A mentor in one of my business workshops told me to think about where we're spinning our wheels. The definition of insanity is doing the same thing over and over again and expecting different results. So where is the insanity? Where do we need to try a different approach?
We need a new approach to finding the crews to work on all these flips we're getting under contract. Steve has been out looking for deals and he's finding them – or they are finding him! It's spring and the deals on houses are popping up like flowers. People want to sell and move forward. We want to buy, fix up and sell to other people who want to move forward! We have a lot of work for skilled tradesmen (and women) who want it.
A Difference in Work Ethic
It boggles my mind to think there are people out there who don't take work as seriously as I do. It's a common problem with us entrepreneurs – we wake up bright and early at 5 or 6am full of energy and excitement because we know we're building an empire. Our work is really play, problems are challenges. And of course we're going to do what we said we were going to do. Why wouldn't we?
I think Steve and I made the mistake of thinking the independent contractors we hire to work on our flips all think the same way we do. And why not? They're independent, self-employed business people, just like us, right?
Why Contractors Underbid and Why They Should Never Ever Do This
Well at least one of them is. He was in my workshop Wednesday evening, talking about a job he grossly underbid, in which he over-promised and under-delivered due to barely being able to meet his own expenses. He put in a low bid, because he needed the work. Well, he got the work. But it's hard to put in the time on a job when, because of your own underbidding, you are not getting paid for your time. And he said he needs to stop doing this.
I spoke up – yes, you do need to stop this. Because when this happens, everybody loses. You lose, because you grossly underbid your services. But your client loses big, too. Because we thought we were buying a great service we could afford. You're the professional. You set the price. We saw your price and said, hey, we can afford that, so we hired you. And now you're giving us subpar work, not what you said you were going to do when you sold it to us. And you treat us like we're ripping you off. What a disappointment! Now your business is going to fail, because you're not making enough money. And you've also put our business at risk because we lose time and money due to your mistake. Be honest with your bidding in the first place! And if you were honest, and it ends up being more than you bargained for, be honest again. I'd rather sign a change order than have you screw up my flip.
Stop The Insanity!
Here's what we've done in situations like this, over and over again, expecting that this time it will be different:
1- Give second, third and fourth chances. Not showing up for work because you were sick, the kid was sick, death in the family, car wouldn't start, no money for gas, too hungover, too drunk, too nice of a day to waste on work... Up until this writing we've still been giving one shot, because people do have family emergencies and illnesses from time to time. But now that I think about it, I don't think that's ever worked out for us. The guys we've worked with a long time, who have gained our trust, get a pass. The unproven? Nope. If you can come back to work before we replace you, that's the only way you'll still have a job!
2- Hired contractors by placing an ad on Craigslist. Steve still does it as of this writing. He says it's a good way to try people out. But I don't think we've ever found anyone through Craigslist who lasted more than a few months. Word of mouth through other investors? A much better source. Even the newspaper – we found our best cleaner and painter from an ad she put in the Times Leader services offered section. Older workers use the newspapers. Older workers also, from our experience, have a better work ethic. My mother's 84-year-old “boyfriend” said what we need is him, twenty years ago. A skilled tradesman, retired, just looking for something to do to occupy his mind and put a few extra bucks in his pocket. Well, that guy isn't on the computer looking at help wanted ads on Craigslist!
3- Hired a service like Labor Ready. Unless you're going to be on the job site all day watching them, just don't. Bad experience.
4- Hired a licensed contractor with his own crew, then walked away expecting the job to get done as promised. They have the same issues with unreliable labor as we do when we do it ourselves. They also have the same issues with underbidding a job then resenting it later as the sole proprietor does. (See my previous post: http://thisgingerjustsnapped.weebly.com/blog/house-flipping-drama-settling-out-of-court)
I'm not saying we'll never hire a contractor with his own crew again, in fact we have so many flips coming up we're going to have to take external bids. We're just not going to walk away expecting everything to be hunky dory. I would love one of these contractors to surprise us and deliver as promised. That guy will get steady work, for sure. But we haven't found him yet.
Here's what is working for us regarding the issue of hiring crews to work on flips:
1- We use people we know and trust. They get first crack at any job, and we try to keep them working steadily. They also can help us keep eyes on any new people we're trying out.
2- We try out new people, with the hope of adding them to the ranks of those we know and trust. We do this, knowing very few will make the cut. We try not to take this personally, it's just the nature of the business. We cycle through them, hopefully getting most of them from referrals.
3- We manage the project. In the end, the buck stops with us. This is a fine line to walk – you don't want to micro-manage, especially the bigger contractors who have their own crews and their own ways of doing things. But in the end, they work for us. It’s our business. They are not our Higher Power.
4- We keep the right attitude. We realize we're still building our team, and that's going to take a lot of trial and error. If my calculations are correct, a few years down the road we'll have a fully vetted crew of our own, maybe even two crews capable of simultaneous flips. That's the goal, anyway! We stay positive through the process.
Steve got the keys to another flip today. One I've written about before: http://thisgingerjustsnapped.weebly.com/blog/thoughts-walking-through-flips
It was tied up in a bank's REO portfolio, and it took no less than five months to shake it out. But it's ours, and I'm excited - the granite countertop Steve got at auction will finally go to good use! And the Tiny House flip (http://thisgingerjustsnapped.weebly.com/blog/joining-the-tiny-house-revolution2800754) has been slightly delayed by labor issues, but is nearly complete.
