Carolina Commercial Real Estate Connection

From Residential Homes to Commercial Giants: Scaling Your General Contracting Business Effectively

• Tony Johnson

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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://timelesspropertiescc.com/

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Reach out to us directly at:
info@timelessci.com

Speaker 1:

Welcome to another episode of Carolina Commercial Real Estate Connection. Today I just wanted to talk a little bit about general contracting and if you're looking to get into general contracting or if you're a general contractor looking to grow and scale your company, you need to start putting critical pieces in place and start thinking ahead and setting the proper goals in order to grow that company. So you know, I kind of want to go through just a couple of things that we've discussed before and would love to get feedback and comments of what else I can do to help aspiring or newer general contractors looking to grow or expand or maybe just looking to keep their company afloat right and get to the next level. I've started as a general contractor, got my license in 2007, and I've been building ever since then. We've built everything from residential homes, done residential remodels, done fire, water damage, mold. Then we went on to do tons of different commercial work for local government, school systems, private entities, national franchises, built industrial flex office, anything under the sun. Now we're into sports fields and site work. So we've got a plethora of experience and what I've noticed is, for the first many years going through, I tried to do everything, be everything for the company, which hampered me from really growing. Once I started to let go of things and find people to help was when I really started taking strides as a company and growing as a person. And now my focus is on building and developing the right people and then putting them in the right seats in order for my company to continue to scale and grow and get to the next level, to continue to reach my long-term goals, and so what I would like to do is help people reach their initial goals or get to the next level to continue to reach my long-term goals, and so what I would like to do is help people reach their initial goals or get to the next level on their goals. So please reach out to me down below and give me some feedback on what you're looking for me to discuss so I can bring that up in future talks.

Speaker 1:

So quickly going through, just something that I've thought about multiple times is many contractors go out there and they're looking for work, so the first place where you look typically is friends and family. You know to get an opportunity, just to get some work, to get your name out there, but you don't want to stick with that too long because typically working for friends and family. You're not going to make any money on those jobs, right? So you're doing those at a discount just to get work. So you can do jobs for other people at a discount, just to do work. And those you know will probably give you more experience than working for the friends and family aspect. And either way, if you're going to do them, you're probably not going to make money in the beginning because you don't have a great reputation out there. You don't have any reputation. But what you will learn is whenever you do a job, especially in the beginning as a general contractor, in the beginning as a general contractor, do what you commit to and be as clear as possible and set the expectations as clear as possible with the client when you're doing that job, so their expectations are met at the completion of the job and you know then you can get a referral. So you always want to complete the job with them, get a referral.

Speaker 1:

So one of the biggest problems that you run into is the gray area, especially when you're starting out in smaller jobs. There's a ton of gray area because sometimes you don't have drawings. If you do have drawings, they're very lackluster. It's just basically a glorified picture. Right, it might have a structural amulet that's detailed, but typically on a smaller job, you might not have engineered drawings for electrical, plumbing, hvac. So it's your interpretation of what you need to get done and then the client's interpretation of what needs to get done. So your interpretation, their interpretation. There's a lot of gray area, that's there and so that's why prices can vary and if your price is really low, they're thinking that they're getting a deal.

Speaker 1:

You have to make sure you're delivering on what you're pricing and you need to set that proper expectation so when the job is done, they're not asking you to do 15 other things for the price that you quoted, that you quoted, and then you're not asking for more money, getting an upset client and creating an issue for yourself where you can't get a recommendation. In order to step up and get more work, you need that recommendation from the client. So, going through and being completely clear with the client, that means you need to ask questions from them to get feedback on exactly what they're looking for, and then you price it and write out everything that you're including, anything that you're not including, put it as excluded or not included, right, or this is an ad alternate for me to do this or that, but make sure you're as detailed as possible. I have looked at so many estimates over the years where you'll have a contractor just throw together one page, have no details and here's the price right. And so either one thing or another is going to happen. Either you're going to get into an issue with the client and you're not going to get paid because they're going to tell you that you didn't do what you were supposed to do, or you're going to do half the job and the client's going to want the rest, and then you're going to charge them for the rest that you didn't include, and then they're going to be an upset client. So it's critical to detail that estimate.

