Contractor’s Secrets

Jon Tenbrinke
 
Sarah: That's about how contractors should be pricing jobs, why should you stop asking for a cheap contractor? Why do jobs go bad and much more? Welcome, Jon, how are you?

Jon: I am great. How are you guys doing?

Sarah: Excellent. You are going to be presenting for the next half an hour. And we are all ears. We're excited to see what you have to present to us today.

Jon: Thank you very much. First things first, I'm ready to get back to real life networking events, but we'll do the best we can do here. We're going to go down a rabbit hole today because a lot of the stuff I'm going to say is probably not going to be popular, but that's what we'll do. But first thing I'm going to do is we're going to go into a little bit of a market update here. Just seeing how things are going out in the conversion world, the renovation world. And we'll go from there. It's, believe it or not, that bad. We have some delays in supplies, but really things are fully operational.

I'm trying to go to Home depot. It is a little bit of pain right now, but not a big deal. Everything is about pre-planning and ordering early right now. You want an Ikea kitchen tomorrow. You better order three weeks ago. That type of thing where normally it's next day service. It's just something that is not a big deal, but do your stuff earlier than you were planning and you'll be fine. We haven't had any really major delays. And it sounds like things are gonna start opening in a couple of weeks. It's time to get off to the races.

My next subject here is one that drives me nuts, all the investor groups and I love them all. But when you start out the question by looking for a cheap contractor to install. Then the next person, two weeks later, is bitching or scurry, excuse the language. I didn't mean to do that. I'm complaining that they got taken by a contractor. They have a bad experience. Why do you think that was to stop by asking for a cheap contractor and asking for a reliable contractor, asking for somebody that somebody else has worked with referrals. And you'll have a much better experience.

We are in the world's worst business contracting. I love what I do. I love the industry, but there is such a low barrier entry that you're going to have 90% bad for 10% good. Just remember that, don't just ask for reliability. it's so much better to have a medium price contractor that's reliable and good to get your jobs done on time and on budget than it is to look for a cheap guy to save an extra five bucks.
In my opinion. Now I know that some people want the cheapest. That's fine, but you're going to realize that there's going to be problems with that. Now, hopefully you've built up some relationships and then great. But, if you're stuck in there for someone new, this is going to cause you a bunch of problems that you can save for yourself.

If you stop doing this, I'm going to go into how contractors price jobs in a second. But it's a little bit of a rabbit hole because contractors don't charge enough money. That's why so many jobs go bad. The American public might read a great book from Michael Stone. I think it's Michael Stone. It's a contractor secrets book, but it says the general public is getting the greatest deal in history, offering innovators. And it's so true because most guys don't have a clue how to price jobs. Guy goes in, oh, it's going to cost me this. I'll add 20 points. His business probably cost them 25 to 34 points just to run.

Most people don't know this. I didn't know this at the beginning either. I spent a lot of time educating myself on this subject and, just to run a good business. The average cost is 25% to 34% of his revenue just to stay in overhead. And most guys don't know that. They price these jobs and all of a sudden, where's he gone he's disappeared for two weeks. It's because he took another job to cover the loss he's taking on this job so he can finish your job in the rabbit hole continues.

This is why the contractors jump. It's because they screwed themselves and it's not your fault. You asked for a price, they gave you the price. I'm not blaming you. The honest truth of the matter is 90% of the people need to go in this industry and you're going to have amazing people. There are some awesome people in this industry. There's a lot of great countries, a lot of great renovators, but unfortunately, they learned how to build the thing, but they never took the time to learn business. And they went into business and most of the E-Myth Michael Gerber, it's an entrepreneurial seizure.

It's because they were pissed off at their boss, just like I was when I left. And then all of a sudden you're spending two, three years struggling financially because you're not charging enough for your jobs. It's just a nightmare of a rabbit hole. And I am in seven different contractors, educational groups. And I listened to this daily and it's just based on one principle. Now, if you're going to charge the right amount of drugs, you have to provide a quality service. You have to make sure that you are doing everything you promise and more, but that's a little bit of a different story. That's why I just wanted to go on that little rant. I apologize.

That's something that drives me nuts. Do you guys have any questions? I'll answer them like. How do contractors price jobs? What contractor should price jobs? The first thing they do is they need to figure out the cost of goods sold. Your direct costs of labor, subcontractors, and materials, right? Once they figured that out, they need to add their overhead expense and that's where people screw up. And once they add their overhead expense, they have to add their desire, profit 10%, whatever. And then that is how you come up with your sales price. Now that's going to drive the cost up, but in fact, guys got that pricing structure.

That means he's got the resources to complete your job on time on budget. It's not going to be jumping around. It's not going to screw you. And I guarantee you, 90% of the jobs that fail isn't because he intended you to screw you. It's because he screwed up financially. He didn't have the money to finish the job and had to go get the next check.

