Or, How to Avoid the Foolish Mistakes Most Contractors Make
”All I want to know is where I'm going to die so I'll never go there."
This counterintuitive wisdom contains more practical business advice than most management books provide in a lifetime. The secret to success in home services is not some revolutionary system or secret formula. The secret is simply this, avoid the illogical stuff.
Most contractors fail not because they lack skill or intelligence. They fail because they keep making predictable errors that competent people have made for generations. If you can simply stop doing those things, if you can develop the discipline to avoid the obvious traps, you will already be in the top ten percent of your profession. -
The Three Enemies of Contractor Profitability
Before discussing what you should do, let me be clear about what you must not do. In home services, three enemies destroy more businesses than all other causes combined.
The first enemy is chaos.
Chaos is what happens when you have no scheduling system, no process for follow-up, and no organized way to track jobs. Chaos looks like double-booking two appointments in the same neighborhood and arriving at a job site without the right parts.
Chaos looks like finishing work and not sending an invoice for three weeks. Chaos is not a character flaw. It is what happens when you grow faster than your systems. But chaos will kill your business just as surely as any competitor.
The second enemy is the money illusion.
This is the tendency to focus on revenue instead of profit, on top-line numbers instead of bottom-line reality. I have met contractors doing a million dollars a year while barely paying themselves a salary.
They confuse activity with achievement. They feel successful because the phone keeps ringing, but they never calculate what each job actually contributes after fuel, vehicle maintenance, tools, and the endless small expenses that eat away margins. Revenue is vanity. Profit is sanity.
The third enemy is the customer from hell.
Not the difficult customer. The customer who pays slowly, complains constantly, demands extras, and makes every interaction painful. Most contractors are too polite to fire these customers.
They tell themselves that any customer is better than no customer. They forget that a customer who costs you more in time and stress than they pay you is not a customer at all. You are paying them for the privilege of serving them.
The Scheduling Problem
Let me tell you about a contractor I will call Dave. Dave is skilled with a reputation for good work. He runs a small operation, himself and one helper. Dave works harder than anyone I know. He starts early, stays late, and rarely takes a weekend off. By all appearances, he should be doing very well.
But Dave is barely keeping his head above water. Why? Because Dave's scheduling system consists of remembering things in his head and hoping for the best. Dave accepts jobs by phone while driving between job sites. He writes addresses on scraps of paper that get lost. He double-books himself at least once a month. He regularly arrives without parts because he did not check inventory before leaving. His customers call constantly because they never know when he will show up.
Dave's problem is not that he lacks skill or work ethic. Dave's problem is that he has outgrown his organizational capacity. He is trying to run a business with methods that might work for a solo handyman but cannot scale to a growing operation. The brain is a terrible scheduling system. It forgets things under pressure. It confuses appointments. It cannot simultaneously manage a job in progress while tracking commitments to other customers.
The solution is not more effort. The solution is a system. The best contractors use scheduling software and route optimization tools. They build processes that protect them from their own limitations. They understand something that most people never grasp. Systems are not constraints on freedom. Systems are the foundation of freedom.
The Money Illusion
There is a peculiar blindness that afflicts contractors when it comes to money. They will spend hours arguing over whether to use brand-name materials versus generic, saving forty dollars. Then they will give away three hundred dollars of labor because they felt awkward about asking for the full price they quoted.
This is the money illusion, the inability to see money clearly, to understand what you are actually earning versus what you are pretending to earn. Most contractors calculate prices in their heads and hope the number is high enough. They do not track actual costs. They do not know their true hourly rate. They have never calculated whether pricing actually covers vehicle depreciation, insurance increases, and the slow erosion of tool quality.
Every job has three components:
- Direct labor cost
- Direct material cost
- Overhead allocation.
If your price does not cover all three with an appropriate margin, you are not running a business. You are running a charity that happens to collect some money.
Here is a useful exercise that most contractors resist.
Ccalculate what you actually earned last year divided by the actual hours you worked. I mean every hour spent on the business, including driving, estimating, ordering materials, doing administrative work, and everything else. If that number is less than what you could earn as an employee doing the same work, you are losing money even when you feel like you are making money.
The Compound Effect of Small Advantages
I want to end with a thought about compound interest, which Charlie Munger called the eighth wonder of the world. In contracting, small advantages compound just like money does. A five percent improvement in scheduling efficiency compounds over months into hours of recovered time. A ten percent improvement in pricing accuracy compounds into thousands of dollars of recovered profit. A small reduction in customer service problems compounds into dramatically reduced stress and improved capacity for new work.
The key insight is that you do not need to double your profitability. You simply need to be slightly better than average, consistently, over time. A contractor who improves by one percent each month will, within a few years, be operating at a level that seemed impossible when they started.
Most contractors look for the big score. They hope for that one massive job that will change everything. They dream about raising prices and instantly doubling their income. This is the wrong approach. The right approach is the boring approach. Get a little bit better every day. Fix one small problem this week. Implement one new process next month. Gradually, systematically, build the infrastructure that supports a profitable business.
A Final Thought on Character
If I have learned anything from studying successful contractors, it is that character matters more than technique. You can have the best scheduling software in the world and the most sophisticated pricing formulas, but if you lack the discipline to use them consistently, they are worthless.
The contractors who succeed over decades share certain characteristics. They are honest, even when it costs them money. They do the job right, even when no one is watching. They treat their employees well, even when they could get away with less. They keep their promises, even when it is inconvenient. They do not cut corners on safety. They do not lie to customers about what needs to be done.
Technical skill will make you a living. Character will make you a fortune. Do not neglect the latter in pursuit of the former.