You Gotta Make a Profit
January 2006I think profit is one of the most beautiful words in our language. It stands for growth, bank credit, bonding, better cars, sending our kids to good schools, bigger homes, travel and a secure retirement. Over the years I’ve heard contractors say they’ve taken jobs at cost to keep their crews busy. I think this is a sure way to lose your good people because, before long, you won’t be able to pay them. I’ve never taken a job knowing my company would lose money. To ensure a profit, the first thing to do, of course, is to know your real costs.
Right after the collapse of the U.S.S.R., my brother got a consulting job at a food processing plant in Slovakia. He was trying to explain to an interpreter that the company had to increase its profits, only to find there was no word for profit in their language. Until then, the company shipped everything to another region in the Soviet republic, regardless of quality. My brother spent the next few hours explaining the basic tenets of capitalism. Interestingly, upon his return to the plant years later, he found it very profitable, but management was still explaining the value of profit to the workers.
Years ago when I sold gypsum, a home builder called me to verify that his drywall contractor was ordering the additional board required for a job. The drywaller had missed his estimate and wanted an increase to his contract. I expressed surprise when he was given the increase because I thought GCs didn’t care if their subs made money. The homebuilder said if a sub lost money, then he would cut corners on the job to stop the bleeding. Ultimately, that would reflect badly on the homebuilder. "Subs have to make a profit to give the quality job I am paying for,” he told me.
TV’s Dr. Phil loves to ask, "And how’s that working for you?” Well the former communists in Slovakia are now hard-nosed capitalists and expanding operations, while the drywall company is still doing well after 38 years in business. The homebuilder, meanwhile, has built more than 40,000 homes and contributed millions to charities. And guess what? He got his start as a plastering contractor with his father!
When I get a chance to explain the Association of the Wall and Ceiling Industry’s purpose, I say it is to help members increase their profit. AWCI can supply the tools, but we have to use them.