Why Contractors Fail and How to Avoid It!

Why contractors fail and how you can avoid it My goal today is to share some insight with you based on 35 years of owning businesses and the last 10 years coaching hundreds of contractors about the three major reasons why contractors fail and what you can do to prevent going down the same path. As I speak at events and participate in panels, I keep getting asked why home service contractors fail. For years I was going off of old stats that say 70 to 80% fail within the first three years. According to the U.S. department of Commerce, the actual numbers are 29.1% in year one, 56% within three years, 72% year five, and 97.6% within 10 years are no longer in business. These numbers are still unacceptable and I want to broaden it to include why anyone fails at achieving anything big that involves being in charge of a team. I've had my own successes and failures over the years in business and I want to help you avoid some of the mistakes myself and many others have made that have only become clear to me in the last few years. After a lot of heartache, stress and observation, I can't even fathom the money I've blown missed out on not knowing what I'm going to share with you in this series. In this video, I will share with you three main reasons that contractors fail, the actual root cause of these failures, and what you can do to be successful as a contractor. First, let's attack the root cause and then we can cover the three branches of the tree that will either bear fruit or fail based on you. Who knows, you just might end up with a business or a life that you love and loves you back if you take just a little time to listen. So let's talk about the root of the problem. Let's just get right to the point. The root of the problem is pretty simple really. It is a low barrier of entry to a world that has a high barrier to achieving success. Think about it for a minute. For most home service contractors, if you're smart enough to acquire a business license, which some don't even go that far, and have tools in a truck, boom. You're a business. No college degree, no high school diploma, or heck, even a ged. The vast majority of contractors that fail start one of two ways. You're either good at what you do and get word of mouth work or you can sell ice to an Eskimo and and thus obtain work, both of which are important, but neither of which qualify as a business person although you have a business license. Maybe now, in an effort to be transparent, some states do require a license, but most that do well, the tests are pretty simple with a little study. Most tests don't consider the business side just can you pass a test that says you know how to do the work or not without actually seeing any proof of workmanship? There are a few exceptions like Minnesota and Florida who have more difficult tests, and California that requires you to actually be an installer for a period of time before you can become a contractor. But the reality is still a pretty low bar. So we get started because either someone wants us to perform some work on the side or because we can do it better or right. And finally, why am I doing it for them when I could keep the profits and maybe even all three in some cases? The reality is most end up creating a job that they work for instead of a business that works for them. Not only have they become an employee, which they were trying to avoid, but they work harder and longer hours trying to figure out the business side of things, preventing them from achieving the dreams they set out to achieve by being in charge of their own destiny. It is a cruel cycle that's hard to stop. So what does all this mean? Before you start a business, you better understand what comes along with it. Find a mentor, get a coach. Do your research. And be careful of the enemies of pride, ego and greed. These factors will lie to you and tell you you can do it on your own without sacrifice or cost instead of investing to gain the return on investment faster because you invested in yourself knowing nothing great was ever achieved alone. For reason number one of why contractors fail. A lack of purpose. How to approach it to give you the motivation you need every day for as long as you want. In the first video in this series on why contractors fail at such a high rate, I covered the root cause of those failures. A low barrier to entry and why it presents such a problem due to our lack of the necessary tools to run a business. Here in part two of this series, I want to talk to you about one of those tools and the first reason why contractors, or really anyone, fails to achieve their goals and dreams. A lack of true purpose. I have been fortunate enough over the last 20 years or so of my life to speak in a variety of environments that allow me to ask the attendees if they know their purpose. Based on my research, less than 5% know it clearly. I believe that is more because we have a difficult time defining it than not having a purpose. I believe everyone has something inside of them that drives them, but you don't stop long enough to think about it and how it applies to your daily life. The best definitions I have been able to find are from a Stanford study, several mentors and coaches, and a little of my own