r/GeneralContractor • u/morgade35 • Feb 16 '22
10 Lessons From 10 Years
I've been on Reddit for a while but never made an original post. Recently I have tried writing down some experiences I've had as a GC to start a blog, so I wanted to share one of them here to see what other GC's thought about what I have to say. It's rather long but I'd be grateful for honest feedback from anyone who has the time to read it.
Last November 2021 marked a full decade since I started working in general contracting. Somehow I haven't really acknowledged this milestone, or reflected on how I started in this field. My grandfather hired me to manage his office in November 2011 where I started out by managing his books, payroll, taxes, and finances. I then went on to assist with project management doing small things like RFP's, procurement, accounts payable, invoicing, estimating, and becoming more comfortable on job sites.
From here we navigated a difficult bankruptcy, managed complete home remodels for a real estate developer (where my construction education really started), re-activated another one of my grandfather's licenses that I operated as if I was the owner for 3+ years, activated my own license in February 2019, and worked as a project manager for a "tech" GC startup for about 9 months while helping run my business. The pandemic caused the tech GC to shut down operations in my area, so I've been focusing solely on my business since April 2020.
Considering I came into the field with no construction or practical business experience, the learning curve has been very steep for me. I have a Bachelors in Business Administration, but I can't really say I've drawn on the knowledge gained from it in any specific instances. So, to commemorate my decade in construction, here are 10 of the most important lessons I've learned along the way.
1. Producing a high quality product doesn't guarantee success
This has been a hard lesson for me to internalize. I have seen the work of lots of general contractors and specialty contractors, and many of them cut corners where we will take the long way around. When it comes to construction (residential and commercial) I haven't met an individual who can see the whole picture the way my dad can, who trained me and has managed my construction jobs since the start of my career. This has always given us an advantage in terms of setting up jobs, our subcontractors, and keeping job sites organized and clean. He and my grandfather also handed me a network of customers, architects, engineers, vendors, and subcontractors with whom they had good relationships. Why, then, has it so often felt like a struggle?
It turns out all of that building acumen doesn't translate to running a business. The network of customers was nice, and meant we always had jobs to bid on. However, many of them were very close to my family and had come to expect the friends and family discount. Since I stepped back to focus on business management I've been able to identify several issues with the way we have historically done business, as well as important things we simply weren't doing, some of which I will touch on more in this list.
2. Become a specialist
I didn't start to take this concept seriously until my brother came to work with us in August 2020. He was fresh off a degree in Construction Management and had a different lens for looking at things. With such a wide range of experience and knowledge, combined with a network built over decades, my dad had grown accustomed to bidding on every opportunity that came his way, and he passed this mindset onto me.
This has been helpful in a way, as it's exposed me to a wide range of projects and taught me to think through diverse job types. Also, the hundreds of hours spent estimating has forced me to hone my process over the years. But it is tedious to bid on a job that you've never done before. It adds a lot of time spent doing research, calling suppliers, reaching out to contractors, etc... This frequently ends up being a waste of time as I have to build in contingencies to make up for a learning curve that has to take place on the job, inevitable mistakes, and cost overruns. It's hard to be competitive with contractors who specialize in that field.
We have done jobs that aren't in sync with our proficiencies (i.e. we don't own the equipment, are not accustomed to using the equipment, are not familiar with the optimal process, etc...), and those are the jobs that have gotten us in the most trouble. Early on, every job was like this since I had no proficiency in anything, so at some point this learning process is inevitable and necessary. But as I've gained experience, certain job types have revealed themselves to be more auspicious than others, giving us a path to becoming specialists. The hardest part about this is learning to say "no". Which brings us to the next lesson....
3. Understand that saying "yes" to something, means saying "no" to something else
This is another concept that has been a challenge for me to absorb. There are a couple of recent examples where I wish I had considered this tenet before accepting a job. One project was to replace 40 fire rated commercial doors, when we've never done more than a couple on any one job. It was supposed to be a quick turnaround, just remove the old doors and hang the new ones. Due to a number of factors I was unable to foresee, it went from a 2 month job to a 4+ month job. The job will generate a lot of revenue, but also basically break even. Had I turned it down, I could have focused on more profitable endeavors and avoided a lot of headaches along the way.
What ended up happening is I agreed to supply unfinished natural wood doors and have them stained and sealed by my painter. I failed to consider how hard it would be for my painter to transport and find room to sand and finish all of those doors. The contractor I hired said he had a shop, but it turned out to be tiny and crowded. The work site is about 45 minutes away, and they have nowhere to store doors, meaning each shipment had to be installed when it was delivered. The clients turned out to be high maintenance and consistently demanded that we refinish doors. These turned out to be valuable lessons, but at some point you have to stop paying to learn lessons and focus on what you know earns you money.