The cool thing is, both flips are on the same street. Easier to keep an eye on our crews that way!
We need a new approach to finding the crews to work on all these flips we're getting under contract. Steve has been out looking for deals and he's finding them – or they are finding him! It's spring and the deals on houses are popping up like flowers. People want to sell and move forward. We want to buy, fix up and sell to other people who want to move forward! We have a lot of work for skilled tradesmen (and women) who want it.
A Difference in Work Ethic
It boggles my mind to think there are people out there who don't take work as seriously as I do. It's a common problem with us entrepreneurs – we wake up bright and early at 5 or 6am full of energy and excitement because we know we're building an empire. Our work is really play, problems are challenges. And of course we're going to do what we said we were going to do. Why wouldn't we?
I think Steve and I made the mistake of thinking the independent contractors we hire to work on our flips all think the same way we do. And why not? They're independent, self-employed business people, just like us, right?
Why Contractors Underbid and Why They Should Never Ever Do This
Well at least one of them is. He was in my workshop Wednesday evening, talking about a job he grossly underbid, in which he over-promised and under-delivered due to barely being able to meet his own expenses. He put in a low bid, because he needed the work. Well, he got the work. But it's hard to put in the time on a job when, because of your own underbidding, you are not getting paid for your time. And he said he needs to stop doing this.
I spoke up – yes, you do need to stop this. Because when this happens, everybody loses. You lose, because you grossly underbid your services. But your client loses big, too. Because we thought we were buying a great service we could afford. You're the professional. You set the price. We saw your price and said, hey, we can afford that, so we hired you. And now you're giving us subpar work, not what you said you were going to do when you sold it to us. And you treat us like we're ripping you off. What a disappointment! Now your business is going to fail, because you're not making enough money. And you've also put our business at risk because we lose time and money due to your mistake. Be honest with your bidding in the first place! And if you were honest, and it ends up being more than you bargained for, be honest again. I'd rather sign a change order than have you screw up my flip.
Stop The Insanity!
Here's what we've done in situations like this, over and over again, expecting that this time it will be different:
1- Give second, third and fourth chances. Not showing up for work because you were sick, the kid was sick, death in the family, car wouldn't start, no money for gas, too hungover, too drunk, too nice of a day to waste on work... Up until this writing we've still been giving one shot, because people do have family emergencies and illnesses from time to time. But now that I think about it, I don't think that's ever worked out for us. The guys we've worked with a long time, who have gained our trust, get a pass. The unproven? Nope. If you can come back to work before we replace you, that's the only way you'll still have a job!
2- Hired contractors by placing an ad on Craigslist. Steve still does it as of this writing. He says it's a good way to try people out. But I don't think we've ever found anyone through Craigslist who lasted more than a few months. Word of mouth through other investors? A much better source. Even the newspaper – we found our best cleaner and painter from an ad she put in the Times Leader services offered section. Older workers use the newspapers. Older workers also, from our experience, have a better work ethic. My mother's 84-year-old “boyfriend” said what we need is him, twenty years ago. A skilled tradesman, retired, just looking for something to do to occupy his mind and put a few extra bucks in his pocket. Well, that guy isn't on the computer looking at help wanted ads on Craigslist!
3- Hired a service like Labor Ready. Unless you're going to be on the job site all day watching them, just don't. Bad experience.
4- Hired a licensed contractor with his own crew, then walked away expecting the job to get done as promised. They have the same issues with unreliable labor as we do when we do it ourselves. They also have the same issues with underbidding a job then resenting it later as the sole proprietor does. (See my previous post: http://thisgingerjustsnapped.weebly.com/blog/house-flipping-drama-settling-out-of-court)
I'm not saying we'll never hire a contractor with his own crew again, in fact we have so many flips coming up we're going to have to take external bids. We're just not going to walk away expecting everything to be hunky dory. I would love one of these contractors to surprise us and deliver as promised. That guy will get steady work, for sure. But we haven't found him yet.
Here's what is working for us regarding the issue of hiring crews to work on flips:
1- We use people we know and trust. They get first crack at any job, and we try to keep them working steadily. They also can help us keep eyes on any new people we're trying out.
2- We try out new people, with the hope of adding them to the ranks of those we know and trust. We do this, knowing very few will make the cut. We try not to take this personally, it's just the nature of the business. We cycle through them, hopefully getting most of them from referrals.
3- We manage the project. In the end, the buck stops with us. This is a fine line to walk – you don't want to micro-manage, especially the bigger contractors who have their own crews and their own ways of doing things. But in the end, they work for us. It’s our business. They are not our Higher Power.
4- We keep the right attitude. We realize we're still building our team, and that's going to take a lot of trial and error. If my calculations are correct, a few years down the road we'll have a fully vetted crew of our own, maybe even two crews capable of simultaneous flips. That's the goal, anyway! We stay positive through the process.
Steve got the keys to another flip today. One I've written about before: http://thisgingerjustsnapped.weebly.com/blog/thoughts-walking-through-flips
It was tied up in a bank's REO portfolio, and it took no less than five months to shake it out. But it's ours, and I'm excited - the granite countertop Steve got at auction will finally go to good use! And the Tiny House flip (http://thisgingerjustsnapped.weebly.com/blog/joining-the-tiny-house-revolution2800754) has been slightly delayed by labor issues, but is nearly complete.
The cool thing is, both flips are on the same street. Easier to keep an eye on our crews that way!