estimating courseof some kind is the best
practice.
Anybody needing some basicestimate template, feel free to
shoot me an email, reach out tome.
I'll be happy to provide youwith some basic Excel template
to do a takeoff with some randomsquare foot numbers to get you
(06:20):
started if you don't have thatexperience.
So that's one of the mostimportant things in construction
is understanding how toestimate.
And then it's finding peoplethat have experience
subcontractors that haveexperience and good reputation.
You want to use them to buildyour reputation Anybody that's
(06:40):
starting in construction ortrying to grow in construction.
It is critical to get good teamplayers with you and for you to
follow through on everythingyou say.
The only thing that acontractor has is their
reputation.
Once it's bad, it will followyou around forever.
If it's good, it'll also followyou around forever.
So you know it's okay not to getevery job.
(07:02):
A lot of times I won't get ajob.
My price is too high and Iwon't go down to the low price.
You know, because I they'regoing to pay more for me because
I'm going to do a quality job.
I'm not going to give them 50change orders.
You know I'm going to give thema great experience and they're
going to want to use me again.
So it's going to cost a littlebit more, right?
(07:22):
So you don't want to be thelowest guy in the market,
because the lowest guy in themarket is going to go out of
business.
So another thing to bear in mindthat a lot of newer contractors
are doing is not chargingenough money to grow.
So when we say, you know, onceyou start to establish and
you've got some work.
When you have work is theoptimal time to go.
(07:43):
Get more work and don't bescared to charge for what you're
worth, because the only way togrow and get into a position
where you can hire people underyou and pay your bills and make
money is to charge the rightamount for your work.
So there are a milliondifferent things that you have
(08:04):
to bear in mind when you'repricing a job that people leave
out.
So if you are pricing a job andyou're pricing the job and let's
say you do a 10% markup, saythe industry standard is 10% or
10% overhead, 10% profit, right?
Is that what your overhead andprofit is?
Have you figured that out?
And so, on top of this overheadand profit, what is that?
(08:28):
So you want to make sure thatyou're making at least 5% profit
after all of your overhead andall your expenses, right?
So it's overhead is one thing,but a lot of people will say,
okay, well, here's my overhead.
I've got one guy.
He's going to cost me, you know, $300 a week, so that's, that's
(08:48):
my overhead.
And then let me charge myprofit, right?
Okay, that's not coveringanything.
You have insurance and workerscomp you have to pay for If you
have an office, you have youroffice expensive, you have paper
for your office Then you knowyou're going to have additional
expenses, that you need to getmore and more detailed on those
(09:11):
expenses.
You can, if you're usingQuickBooks or an accounting
software, you can actually gothrough in a QuickBooks and set
your budget for the year and layout all those expenses and then
(09:32):
you can, when you're inputtingeach expense through QuickBooks
through the year, you can kindof go and model and see what you
did and then the next year youcan do it again.
The next year you can do itagain as you grow as a company
you'll understand all thoseadditional expenses to set a
base point for your generalconditions overhead and then
(09:53):
markup right.
So if you're doing commercialjobs, you need a line for a bond
, you need a line for your taxes, you need a line for your
insurance, you know.
Then you need your overhead.
If it's a larger job, are youputting in a contingency?
If you're doing a lump sum bid,you want to put in a
(10:13):
contingency of some kind.
You know, if you're not doingcost plus and I always recommend
doing hard bid, not cost plus,because that's you even create
more arguments for yourself incost plus, because nobody can
ever really tell you what oncost plus what right.
So always do lump sum bids,okay.
(10:33):
But going back to this, so youhave your general conditions,
which is all of your, you knowmanpower that's on site, any
office staff you want to putthat in there, any
administrative supplies that youwant, all those are going to go
in your general conditions andyou establish your timeline.
Those are one thing.
Then you have down there yourprofit and then, if you can
(10:58):
embed any, typically, what wewant to see is at least 20%,
with all of that embedded.
If you're a smaller company,that 20% is going to have you at
a profit probably of around 8%.
Once you're paying for all thenormal things with doing
(11:18):
business, you're probably goingto end with an 8 percent profit.
Then bear in mind of that 8percent profit.
We haven't discussed taxes, sothen you're going to be paying
taxes on that.
So how much are you reallyclearing?
Five, six percent, right?
So if you want to clear higherthan that, you're going to need
to charge more than that, ok.
So if you want to grow, youneed to.
(11:38):
You're going to need to chargemore than that, okay.
So if you want to grow, youneed to be able to set money
aside right.
So you want to take a portionof profit and set it aside where
you're not spending, so you canbuild up some reserves to grow
right, because there's going tobe down months, there's going to
be up months.
So that's what I'm saying.
So bear in mind that We'll talksome more on the next episode,
(11:59):
but thanks so much for joiningus.