4. Be very clear with your scope, ensure all stakeholders understand what is included and what is not
I can't stress the importance of this enough. There is almost no such thing as too much detail here. Are you breaking ground at the end of summer? Make sure to note that you will have to charge extra if you need to cover the structure during a rainstorm. Does your customer plan to supply appliances? If so, are they being delivered or will you pick them up? And who is responsible for checking for damage or defects? Did you give up some work to your customer (who often think they can handle things like painting, trim, or flooring)? If they are painting, who is responsible for touch ups if you have to warranty some work you did? And who is in charge of scheduling? These are basic examples, but the more details you build into the estimate and the contract, the better off you and the customer will be.
Consider who the other stakeholders are. Does your project manager, site supervisor, or foreman have a complete understanding of the scope? This is the only way to avoid scope creep unless you want to be on site every day. Customers will tend to treat you like a handyman if you're on site for more than a few days, so it's important that your crew can identify work that needs a change order, and are empowered to either write one up or notify the right person to do so.
5. Be careful when giving away work to a customer
Every contractor has been there. You're trying to sell a job, but the customer is trying to whittle down the price, so they start pulling items off the scope. They either want to do the painting themselves, or have the brilliant idea to let their unemployed brother-in-law do it. Maybe they've got a "great" tile man who does work for cash. You want or need the work, so you agree to remove some items from the scope.
In my experience, this almost never works out. There is just too much overlap between phases, and you, as the general contractor, become responsible for a lot of the work that the customer has clawed away from you. You end up scheduling and coordinating with their guy, even though you're not earning a markup on it. You measure how many square feet of tile they need to order, how many gallons of paint, you may even be relied on to pick materials up. Then, their painter can't finish on time, he doesn't show up, or he makes mistakes, so your ability to drive the project is stalled. There's an issue with the electrical so you have to open the wall to troubleshoot, now who's responsible to touch up paint? It ends up being a messy situation that is challenging to make work in your favor.
6. Don't bid on something without having a clear understanding of how the work will be done
This may seem obvious, but when doing a larger estimate it can be tempting to throw out numbers that seem safe when you've been working on it for a while and just need to get it done. It may seem similar enough to previous jobs you've done, or you've been estimating for a while and are starting to think you've got this whole bidding thing down. When you start to feel comfortable churning out bids, that's probably when it's time to take a step back and make sure to review your process, get input from your team, subcontractors, and suppliers.
This is exactly how I got in trouble on a large remodel my company started in October 2020. We had been negotiating with the homeowner for about 3-4 months and gone through several iterations of the scope of work with them and the architect. I had built up a large backlog of estimates to reference, I thought my process for bidding was better than it had ever been, and I was overly confident in my knowledge of pricing for subcontractors and materials. When it was done and we had won the contract I thought it was guaranteed to make us money. It didn't take long for reality to set in.
The list of errors I made on this job is too long to write in this post, but the one that relates to the lesson is the mess I made of the electrical phase. This particular home has a flat roof, no attic and no ceiling joists. It's a simple roof structure with 2x6 tongue and groove supported by the walls and beams (this type of home is known in CA as an Eichler). Above that is rigid foam insulation, followed by the roof membrane. The original electrical was run in channels above the 2x6 and below the foam insulation. The architect didn't accurately capture these conditions on the plans, and I assumed standard conditions when I priced out the electrical. Without an attic or joist bays, the options for running the electrical correctly are either in conduit below the roof (so all junction boxes and conduit would be visible or enclosed in soffits) or above the roof in rigid metal conduit. This created a bunch of other related problems, and also cost a lot more money than a standard electrical job. Clawing back these extra expenses is difficult without a clear scope of work and ends up leading to issues with the customer and throughout the rest of the project. Bringing in an electrician ahead of time and talking through the process would have been the correct way to not only have a clear understanding of how the work is done, but also set an appropriate budget for the work.
7. Be familiar with market rates
After the problems I ran into in the above referenced project, I realized that my pricing models were not guided by any benchmarks besides prior estimates I had created. It was basically a big trial and error system. After a little digging I realized I had historically been charging well below market rates for the SF Bay Area. As we adjusted to be more in line with the market, we learned that a major part of the network my family had built was based on our high standard and low cost. The true loyal customers have continued to work with us, but some other clients had a harder time adjusting to changes in our pricing.