observation and nuance. First, the clinical definition Purpose is a chemical reaction that takes place when our talents and skills meet the needs of the world, resulting in emotional fulfillment. Now, the practical definition purpose is not a destination to achieve, nor is it something we find. It is a journey and a practice that evolves and adjusts in intensity throughout our lives, which gives us meaning. So how do we approach this thing called purpose? As a contractor, if your purpose is why you do something, what inspires you to that why in the first place? Well, the simple answer is you. Or better said, your identity. Or even better, who you identify as. I'm not talking about all that social media stuff that everybody fights about. I'm talking about you specifically, and how your innate talents and learned skills bring you and others joy and fulfillment. When we apply this to our business, what does your business identify as? Are you really a contractor or something more? Let me put it this way. If you don't absolutely believe that the journey is worth it, you won't have the passion to keep moving forward. In other words, your want to won't be enough. The further along the journey, the more obstacles and challenges you will face. If you have something driving you worth fighting for, you will find a way. If not, you'll take another path. If who you are isn't aligned with why you do what you do, you likely will not succeed. Maybe in the eyes of the outside world, but inside you will feel like something is missing. So ask yourself, who am I? What am I doing when I'm having the most joy? What are my skills and talents I can apply to the world to live the life I want to live? What does my business need to look like to live that life? To better understand this concept, I want to share a little story with you. Ten years ago, I didn't really understand why my identity or who I really was. I thought I was a C level executive and a business owner. The reality only became clear as I spent the last few months of my grandfather's life with him in the hospital. He asked me those same questions, just in a little different way. You see, I had just resigned from a pretty prestigious position as a director of sales for a software company providing a CRM to home service contractors. It was the first time in my life I left a job without the next best thing lined up. He asked me what I planned to do, and I immediately answered with golfing and fly fishing. He laughed and said, that won't last long. What do you want to be? I said, I want to be a college basketball coach. Again with the laughter. Well, I do believe if anyone could pull that off that it would be you. Such an advanced age. What is it about the job? Is it the coaching or the basketball? Things got pretty serious at that point, which wasn't I told him I would get back to him on the next day. After really thinking about it, it was the coaching. I've coached little kids to college athletes, not only in basketball, but baseball and football too. I've coached thousands of sales reps, dozens of managers, contractors, and the list goes on. Sometimes paid, sometimes free, but regardless of the money, I love to coach. I told him as much the following day. Then he asked me what was I great at and I replied with well, I'm pretty strong at this contracting thing. And boom. Contractor Coach Pro was born. You see, he knew who I was and up until that point I really didn't know. Now, how about you and your company? Are you really just a contractor? Or are you possibly a growth development company, a sports franchise, a marketing and sales firm, a recruiting and training organization, or something else that fits your talents and skills? If it doesn't make you get out of bed every morning to take the next step of the journey feeling that the effort is worthwhile, you will not have the discipline necessary to achieve your aspirations and you will fail. Maybe not right away, but when the obstacle or challenge gets big enough and the easy path is right there to take, well, the next step will be determined by your identity and sense of purpose. Think of your purpose as the thing that will propel and compel you and your business every day. Last but not least, our purpose here at Contractor Coach Pro is to empower people to believe. With my identity as a coach, this gives me the emotional fulfillment of our purpose to see a contractor believe in themselves, to believe in us as their guide, and ultimately to believe that God exists. He loves us and wants us to love each other. We do this through caring enough to willingly serve our clients and so they know we truly love them. And everyone on our team knows it, is aligned with it, and is motivated to get it done every day because we love it. The journey is worth it, and my want to is enough is yours. In the first two videos in this series on why contractors fail at such a high rate and how you can avoid the same fate, I covered the root cause of those failures, a low barrier to Entry. And the first reason contractors fail? Because of that low barrier. A lack of purpose. In today's video, I want to share with you the second reason contractors fail. A lack of leadership capability. Let me ask you a question. Are leaders born or made? Think about that for