Your business performs as your people behave, Nexstar Network President and CEO Jack Tester told nearly 600 contractors and their key employees at the opening of the best practices group’s recent Super Meeting. Your business performs as your people behave. A three percent net profit and a 15 percent net profit are the result of very different behaviors.
Tester advised the contractors to “work the model” and that model isn’t necessarily for everyone. The model for the assembled contractors is the service and replacement business, which precludes remodeling and new construction. I don’t necessarily agree with everything that was said, but I concede that they have good reasons why.
If you don’t pay attention to an aspect of your business, it will not grow, thus the need for focus. What you focus on is what you become, and what Nexstar is urging its members to become is the leader of a service and replacement business. If the head of a contracting firm makes that his or her identity, then that’s the way they will act.
Nexstar is urging its members to become the leader of a service and replacement business. If the head of a contracting firm makes that his or her identity, then that’s the way they will act.
The object is to do those things (behave) that the leader of a highly profitable business does. Tester noted that a number of contractors had joined Nexstar over the years to escape the new construction market. When the recession hit, Nexstar’s membership fell and many of those contractors who dropped out (or failed entirely) had not been able to extricate themselves from the new construction market fast enough. Conversely, well-run service and replacement contractors continued to grow, even during the recession.
Sell work to the end user, Tester said, the person who will enjoy the outcome — home comfort in one form or another — of the contractor’s work. If you sell to a commercial customer, then you understand you’re dealing with a customer who only wants the low bidder.
This is one of the areas in which I disagree. I know a very prosperous commercial contractor in Chicago that has been in existence for more than 100 years serving commercial, institutional and government customers. They’re customers who aren’t paying out of their own wallets, and it takes the emotion out of the purchase decision. It works for him but it’s not the business model for everyone.
Another area where I disagree with Tester is that work can last no longer than a day. It’s better for the customer and the contractor, he said. It allows the contractor to repeat success every day. It lowers the risk profile, because if you screw up a job, it’s not fatal. If you screw up a $100,000 job, that’s a problem. Everything can be COD so you have good cash flow and little to no receivables. Installations should be performed the day after they’re sold. If you can’t do that, the contractors were told, perhaps you’re understaffed in your installation department. Because you’re constantly searching for more one-day work, it keeps everybody hungry.
Those are all good reasons and they provide a path to success for a lot of contractors because that focus can create behaviors in your employees to pull that off successfully. It’s clean and uncomplicated. It also allows the head of the contracting firm to know what to say yes to and what to say no to. If somebody from a home warranty company calls, for example, that doesn’t fit in with the model, so you tell them no.
My problem with this is that it precludes a whole bunch of activity at which contractors should be looking, such as home performance contracting or smart homes. I’ve interviewed a lot of contractors who have done some outstanding work mixing a ground-source heat pump with a forced air system or mini-splits or radiant heat. Award winning work, but it can’t be done in one day.
Keeping work simple, pure and focused works for many contractors, but it’s not for everyone.