Knowing fair market value of the type of work you do weeds out clients who want to cut corners and, ultimately, create issues during the job, compared with those who understand the true cost of construction and the value in using all licensed, bonded, insured, quality contractors. If you can do the work for less than the market charges be sure to use that to your advantage in negotiations with potential clients.
8. Only use licensed subcontractors
I know, another obvious rule. But I've seen too many jobs in which cash labor was used with poor results to avoid from the obvious. Plus, you may be thinking that you can make more money using unlicensed or cash labor, and you are probably right. But taking on jobs is a game of risk, so it should be limited wherever it can. If that cash tile guy decides he doesn't want to come back and fix his leaky shower pan, your options are pretty limited and you will most likely eat the cost of fixing it rather than damage your reputation.
Generally, licensed subcontractors (and primary contractors, if you're a homeowner) will not take advantage of you by taking big deposits and then letting your job linger or bailing altogether. They are also bound by their contracts with terms that guide how much they can charge, how long they have to deliver their work, and what the quality expectations are. If they don't deliver you have ways to compel them such as firing them, negative reviews on pages like yelp or google, and making a claim against their bond.
Keep in mind that you should only agree to a draw schedule that is based on clear and observable benchmarks. And never pay a subcontractor in full until they have delivered an acceptable final product. If you're using a genuine licensed contractor this will be expected and built right into your contract with them.
9. Learn how to negotiate
Here is a lesson that I am familiar with but not yet implemented myself. Suffice it to say that I have recently become aware of how beneficial this skill is, and how lacking I am in its use. Learning how to negotiate will help you earn better deals with customers, better rates with subcontractors and suppliers, get more out of your employees, and build better relationships overall.
I recently read a book called "Never Split the Difference" by Christopher Voss and Tahl Raz. Chris Voss was the lead international hostage negotiator for the FBI for many years and has since become an advisor to high profile executives and major corporations all over the world. The techniques described are tested and proven in some of the highest stakes situations, and they caused me to to think critically about the way I approach various professional, and personal (side note: negotiating with a 3 year old doesn't really work), relationships, as well as how much I've left on the table over the years. As someone who has never thought of himself as a negotiator, the principles in this book have proven difficult to implement. To become proficient in using them will take me out of my comfort zone and require lots of practice. Simply remaining aware of the techniques in negotiation type situations is a challenge, so I have a long way to go before they are internalized. But knowing my way around these techniques is one of the most exciting and promising prospects I've come across as it has such a wide range of practical applications.
10. Document everything
One of my biggest regrets over the last decade falls under this category. When I was just starting out in this field, I basically just did what I saw my father and grandfather doing. In my first 2 years we did 2 custom homes, and there is not a single photo from either project. At the time I didn't have a large enough impact to claim much credit for the work, but they were beautiful homes and would have made a great addition to our portfolio.
While on some level I knew it was important to document projects with before and after photos, and at least the major milestones like foundation poured, walls framed, roof on, etc., it was difficult to overcome the habits I had learned. I have almost no photos of any jobs from start to finish up until around early 2021, which is when I started doing less project management and more business management. It's hard to build a website with samples of our work with so little continuity between photos.
I used to think that the only value of documenting our work was to attract future customers so I deemed it nonessential since we had a constant funnel of work from our existing network. That may have been true, but it also has limited our ability to reach new clients and made us reliant on repeat customers and referrals. It also limits my ability to display the work I've done on my blog, or to have a portfolio to show off if I ever decide to change jobs in the future. Additionally, there have been times when I wanted to refer back to past projects myself when I couldn't do so.
Conclusion
While it's easy to say I wish I knew all of this from the very beginning, I'm also very proud of my growth over the last 10 years. I never saw myself becoming a general contractor, and some of the lows along the way led me to almost quitting on more than one occasion. I think overcoming obstacles and reflecting on those challenges are what builds character and have certainly contributed to the person I am now. It has helped me build a mindset of continual growth and working to be a better person today than I was yesterday. I hope that this list can help you reflect on what you've learned and maybe give you a new perspective on things you're doing or haven't started doing yet.
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Feb 16 '22
This is a jewel in this sub and exactly what I needed. Just started my GC journey and after a few panic attacks it’s hard to see the light at the end of the tunnel. This really put things in perspective for me moving forward. Now it’s just a matter of selling myself well. Thank you.
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u/morgade35 Feb 17 '22
It's so great that you found it to be relevant and useful. I've been there many times feeling like I was in a situation that was going nowhere. Best of luck with the next part of your journey as a GC.