a second before you answer. Sure, some of us are born with leadership leaning tendencies. But. But leadership is a skill and anyone can learn it if their want to is bad enough. To better understand whether that is true of you or not, we must first define what leadership is. So what is the clinical definition of leadership? Leadership is the art of motivating a group of people to act toward achieving a common goal. Pretty simple concept, but difficult to achieve. To truly understand leadership, we need to dig a little deeper than the definition. Leadership isn't good or bad. It is either strong or weak. Let me say that again so it sticks. Leadership isn't good versus evil. It is strong or weak. I'm sure you can think of bad people who have had millions follow them. Yep, still a strong leader. I'm also sure you can think of several people throughout your lifetime who wanted to lead and have never quite figured it out. Well, those are the weak ones. Strong leaders understand that leadership is a combination of their level of skill and ability to create capacity to do more in less time. Leadership is a big undertaking and I have only so much time to keep your attention, so I can only scratch the surface here, but the equation you need to know is what I call the Leadership Impact equation. Skill multiplied by capacity equals your impact exponentially. Your level of skill multiplied by your capacity to create more time to work on your business will determine the overall impact exponentially of your business. Think about that for a second. Heck, pause the video and truly digest. If your skill is low and your capacity is low, your impact will only affect a few and be capped. But if both are high, you can impact an entire planet. We teach leaders every day how to do this so they can position themselves to own their business instead of it owning them. Leadership affects all aspects of your business, but most of all, culture and accountability. If that statement is true, I assure you it is. You will realize you aren't in the roofing, painting, or whatever contracting business you think you're in. You're in the people business. Meaning if you don't connect with your people in a clear shared vision that benefits both them and the company that everyone is accountable to, including you, you're likely to experience a lot of turnover, drama, infighting, chaos, stress, and ultimately mutiny. Does any of that sound familiar? If so, it's time to take a hard look in the mirror and address your leadership skills and time management. If you watched or listened to part two in this series on purpose and the various types of businesses we can be, you will notice they're all people focused. The most impactful thing I can share with you about leadership skill is I believe connection. I believe connection is the super skill of leaders. It is made up of seven very distinct habits which are sub skills to connecting with your people. Remember you're in the people business. You can use these habits to inspire others to willingly follow you due to that connection. These habits are to engage Engage everyone with a vision they want to be a part of because it benefits them to educate. Educate yourself and others to fulfill the vision. You become a person who delivers on their word. The example Set the example of what you want others to be and the effort and humility required to be a part of the team. Empathy show empathy but not sympathy. Empathy is caring enough to put yourself in someone else's shoes to better understand what they're going through, but not allowing those issues to be an excuse but a challenge to be overcome with your help. Sympathy is allowing the excuse to defeat those you lead. Then encourage Encourage others for positive effort in front of everyone and you'll get more of it. Do the same with discouragement, you'll get more negative effort. If something negative happens, handle it in a one on one and make sure to have an action plan to get them on the right track and then we have empowerment. Empower those whose efforts deliver results with responsibility and ownership. Start small and grow to bigger responsibilities and who knows, you just may have a new leader that affords you more capacity. And finally, expect Expect to be accountable, both you and your team, to the expectations and behaviors that are the requirements of your culture. And you will earn the respect you want as a leader because they see your character. A great exercise for you would be the I commit to exercise. Take each of the seven habits I just shared with you and ask yourself how do I commit to engage? Educate? Set the example. Follow the same format for all seven, writing each one down. On those days when you feel like this leadership thing is tougher than you thought, pull that out of the desk drawer and get back to your commitments. In part four of the series, I will cover the final reason of why contractors fail. A lack of knowledge and how you can obtain it to avoid the school of hard knocks and just fail. Forward Myths to Success in the first three videos in this series on why contractors fail and how to avoid It I covered the root cause of those failures. A low barrier to entry and the first two reasons contractors fail because of that low barrier. A lack of