In 1998, I was teaching a one-day class when an attendee stood up and made this statement. It was so good I wrote it down; I’d give him credit if I knew who it was. Print it out and hang it on your wall:
You must recognize the importance of charging enough for the work you do.
When you charge enough, you have the money available to use the best mechanics and subs to build your jobs; you can buy from the best suppliers so that you use better materials; you can hire the best bookkeeper and accountant to take care of your books and financial affairs, the best office manager to run your company . . . in short, you can afford the best people.
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By using the best people, it frees your time, giving you the ability to run your business and not have to worry about what your employees and subs are doing. The best people are people you can trust. You can count on them to get the job done right the first time.
When the job is done right the first time, you have well-run jobs and satisfied customers. That is the key to making money in construction.
We talk about charging enough for your work in Markup and Profit Revisited. We also recently published an article on finding construction employees. If you want to attract and keep good employees, you need to pay top dollar. There’s nothing wrong with young people wanting a good wage for their work. When I was young, that was my interest, too; I wanted to make money. As a business owner, if you want the best employees, you must be willing to pay accordingly.
Ask around your area to see what most other companies are paying their employees. Set your rate to attract the best people which means your rates will probably be the highest in the area.
Once you establish your pay scale, set up a three-tiered pay level for each new employee. The first level takes them through their probationary period. Most companies set that period from 1 to 3 months in length. Assuming they’re getting the job done, move them to the second level and up a notch on the pay scale. You can also ask them to do more at this point. More pay means more production.
When they’re doing the job well and you’re happy with their performance, that’s when they move to full-time, permanent employment. This process can take from 6 months to a year. (More on hiring, evaluating, training and promoting production employees, including job descriptions, can be found in Tim Faller’s Human Resource Manual.)
Along with paying top dollar, I’m hearing that the contractors who hire the very best people are the ones who provide strong benefits. Medical plans, vision and dental plans, retirement plans, vacation and holiday time and sick days are all part of the package. It isn’t cheap to offer, and it will make your jobs more expensive.
If you’re paying any production or sales employees as subcontractors, make sure they really are subs. The construction industry is a prime target for IRS audits on subs. You’ll owe back taxes with penalties if you’re caught treating an employee as a subcontractor. The rules have been changing with the latest rule published in January of 2024. You’ll want to review this information; you also might want to get professional advice.
Hiring the right employees will help you sell your jobs, because your prospective clients know you can deliver.
It’s a Generational Problem
It makes sense that the shortage of employees also means it’s hard to find subcontractors. It all ties back to a shortage of people in the trades.
Those of us who have been around a while saw this coming. Young people just weren’t getting into this business at the same rate that we and our friends got into it in the 60’s, 70’s and early 80’s.
I’m seeing signs that young people are becoming interested in the trades again. They’re starting to look at college debt and realizing that providing a needed service is a respectable way to make a living.
Help make the trades more attractive by offering a good working environment, top pay and benefits. That will help you attract the best people, and it just might attract the next generation.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.
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