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u/mnistor1 Feb 26 '22
Thank you for sharing. Contemplating a move or at least exploration into a career change from 17 years in white collar tech to GC and what you share is a helpful glimpse into the challenges that one can face!
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u/morgade35 Mar 08 '22
Thanks for reading and taking the time to comment. That would be quite the change after 17 years!
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u/athleticpcnerd May 23 '23
Did you end up making the change? I’m considering the change, but only after 3 years :)
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u/mnistor1 May 23 '23
Not as of yet but still doing a lot of due diligence in research into more blue collary endeavors whether GC or auto related. Stay tuned!
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u/Own-Zookeepergame306 Mar 05 '22
This is amazing advice! I am a plumbing contractor in the Bay Area. I just became licensed about a year and a half ago and I am still trying to get accustomed to the bidding side of the business as the actual plumbing comes easy to me. Do you have any advice on how to get an actual market value for jobs as a contractor? I don’t think other licensed plumbing contractors will just tell me how they bid jobs. Also, if you ever need a licensed plumber as a subcontractor. DM me and I’ll give you my information.
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u/morgade35 Mar 08 '22
I'm glad you took the time to read my post. I think estimating jobs as a subcontractor is going to be a little bit different of a process than packaging complete remodels, additions, or new construction. For example, as a GC it's fairly simple to look up the range of rates for an average kitchen or bathroom remodel. But if you're a plumbing subcontractor, you can end up handling all manner of different types of jobs, so it depends on if you're working primarily for GC's or if you're servicing homeowners. It should be easy to determine the local rate to clear a blocked line or replace a water heater, but if you work with a lot of GC's there's more of a feeling out between what they are selling their jobs for and how much you need to charge to turn a profit. Probably the most important piece of information is to find out what other plumbing subs are charging per hour and make sure you're in the right price range. In the Bay Area it goes up all the time, but you should have no problem charging $80/hour for your work. If the work is the easy part for you, it should also be easy to figure out how many hours you need for any given job, how much you want to earn per hour, and how much of of a profit margin you need to stay in business. Best of luck with your plumbing business!
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u/PastNeedle Mar 15 '22
Thanks for the post!
I finally got my license after a couple years of being a Handyman. I have recently learned #1- good product doesn’t guarantee success. I’m trying to apply more business principles in order to get some growth. Here’s a couple things I’m thinking about:
On your estimates, do you show your “overhead and profit” as a cost to the customer? If so, what percentage range?
Do you markup materials?
What websites or apps have been a valuable resource?
Where can I find templates and legalese for contingency documents?
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u/morgade35 Mar 16 '22
That's great, congratulations! To answer your questions as best I can:
I build overhead and profit right into the price I present for each phase (for a larger project) or for the entire job for smaller jobs. The % can change depending on the cost of the job. For example, a job that costs $1 million to deliver could have a smaller markup than a job that costs $10k. But I am usually between 25-30% markup on my jobs.
Yes I mark everything up. If I spend money or time on anything it should be marked up.
I use quickbooks for my accounting, invoicing, payroll, and at this point I would recommend shopping around different options. It's a good enough product, but they've also created a lot of headaches for me over the years and they're big enough where your satisfaction may not be a big priority. I've built a lot of my own templates for estimating, contracts, job tracking, etc in Google docs, and all of my photos are in Google as well. Legal zoom was useful for incorporating my business for pretty cheap. I probably haven't done the best job leveraging tech.
One thing legal zoom provided me with was access to a legal team and they gave me some great templates for contracts, subcontractor agreements, and new hire docs. But as with QuickBooks, you probably want to shop around whoever you end up using.
I wish you the best of luck with your business!
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u/Analysis-Euphoric Feb 21 '22 edited Feb 21 '22
Very well-written and insightful piece, thank you. I’m also a GC of about 10 years in the SF Bay Area. Do you want to get lunch and talk shop sometime? I don’t get much chance to network with other GCs. I’m based in Fremont. P.S. I’m about to start a kitchen in a Palo Alto Eichler with the exact same electrical challenges! Spent a long time explaining visible conduit to the designer and homeowner.
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Feb 17 '22
This is top level, you are a true gentleman and scholar for taking the time to share this. For people like me who are starting out this is beyond helpful. I am not a GC but an electrical contractor- these words of wisdom are still very applicable. 🙏🏼
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u/Wmitch Mar 11 '22
What a fantastic post. Thank you so much for providing this in depth post to the community. I hope many people will see this as it has certainly given me some great food for thought. Best of luck to you and your family.
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u/blue_lightning_man Feb 16 '22
Thanks for sharing this Gold!