Stupid contractors make these mistakes and pay the price in slower times.

Last January I wrote about the stupid things contractors do in the slower months of the year. I promised a subsequent column on stupid things contractors do during the busy times of the year. Since the summer was so busy for most of the contractors, I’ve waited until fall.

So here are the stupid things that I know you, the smart contractor, won’t do now that the unusually hot, humid and demanding summer is over.

1. Spend the cash from all that business.

Your bank accounts are holding a lot of cash, and it’s tempting to spend it. Don’t. I’ve seen contractors go on great vacations, purchase expensive homes, and buy other indulgences because they had cash in the bank. Then the slow season comes, and they don’t have the cash to survive.

The smart contractors determine how much cash they need to survive the slowest three months of the year and make sure that amount of cash is always in the bank. It’s usually in a money market fund or other liquid investments.

Then if there is additional cash, they spend it to purchase assets for themselves. The easy way to calculate the cash you need is to take three months of overhead costs plus three months of payroll costs. That is the least amount of cash that you should have in the bank.

2. Continue paying overtime when it isn’t warranted.

Your employees got used to a great paycheck every week because it included overtime, which was warranted. They were productively working to earn it. Now that the busy season is over, they still want that nice paycheck, so they have a tendency to slow their work down to cover the extra overtime they are used to.

Question all overtime, even if it is only an hour. If that hour is billable to a customer, then that hour is warranted. However, if that hour can’t be billed to a customer, it must be justified. An extra hour per employee that you can’t bill to a customer adds up to a lot of extra dollars you don’t need to spend.

3. Passing on an audit of paperwork.

Make sure all jobs got billed, and you collected the cash from them. Make sure all financing paperwork was signed.

Things can slip through the cracks when it gets busy. The installation crew leaves the invoice, but the customer isn’t home when the job is finished. The financing paperwork doesn’t get signed, or the customer doesn’t give the crew a check. The office was so busy that even though back-office employees knew a job wasn’t paid for, they didn’t stop to call the customer.

Or, the sales people were so busy that they didn’t go back once the job was finished to explain the system to the customer and collect payment or the financing paperwork. Do an audit. Make sure you got paid for all the work you did.

4. Get lazy about maintenance agreements.

The excuses: “We’re too busy to talk about them”; or, “We’re too busy to perform the maintenance this summer.” This attitude will continue through ifyou don’t stop it. Your employees formed this lazy habit in the summer and they will keep it up in the fall if you don’t make an effort to end it.

The office and service technicians are never too busy to talk with customers about maintenance. Now is the time to go back to all of the customers you didn’t talk with about maintenance, thank them for their business this summer, and explain why maintenance is a great deal for them.

5. Forget to say “Thank You” to employees.

Everyone worked hard this summer. Recognize their contribution:

• Express your thanks at a company meeting.
• Have a company breakfast away from the office to say thanks.
• Put a note of appreciation in their paychecks.
• Send a note home to spouses and other loved ones thanking them for their patience and understanding this summer while your employees were taking care of customers rather than being with them.

Your employees and their families will definitely appreciate your thanks.

6. Bask in the glory of a hot summer.

Celebrate the success of summer and get back to work. If you need a little time off to rest, then take a little time. But don’t get lazy. Now that you can concentrate, get ready for fall and the end of the year.

This means creating your fall marketing plan, maintenance agreement and replacement contests, and other activities you need to do to end the year on a strong note. You had great profits this summer. Don’t blow them away by being stupid this fall. 

Ruth King has over 25 years of experience in the hvacr industry and has worked with contractors, distributors, and manufacturers to help grow their companies and to become more profitable. She is president of HVAC Channel TV and holds a Class ll (unrestricted) contractors license in Georgia. Ruth has authored two books: The Ugly Truth about Small Business and The Ugly Truth about Managing People. Contact Ruth at ruthking@hvacchannel.tv or 770-729-0258.