I have a friend who is a mid-sized electrical contractor. His work is evenly split between commercial and residential, with contracts ranging in value up to a few hundred thousand dollars. I recently spoke with him about his business and his responses to my inquiries were direct and honest, yet sometimes unexpected. My questions were framed from my perspective as a contracts attorney. See if his answers match up with your own thinking about your business.
Ittig: Do you sense in advance what jobs will be good, and which are condemned at birth? What are the signs?
Contractor: When I first started my business I quickly found that I needed to develop a sort of sixth sense, which is my customer intuition. When a new customer right out of the gate tells me how long they think it will take to do the job, or if they want me to take shortcuts to save money, then I am concerned. In my line of work, safety and quality materials come first, and then cost is considered.
I also see a red flag if a general contractor offers me the job only if I reduce my estimate and then he gives me another electrician’s bid. Although I have been in business for 30 years, there are still times I think a job will produce a great business relationship and it ends up going sour anyway. These days you need to have more super senses than Spiderman to run a business.
Ittig: Do you turn down work when the job just doesn’t feel right? If so, how many years were you in business before you felt free to trust that judgment?
Contractor: Sometimes you find out the hard way that certain jobs should be turned down. When I was just starting out, I didn’t feel I was able to turn jobs down. After four or five years of being in business, I trusted my judgment. Contractor grapevine can also be a good source of information when deciding to take on a job or not.
Ittig: What would it take for you to walk off a job that is under construction? Have you ever done that? If so, what was the cause?
Contractor: I have walked off of very few jobs. I believe that most disagreements can be resolved during a job in progress. But the biggest reason for walking is nonpayment.
Ittig: What investigation of the owner’s finances do you do, if any?
Contractor: I don’t normally do any type of credit investigating. Word of mouth is sometimes reliable in the small communities. For larger commercial jobs, I take my chances and rely on first impressions and 30 years of experience. I find most of the time that if you are allowed to do a good job the money will follow.
Ittig: Are there types of projects your company just won’t do? Which ones, and why?
Contractor: As a rule, we do not do tract housing. The profit margin on a tract house is low and it usually requires the quickest and cheapest methods of electrical construction.
We take pride in our quality of work and my employees feel each job is special and enjoy the challenges of quality not quantity.
Ittig: What gives you the greatest satisfaction in your profession?
Contractor: The greatest satisfaction is being able to look at a job well done and a customer well satisfied.
Ittig: What do you least like to do?
Contractor: I least like the paperwork and the financial end of the business. I would rather be out in the field with my workers or meeting with customers.
Ittig: What would it take for you to even consider doing work far from home?
Contractor: The job would have to be extremely profitable. You have to consider fuel prices and or lodging as well as the feelings of my employees. However, I think this is a trick question thrown in by Mr. Ittig just to see if I was paying attention.
Ittig: How has the National Electrical Contractors Association (NECA) benefited your business directly or indirectly?
Contractor: NECA has helped me immensely with their magazine, which contains a great volume of information.
Ittig: Feel free to venture into other areas for discussion.
Contractor: One area of importance to business that I have not mentioned, but is crucial to its survival and success, is the employees. I try to find honest hard- working people. I believe in offering good benefits and keep my door open to each one of them. I think you get what you give.
Ittig: For fixed-price contracts, do you ever monitor a job’s cost, during performance, to see whether you are within budget? After the job is over, do you assess profitability (estimated cost versus actual)? If you do either, how do you make the assessment?
Contractor: Even on a fixed-price contract job, I have the men do their paperwork as if it were a time and material job and submit it daily to the office. My billing department then does a mock invoice of the materials and labor. That way I can monitor the job as it progresses. The mock invoice is also helpful when billing the customer, as I can bill along truer lines according to percentage of job completion. This also allows me to assess profit or loss along the way before completion.
Ittig: Is there a job size that you would not bid (e.g., over $500,000, over $1 million, over $2 million)? If so, what are your concerns?
Contractor: There are two things that would keep me from bidding a big job. The first thing would be lack of employee/manpower within my company.
Second would be questionable stability of who I would be working for, as larger jobs can come with concerns of cash flow and retainage fees. A big job is really a bunch of small jobs put together. Looking at a large job as a whole is too overwhelming, so I always break it down into smaller bites.
Ittig: Would you be interested in expanding your low voltage work (security systems, sound and light systems, etc.)? What are your reasons, pro and con?
Contractor: We have a very demanding schedule for our low voltage work and I would like to expand in that area. To date, I employ one electronics technician and two lighting control programmers. The only expansion cons are that I would need experienced techs and finding them is difficult. The various low voltage systems are really in demand both residential and commercial wise. I view it as solid future work as long as the techs are truly qualified.
Ittig: What percentage of your work is bid to electrical drawings versus your own design-build work?
Contractor: I would say electrical drawing versus our design-build, the percentage is 50/50.
Ittig: Why are outlets always on a 10 degree angle?
Contractor: This is a question only an attorney or engineer would ask. When tightening a device on a wall, one must turn a screw clockwise, which always seems to move the device on the last turn to that position. If you tighten the top screw last, the top will be 10 degrees to the right.
If you tighten the bottom screw last, the bottom will be off 10 degrees to the right. To correct the problem, put painters tape on a torpedo level (so you don’t mark up the walls) and straighten your devices/covers. Also, a laser level will do the same thing and will be very precise.
My friend’s answers involve a number of legal issues that have been addressed in prior articles: cost-plus contracting, abandonment, punch list items, design-build contracting and monitoring job performance. Do these answers comport with the way you operate your business? Consider running these questions by your own people. EC