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In my previous entry about targeting a specific service niche, I touched on the subject of replication in your business. It’s time to revisit and elaborate on this notion.
First, let me be perfectly clear that you will never get rich with your service or contracting business unless you are willing to grow the business and bring on employees to perform the labor. If you started that painting business because you simply love painting and get satisfaction out of performing the labor, then more power to you. Just understand that in order for the business to expand you have no choice but to take on a managerial role and pass off the brushes and rollers to worker bees.
In a simplified example, look at these two scenarios:
- You, the business owner, insist on performing most of the work on every single painting job, though you do have a helper that earns $10 an hour. Since most of your time is spent painting, there is little time left to devote to advertising and marketing efforts, which limits your annual gross revenue to $100,000. After expenses and paying your helper, you’re earning around $50,000 before personal income taxes. Not bad, but you’re not getting rich either.
- You have decided to step away from performing the actual labor so that you can focus more time and energy on marketing, sales, and administrative tasks. The resulting increase in business exposure for your company pushes your annual gross revenue to $200,000. You now have two two-man teams that do all of the actual painting. Each team has a “lead painter” that earns $12 an hour and a helper that earns $10 an hour. After paying all your workers and all other business expenses, you’re earning $70,000 before taxes.
Clearly, scenario number two is a more desirable outcome. You’d make $20,000 more per year by taking on more work, all without so much as touching a paintbrush! To make it even more interesting, let’s take things a step further:
- Emboldened by your increase in income, you decide to launch an even more aggressive marketing campaign that raises your advertising budget but results in annual gross revenue of $500,000. You now have five two-man teams that perform the labor, one salesman that gives estimates, and a secretary to answer the phone and perform basic office duties. Obviously with expansion has come higher costs, but after all is said and done you’re earning about $125,000 a year before taxes. Not too shabby considering that your duties amount to making executive decisions, handling the marketing, and watching a good deal of ESPN in your office.
Hopefully you can see where I’m going with this. Pull out a pen, paper, and calculator and extrapolate these numbers out even further (million-dollar service businesses are fairly common in many big cities) to see for yourself that the income you’ve always dreamed about is achievable, but it simply cannot happen if you’re doing all the work yourself. You’ve got to pull yourself away from the labor if you ever hope to truly make a lot of money. To get rich you must grow and learn to delegate. There is no other way. If you can’t stand the thought of parting ways with a brush in your hand and paint on your face then so be it. Just be aware that you’ll probably never earn six figures and you’ll be busting your butt for the next 30 years just to pay the bills like everybody else.
My name is Jeff and I created this blog in 2007 to help and inspire contractors and home service providers. It’s come a long way since then.
I just found your website and I am really learning a lot from it. I am 26 and started my businness a year and a half ago. I have 1 full time employee and am ready to take the next step. I love what I do but know I need to give up the labor part to really start makin money. How do you know when to take the next step and hire more employees. Thanks
Hey Nick,
I think your best indication is when you start getting inundated with more work than you can handle. That’s when you start adding more hands on deck. If you’re turning away jobs or having to schedule them out months in advance because you just don’t have the time, then you’re probably ready to hire more people. Hope that helps. Thanks for the comment!
Hi Scott,
I’ve been doing construction for 14 years, I’m 32 and worked for the carpenters union for 5 years and got my journeymans card and then market crashed. I went on my own and blew up quick luckily with a investor who was buying Townhome’s to rent (5 a month) and at that rate I needed people. I know so many friends that are carpenters but I have to say, bad idea. I am hearing horror stories about putting employees on payroll in my line of work so I 10-99 ‘d my “friends”. When I went online to search for other workers they all wanted paychecks every week and taxes taken out. I started with no capital and didn’t have have a bunch of back up money just in case and sure enough, 2 years later the investor moved and work went on but not enough to keep everyone employed. It was hard letting everyone go, I got threats, etc. now it’s to the point I am screening calls and I went back to the union but I want to expand and start over and be big but again, no Capital. I have a house that is paid for that I’m flipping but til it’s done I can’t get a loan or sell and can’t finish quick enough cuz I have no money besides unemployment (which I forgot, after 6 months we all were laid off “for winter”) I don’t want to ramble but any suggestions?
Since you’ve had so many issues with employees, maybe it would be best to just go solo for awhile. During tough times a lot of guys will just switch over to doing handyman work when there aren’t enough big remodeling jobs. YOu can make a LOT of money as a solo handyman if you price your work correctly. Check out Dan’s 100k handyman product in my “resources” section.