Please reach out if I can helpyou in your construction company
.
Have a great day.
Welcome to another episode of Carolina Commercial
Real Estate Connection.
Today I just wanted to talk alittle bit about general
contracting and if you'relooking to get into general
contracting or if you're ageneral contractor looking to
grow and scale your company, youneed to start putting critical
pieces in place and startthinking ahead and setting the
(00:23):
proper goals in order to growthat company.
So you know, I kind of want togo through just a couple of
things that we've discussedbefore and would love to get
feedback and comments of whatelse I can do to help aspiring
or newer general contractorslooking to grow or expand or
(00:43):
maybe just looking to keep theircompany afloat right and get to
the next level.
I've started as a generalcontractor, got my license in
2007, and I've been buildingever since then.
We've built everything fromresidential homes, done
residential remodels, done fire,water damage, mold.
(01:08):
Then we went on to do tons ofdifferent commercial work for
local government, school systems, private entities, national
franchises, built industrialflex office, anything under the
sun.
Now we're into sports fieldsand site work.
So we've got a plethora ofexperience and what I've noticed
(01:31):
is, for the first many yearsgoing through, I tried to do
everything, be everything forthe company, which hampered me
from really growing.
Once I started to let go ofthings and find people to help
was when I really started takingstrides as a company and
growing as a person.
And now my focus is on buildingand developing the right people
(01:55):
and then putting them in theright seats in order for my
company to continue to scale andgrow and get to the next level,
to continue to reach mylong-term goals, and so what I
would like to do is help peoplereach their initial goals or get
to the next level to continueto reach my long-term goals, and
so what I would like to do ishelp people reach their initial
goals or get to the next levelon their goals.
So please reach out to me downbelow and give me some feedback
on what you're looking for me todiscuss so I can bring that up
(02:18):
in future talks.
So quickly going through, justsomething that I've thought
about multiple times is manycontractors go out there and
they're looking for work, so thefirst place where you look
typically is friends and family.
You know to get an opportunity,just to get some work, to get
(02:39):
your name out there, but youdon't want to stick with that
too long because typicallyworking for friends and family.
You're not going to make anymoney on those jobs, right?
So you're doing those at adiscount just to get work.
So you can do jobs for otherpeople at a discount, just to do
work.
And those you know willprobably give you more
(03:02):
experience than working for thefriends and family aspect.
And either way, if you're goingto do them, you're probably not
going to make money in thebeginning because you don't have
a great reputation out there.
You don't have any reputation.
But what you will learn iswhenever you do a job,
especially in the beginning as ageneral contractor, in the
(03:26):
beginning as a generalcontractor, do what you commit
to and be as clear as possibleand set the expectations as
clear as possible with theclient when you're doing that
job, so their expectations aremet at the completion of the job
and you know then you can get areferral.
So you always want to completethe job with them, get a
referral.
So one of the biggest problemsthat you run into is the gray
(03:48):
area, especially when you'restarting out in smaller jobs.
There's a ton of gray areabecause sometimes you don't have
drawings.
If you do have drawings,they're very lackluster.
It's just basically a glorifiedpicture.
Right, it might have astructural amulet that's
detailed, but typically on asmaller job, you might not have
engineered drawings forelectrical, plumbing, hvac.
(04:09):
So it's your interpretation ofwhat you need to get done and
then the client's interpretationof what needs to get done.
So your interpretation, theirinterpretation.
There's a lot of gray area,that's there and so that's why
prices can vary and if yourprice is really low, they're
thinking that they're getting adeal.
You have to make sure you'redelivering on what you're
(04:31):
pricing and you need to set thatproper expectation so when the
job is done, they're not askingyou to do 15 other things for
the price that you quoted, thatyou quoted, and then you're not
asking for more money, gettingan upset client and creating an
issue for yourself where youcan't get a recommendation.
In order to step up and getmore work, you need that
(04:52):
recommendation from the client.
So, going through and beingcompletely clear with the client
, that means you need to askquestions from them to get
feedback on exactly what they'relooking for, and then you price
it and write out everythingthat you're including, anything
that you're not including, putit as excluded or not included,
(05:14):
right, or this is an adalternate for me to do this or
that, but make sure you're asdetailed as possible.
I have looked at so manyestimates over the years where
you'll have a contractor justthrow together one page, have no
details and here's the priceright.
And so either one thing oranother is going to happen.
(05:35):
Either you're going to get intoan issue with the client and
you're not going to get paidbecause they're going to tell
you that you didn't do what youwere supposed to do, or you're
going to do half the job and theclient's going to want the rest
, and then you're going tocharge them for the rest that
you didn't include, and thenthey're going to be an upset
client.
So it's critical to detail thatestimate.
(05:58):
Use any type of estimatingsoftware, don't just guess.
So taking an estimating courseof some kind is the best
practice.
