It’s an age old question that we contractors face. That’s if we’re paying attention to changing market conditions and monitoring how well our own company is functioning.
There is always a balancing act between how much work we sub out so we can stay focused on our core business and giving away dollars and control to someone else.
This leads inevitably to the continual question about whether or not to take on a new trade with new products and services makes sense will continually challenge you and eliminate the subs.
There is no one answer that fits all but here is some good advice that I share with my own clients who have both decided to continue to appropriately use subs and to enter new trades successfully. It’s all based on my own company’s approach.
As a matter of fact, one of my clients is currently debating the value of whether or not to add weatherization products and services to the work they already do. There is this enviable situation because they now do a great job of selling and doing home energy audits and this weatherization work is a natural result of their energy audits.
Currently, they use well-trained subs [the customer delegated how to do the work to their standards!] who do this work at very competitive pricing. But, we naturally debate the worth of potentially making more money and more control of the outcome.
What I recommended to him when faced with a great question like this is to bring it up in his “Daily Business Meditation” first. The “Daily Business Meditation” is where you ask yourself the following set of questions and spend time thinking about it:
- What business am I really in?
- What business should I be exiting?
- What business should I be going into?
In this scenario as to whether or not to bring on a new trade with a new set of products and services, you must ask yourself the next set of questions and then answer them as honestly as you can by first removing your ego from the equation:
- Will we make more money for less grief by continuing to sub the work out?
- Does subbing the work out keep us from being distracted from what we should be focusing on?
- Would we make more money and still be competitive in pricing as well as do a better job if we did the work ourselves?
The other bigger questions to ask are:
- Are you already on top of how to deliver on sales and work done in the trades your company does today?
- Are you the company people think about when they want top notch work in the trade or trades your company does?
Note: If you said yes to these two questions, it’s time to think about expanding into another sector or just growing your service area. If not, it’s time to stay focused and make this a reality first and then re-examine how this next piece you want to add would fit in a profitable model.
My family would ask ourselves these very same questions as it related to own company before we branched out from only selling and servicing oil heating to gas heating, cooling and plumbing. We also know we wanted to “Own the Basement” and keep our competitors out who were beginning to steal away our customers.
Plus, we had learned the secret to successfully adding new trades and that is the creation of documented policies and procedures coupled with a working training center and course curriculum. And the commitment to buy all the tools and equipment and provide the training is what it takes to do this new trade the right way. All of this is a must!
BUT, our company also knew what trades we didn’t want to do. And one trade we never wanted to do was home security. That’s why we found a really good home security company that we could be allies with and we worked out a “Stand-Still Agreement” that benefited us both. A quick explanation of a “Stand-Still Agreement” is that it’s an agreement where both parties agree not to enter each other’s business or take one another’s clients. Know that this type of agreement can vary.
One last thing, once you are philosophically onboard about adding this next piece to your company, you must do a “financial projection” and remember if it doesn’t make sense on paper….don’t pursue it!