Speaker 1:

Use any type of estimating software, don't just guess. So taking an estimating course of some kind is the best practice. Anybody needing some basic estimate template, feel free to shoot me an email, reach out to me. I'll be happy to provide you with some basic Excel template to do a takeoff with some random square foot numbers to get you started if you don't have that experience. So that's one of the most important things in construction is understanding how to estimate. And then it's finding people that have experience subcontractors that have experience and good reputation. You want to use them to build your reputation Anybody that's starting in construction or trying to grow in construction. It is critical to get good team players with you and for you to follow through on everything you say. The only thing that a contractor has is their reputation. Once it's bad, it will follow you around forever. If it's good, it'll also follow you around forever.

Speaker 1:

So you know it's okay not to get every job. A lot of times I won't get a job. My price is too high and I won't go down to the low price. You know, because I they're going to pay more for me because I'm going to do a quality job. I'm not going to give them 50 change orders. You know I'm going to give them a great experience and they're going to want to use me again. So it's going to cost a little bit more, right? So you don't want to be the lowest guy in the market, because the lowest guy in the market is going to go out of business.

Speaker 1:

So another thing to bear in mind that a lot of newer contractors are doing is not charging enough money to grow. So when we say, you know, once you start to establish and you've got some work. When you have work is the optimal time to go. Get more work and don't be scared to charge for what you're worth, because the only way to grow and get into a position where you can hire people under you and pay your bills and make money is to charge the right amount for your work. So there are a million different things that you have to bear in mind when you're pricing a job that people leave out.

Speaker 1:

So if you are pricing a job and you're pricing the job and let's say you do a 10% markup, say the industry standard is 10% or 10% overhead, 10% profit, right? Is that what your overhead and profit is? Have you figured that out? And so, on top of this overhead and profit, what is that? So you want to make sure that you're making at least 5% profit after all of your overhead and all 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 my overhead. And then let me charge my profit, right? Okay, that's not covering anything. You have insurance and workers comp you have to pay for If you have an office, you have your office expensive, you have paper for your office Then you know you're going to have additional expenses, that you need to get more and more detailed on those expenses.

Speaker 1:

You can, if you're using QuickBooks or an accounting software, you can actually go through in a QuickBooks and set your budget for the year and lay out all those expenses and then you can, when you're inputting each expense through QuickBooks through the year, you can kind of go and model and see what you did and then the next year you can do it again. The next year you can do it again as you grow as a company you'll understand all those additional expenses to set a base point for your general conditions overhead and then markup right. So if you're doing commercial jobs, 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 you putting in a contingency? If you're doing a lump sum bid, you want to put in a contingency of some kind. You know, if you're not doing cost plus and I always recommend doing hard bid, not cost plus, because that's you even create more arguments for yourself in cost plus, because nobody can ever really tell you what on cost plus what right. So always do lump sum bids, okay.

Speaker 1:

But going back to this, so you have your general conditions, which is all of your, you know manpower that's on site, any office staff you want to put that in there, any administrative supplies that you want, all those are going to go in your general conditions and you establish your timeline. Those are one thing. Then you have down there your profit and then, if you can embed any, typically, what we want 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 the normal things with doing business, you're probably going to end with an 8 percent profit. Then bear in mind of that 8 percent profit.

Speaker 1:

We haven't discussed taxes, so then you're going to be paying taxes on that. So how much are you really clearing? Five, six percent, right? So if you want to clear higher than that, you're going to need to charge more than that, ok. So if you want to grow, you need to. You're going to need to charge more than that, okay. So if you want to grow, you need to be able to set money aside right. So you want to take a portion of profit and set it aside where you're not spending, so you can build up some reserves to grow right, because there's going to be down months, there's going to be up months. So that's what I'm saying. So bear in mind that We'll talk some more on the next episode, but thanks so much for joining us. Please reach out if I can help you in your construction company. Have a great day.