purpose and leadership ability. Continuing our four part series on why contractors fail, let's discuss the final and biggest reason for failure. A lack of knowledge. Just walk into a library once or do a search on Google or YouTube and you'll realize just how little you really know. Have you ever heard the quote knowledge is power? When Sir Francis Bacon published his work meditation sacre in 1597, the saying knowledge itself is power, he wanted to transmit the idea that having and sharing knowledge is the cornerstone of reputation and influence, and therefore power. All achievements emanate from this. Wow. All achievements emanate from knowledge, which is why a lack of knowledge is the number one reason contractors fail. How about these quotes? The man who asks a question is a fool for a minute. The man who does not ask is a fool for a lifetime. Confucius or to know that we know what we know and to know that we do not know what we do not know that is true knowledge. Nicholas Copernicus I call quotes like these brain ink. In other words, I want to tattoo them on my brain as knowledge to help me be more successful. I write them down, place them where I can see them all the time until they're embedded in my memory, making them unforgettable. Most likely you've heard that to achieve success, you must fail forward and learn from your mistakes. These myths only apply to the creation or innovation of something new. I'll never forget one of my best coaches telling me, if the information exists and is readily available, why wouldn't you learn from others to avoid making the same mistakes? Now, don't confuse blind experience with guided coaching. Both will have failure through experience, but one leaves you flailing, like knowing there's a treasure out there somewhere, but you don't have a map, so you just start digging while the other achieves the goal faster with a lot less pain. Think about how you learned to walk or ride a bicycle or play a sport. You had a coach, whether it was your parent, teacher or a coach. They showed an example, helped you understand the fundamentals, and then walked alongside you as you gained the experience to do whatever it was on your own. They gave you a point of reference to start getting the right experience with a fundamentally sound example that allowed you to take it even farther. This is how we continue to progress as humans. Learn from others that have been there, then fail forward as you progress beyond their guidance. Take the leadership habits from part two of this series. For example, you now know it, but for it to be effective you must experience it and make it a habit. Without the knowledge of those habits, you wouldn't know where to start. You would simply be guessing or failing with purposes, but still very unlikely to achieve connection without the guidance to get you headed in the right direction and the accountability to make sure you have a down There are two keys to knowledge. Number one, understanding what you need to know and when to get it. The knowledge you need for a startup is vastly different from the knowledge needed to run a multi million dollar business. 2. Knowledge is the how to your why. In other words, knowledge without action is meaningless. Think about all the things you need to know to be successful in business. We already discussed the big one, leadership, which defines the culture and why to fulfill your identity and the identity of your business. Remember, it is a skill and thus knowledge. But what about legal insurance processes, hr, finance, technology, marketing, sales, fulfillment training, recruiting, hiring and onboarding to name just a few of the areas. We need some pretty strong knowledge in a time that we call the information age. A lack of knowledge is simply not an excuse anymore. Read There are millions of millions of books and you must become a reader. I'll start with a selfless plug to read my book Contractor's Blueprint. Literally a roadmap for a successful contracting business. But oh wait, that's too slow. How about Google, YouTube, podcasts, social media, mentors, coaches and consultants? The info is out there. Go get it. A wise man knows that applied knowledge increases the velocity of his success. Hey, that's some brain ink right there. God has imbued each and every one of us with innate talent and the capacity to learn by gaining knowledge. If we don't use these gifts, we do a disservice to those we want to lead. If you enjoyed this series on why contractors fail, make sure to like and subscribe to our YouTube channel to continue to get great content like this to help you achieve your goals and dreams as a contractor. If you want a guide to help you speed up the process and get rid of the stress like we have for hundreds of other contractors over the last 10 years, take this free contractor assessment Schedule a free coaching call with one of our amazing coaches. It doesn't cost you anything. We're there to help. If you like coaching and want to work with us, great. But if you don't, we're going to help you with two or three things to help you move forward and propel you faster to that success. You're looking for. We're here to empower you to believe. Thanks for hanging out on this series on why contractors fail and how you can avoid it.