The universe is speaking to me. This is the redux of questions and conversations I’ve had on this subject over the past several days. No one is to take offense at this posting. I’m laying it out as neutrally as I can.
Here’s the summary first: DEs confuse profit with costs.
You think no one wants your job because the profits are small. I think I can speak for service providers everywhere when I say: in working with a start up, I would be delighted if I broke even on a job. Generating one penny’s profit would be icing on the cake. Unfortunately, profit rarely happens. With small lots from start ups, it is more typical that we don’t recover the costs of what we put into the job. We end up with less after we’re done.
It is very frustrating when DEs complain about what they presume is a contractor’s greed. They think their job is turned down because a contractor won’t get as big of a profit on their small job as they will on a larger one. What a contractor fears is losing more on the small job that he or she can sustain. Profit is not the same thing as cost.
I could go on at length and tell you that service provider’s costs amount to being able to make payroll, pay bills and hopefully draw a modest salary for running the show but I don’t think it really hits home. So here’s an example. I’ve got two of those jobs myself right now. I only took them even knowing I’d lose money because I really want these lines to make it -I’m subsidizing their enterprises. That’s what a service provider is doing when he or she agrees to take on your small lot. They’re taking a risk on you. They want you to make it so they help you out by taking the job. You’re not doing them a favor, they’re doing you one that costs them money so be nice.
My clients have no idea what I’ve lost on their jobs. If anything, they probably think they’re paying through the nose. One job cost me over 25 hours of work but I will probably only bill for 10 of it. Maybe less, I don’t think she has the money. Maybe it sounds crazy to under-bill but there’s a logic to it and no, it’s not because I’m holding out for her to become a major account. Big accounts are risky too (all your eggs are in one basket). The reason is, once I’d committed to the job, to return the work to the customer for reworking their portion of it, would have cost me more than the 25 hours in addition to disrupting my scheduled work calender. Cutting my losses meant putting in the unpaid hours. Depending on how well the customer follows the suggestions I’ve made for future projects will determine whether I’ll do more more work for that customer. That is by the way, why a contractor who did work for you before no longer will. An aside about my two customers, they’ll probably be mortified. They are good, caring, dedicated designers and as responsible as they could be. I like them both and will continue to do work for them schedule permitting.
The other job was about nine hours for which I’ll bill 5. That’s not so bad but this is. In the process of her cutting and sewing a sample, fit testing it and sending the pattern back to me for correction, she did something to her pattern that ruined it. I was sick over it. It is not usable and will take more time to unnecessarily re-cut it in addition to her changes. The additional hours are a complete waste of my time and her money. I’ve decided that I’m going to bill her for some portion of the repair because I’ve written of the problem she created ad nauseum. Unfortunately, I just know that when I tell her, she’s going to say she didn’t know (again, even though I’ve written of it often enough) and she will probably resent having to pay but I’m running her job at a loss already. What do I have to do? Take out a billboard saying “Don’t Do This Because It Really Really Matters Even Though You Think I Mean Everybody Else”?. Sometimes people don’t listen until it costs them. Even if we charge a smaller customer for a portion of the costs they created, the service provider is taking the bigger hit. We can’t possibly fathom the millions of ways a customer can do something to ruin a job and prevent them from doing it -and that’s assuming they’ll listen to us. Many don’t. They think it doesn’t matter or that we’re being picky. Like I said, education costs and a contractor can only afford to underwrite a client’s to a limited extent. When we take a small customer, we pick ones we’re willing to underwrite with the hopes they’ll make a go of it.
So I lost money on these jobs, I’ll survive because I made the decision years ago to not buy anything on credit. But not everyone has that luxury; most contractors are over a barrel in ways I’m not and they can’t absorb losses like I have. They lose less money turning down the job if only because they kept their schedules open to accept other jobs that come in the door. In other words, not only are they not losing over and above their costs, they’re not losing opportunity costs. Which is what I’ve lost. I had to turn down other jobs while doing these. Insult to injury, my customers might think I’m scalping them. Point is, contractors can’t take jobs that result in greater cash going out than coming in if they expect to stay in business because they don’t get external funding from charities. It reminds me of that old joke of losing a penny on every sale but making it up on volume.
DEs think that their small job is better than nothing -but is it? Look at it this way. If a job comes in that will cost me 40 hours of work but I can only get paid for 15 of it, I’ll turn it down because even if I only get another small 15 hour job in the same time frame, that will leave me 25 other hours to develop other projects or business that may pay off down the road. A contractor looks at it the same way especially if their costs are relatively fixed. They’d rather spend 15 hours on a job for which they’ll be fully compensated and have 25 hours “idle” than spend 40 hours on a 15 hour paying job. Namely, those “idle” 25 hours will go into cleaning the place up, doing maintenance, repairing machines or electrical, putting up a website or something like that. They’ll put those 25 hours into their own shop.
I know nobody likes to hear this. Many of you think you’re paying through the nose (and maybe some of you are) but chances are good that if you hired someone good, they’re taking a loss on your small jobs. It’s because there are all kinds of things that are out of the scope of the project and we lose less money by fixing it than we’ll lose by sending it back to you. And I also know that some people think it is our responsibility to educate the customer “if we want the business” but they’re missing the point that we might not want the business. Educating the customer is a retail mindset. You do that so consumers know why they need to buy your stuff. At wholesale, it’s all different. The onus is on you. Contractors want customers who need the least guidance because no matter what, even with the most experienced customer, there are always unexpected or unforeseeable events that increase the cost of the project and remember, the contractor can only charge you based on the quote they gave you. Picking customers with larger orders is a cognitive shortcut. Larger orders are usually indicative of a better educated customer. They’ve been around longer to learn and grow.
If you can prove yourself to be an educated customer to the extent your oversights that create work outside the scope of the project are reduced, there are many contractors would be delighted to work with you on small jobs. The unfortunate thing that happens is one’s oversights create a stop to the whole project, say your zippers didn’t come in. You’re embarrassed and I understand that it’s not your fault but it is not the contractor’s fault either. While not your fault, it is always your responsibility as are the costs -it’s not fair that a contractor incurs losses on something that you are responsible for. Time and time again DEs think this delay is minor but it isn’t. The fabric was spread and cut, the machines threaded over and yet the job can’t start because all your stuff isn’t there. So the cut bundles and whatever else you have is pulled off to the side (let’s hope none of it gets lost) while someone else’s job gets processed. So then maybe you think you’re up next because your zippers have since come in but not quite. They had a schedule and you missed your slot. It may be awhile till they can work you back in. Except it will be worse. It takes longer to re-start a job than it would have taken to do it at the time of scheduling because they won’t remember where they were on it and have to follow the path of the job, redoing some of it. Most contractors don’t charge for that because the time is difficult to account for. So, they’ll just put it off until they have time to do it and since they don’t know how long it will take to re-start it, they may wait for a longer time slot to open up. Which could be months. Meanwhile, your stuff is taking up space, getting mixed up with other people’s stuff, some of it gets lost or whatever.
Few people get rich being a contractor so presumed greed over the profit of your job versus someone else’s has nothing to do with it. The question is better phrased as, on which job will they lose less?
There are three lessons:
- Profit is not the same as cost. On small lots, a contractor will risk investing in jobs he or she will lose the least on.
- Be responsible for your education. If we could make you learn what we think you need to know, we would.
- Have a heart. Realize that with small lots, we’re doing you the favor and not vice versa. We’re losing money on it even though we haven’t told you.