Anybody needing some basicestimate template, feel free to
shoot me an email, reach out tome.
I'll be happy to provide youwith some basic Excel template
to do a takeoff with some randomsquare foot numbers to get you
(06:20):
started if you don't have thatexperience.
So that's one of the mostimportant things in construction
is understanding how toestimate.
And then it's finding peoplethat have experience
subcontractors that haveexperience and good reputation.
You want to use them to buildyour reputation Anybody that's
(06:40):
starting in construction ortrying to grow in construction.
It is critical to get good teamplayers with you and for you to
follow through on everythingyou say.
The only thing that acontractor has is their
reputation.
Once it's bad, it will followyou around forever.
If it's good, it'll also followyou around forever.
So you know it's okay not to getevery job.
(07:02):
A lot of times I won't get ajob.
My price is too high and Iwon't go down to the low price.
You know, because I they'regoing to pay more for me because
I'm going to do a quality job.
I'm not going to give them 50change orders.
You know I'm going to give thema great experience and they're
going to want to use me again.
So it's going to cost a littlebit more, right?
(07:22):
So you don't want to be thelowest guy in the market,
because the lowest guy in themarket is going to go out of
business.
So another thing to bear in mindthat a lot of newer contractors
are doing is not chargingenough money to grow.
So when we say, you know, onceyou start to establish and
you've got some work.
When you have work is theoptimal time to go.
(07:43):
Get more work and don't bescared to charge for what you're
worth, because the only way togrow and get into a position
where you can hire people underyou and pay your bills and make
money is to charge the rightamount for your work.
So there are a milliondifferent things that you have
(08:04):
to bear in mind when you'repricing a job that people leave
out.
So if you are pricing a job andyou're pricing the job and let's
say you do a 10% markup, saythe industry standard is 10% or
10% overhead, 10% profit, right?
Is that what your overhead andprofit is?
Have you figured that out?
And so, on top of this overheadand profit, what is that?
(08:28):
So you want to make sure thatyou're making at least 5% profit
after all of your overhead andall your expenses, right?
So it's overhead is one thing,but a lot of people will say,
okay, well, here's my overhead.
I've got one guy.
He's going to cost me, you know, $300 a week, so that's, that's
(08:48):
my overhead.
And then let me charge myprofit, right?
Okay, that's not coveringanything.
You have insurance and workerscomp you have to pay for If you
have an office, you have youroffice expensive, you have paper
for your office Then you knowyou're going to have additional
expenses, that you need to getmore and more detailed on those
(09:11):
expenses.
You can, if you're usingQuickBooks or an accounting
software, you can actually gothrough in a QuickBooks and set
your budget for the year and layout all those expenses and then
(09:32):
you can, when you're inputtingeach expense through QuickBooks
through the year, you can kindof go and model and see what you
did and then the next year youcan do it again.
The next year you can do itagain as you grow as a company
you'll understand all thoseadditional expenses to set a
base point for your generalconditions overhead and then
(09:53):
markup right.
So if you're doing commercialjobs, you need a line for a bond
, you need a line for your taxes, you need a line for your
insurance, you know.
Then you need your overhead.
If it's a larger job, are youputting in a contingency?
If you're doing a lump sum bid,you want to put in a
(10:13):
contingency of some kind.
You know, if you're not doingcost plus and I always recommend
doing hard bid, not cost plus,because that's you even create
more arguments for yourself incost plus, because nobody can
ever really tell you what oncost plus what right.
So always do lump sum bids,okay.
(10:33):
But going back to this, so youhave your general conditions,
which is all of your, you knowmanpower that's on site, any
office staff you want to putthat in there, any
administrative supplies that youwant, all those are going to go
in your general conditions andyou establish your timeline.
Those are one thing.
Then you have down there yourprofit and then, if you can
(10:58):
embed any, typically, what wewant to see is at least 20%,
with all of that embedded.
If you're a smaller company,that 20% is going to have you at
a profit probably of around 8%.
Once you're paying for all thenormal things with doing
(11:18):
business, you're probably goingto end with an 8 percent profit.
Then bear in mind of that 8percent profit.
We haven't discussed taxes, sothen you're going to be paying
taxes on that.
So how much are you reallyclearing?
Five, six percent, right?
So if you want to clear higherthan that, you're going to need
to charge more than that, ok.
So if you want to grow, youneed to.
(11:38):
You're going to need to chargemore than that, okay.
So if you want to grow, youneed to be able to set money
aside right.
So you want to take a portionof profit and set it aside where
you're not spending, so you canbuild up some reserves to grow
right, because there's going tobe down months, there's going to
be up months.
So that's what I'm saying.
So bear in mind that We'll talksome more on the next episode,
(11:59):
but thanks so much for joiningus.
Please reach out if I can helpyou in your construction company
.
Have a great day.
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