It's a nasty cycle, and it's almost impossible to get off of. That's why you gotta be really wearing the bet. I prefer hyper, excuse me. I created a presentation for you. It's a little bit of a slide show. I'm going to go into how to find a good contractor interview questions, and then I'll go through a job process with you. I'm just going to share my screen. I think I'm allowed. Yes, I am.

This is just a little presentation I made for you guys. This is my contact. I'm Jon, from Black Jack Contractor. I'm the owner, here's our contact info. We're strictly a real estate investor based contractor. We focus on conversions, duplexes, legal second suites, triplexes, that kind of stuff, BRRRR renovations.

This is my electrical company. Feel free to reach out we're full service for anybody. And here's the login and context to my show they were talking about. What we focus on on this show is real estate investment, but from a renovations contracting conversion type of issue, we go through actual technical issues and it's a lot of fun please subscribe on YouTube. So, here's my

11 Steps to Finding a Great Contractor

Know what you want. Do you want someone to come in and run this whole job for you? Or are you looking for subcontractors to come work for you and you're going to manage yourself? This is so key because this'll cause you a lot of problems if you're not looking for the right guy. A subcontractor just used to doing this job is not going to manage your project for you and the contractor that you want to do. All the work is going to butt heads with you.

This is the best thing about being part of the REITE club, referrals. We have so many people in this club that I've worked with multiple contractors. Talk to them, find out who they've used, find out their experiences. And you're likely going to find an awesome one.

Online Reviews. This is one you've gotta be careful of, but it should help you be a good indicator. Once you find a contractor, look up their online reviews and save that information from you. Talk to them.

Workers Company and Insurance is super important. WSIB, is a corporation in Ontario. I'm sure most of us are familiar with it and they cover worker's compensation in Ontario. 
Now what's important to know is that some contractors can abstain for WSIB but they must strictly work for homeowners in their space as a real estate investor. When we come to work on your rental properties, that is considered a commercial job.

The contractor must have WSIB. If the contractor doesn't have WSIB and someone gets hurt on their site, then that's going to go after you and you don't want to deal with that. And insurance is mandatory for all contractors. It's a minimum of $2 million, preferably 5 million. My something we would have definitely checked in

Systems and Processes. This is just a simple one. I'm actually going to show you this at the end of the presentation, but we want to talk to them about what systems and processes they use to complete their job.

Experience, as you can see right here, something's gone terribly wrong. And that's why when you're looking for a contract, you want to make sure they have experience with the tasks that you're asking to do. If you ask me to build your house, I'm probably not going to do that great. But if you ask me to do a conversion, I'll probably do a great job for you. I've done 140 of them. That's something you want to make sure that the person that you're hiring has the experience in what you're asking to do.

Communication is so important on so many levels. I'm sure we all understand that, if you're in the beginning steps of talking to a contractor and have a hard time communicating, I promise you it's not going to get better and you're going to be really frustrated.

Company structure. This is a pretty funny photo and it's true, but I'm covering structure. What I mean by that is, the guy that you're interviewing, going to come do the work himself, or does he have a team of people? And if he does have a team of people, what's their spirits level, how are they going to be managed? Do you have a project manager? Is this guy managing himself? He's got time to manage it himself.
I always laugh at this one.

Do you resonate? As you can see right here, Mr. Putin does not look entertained with Mr. Trump here. And this is what I'm talking about is that, when you're talking to a contractor, how do you feel about the guy? Do you resonate? Do you seem like you get along? Because I promise you if you don't get along in the beginning, it's not going to get better through the process.

Cross your I's and dot your T's. It is so important to have proper contracts, contract language, payment terms, proper estimates, scope of works because 90% of the lawsuits happened because this was not followed properly. So, if you have this on paper, both signatures and it lays out the exact what's going to happen, you're much less likely to have a problem. And this is just a funny one.

Questions to Ask a Prospective Contractor
They're all related to the 11 steps, but this is an interview question.

• Have you completed projects similar to this? You want to talk to this guy about the project that you want to do and make sure he's completed work like this and ask him about it.
• Can you provide references for similar work? A keyword similar, again when you ask for references, you're going to actually get names and contexts of people he's done this work for, and you want to make sure that it's for similar type of work. Now, this is an online review. When you actually meet with this contractor, read some of his reviews with him, including the bad ones and see how he handles it and see what the situation is. You want to make sure they're not just all his aunt and uncle filling these out for them.
• Can you provide me with an insurance certificate and WSIB? This is one of the important ones that most people overlook. So, this is just a simple insurance binder. All contractors have to have them minimum 2 million. I carry 5 million, but the point where they should be able to provide this to you within 12 to 24 hours. And if you're having a hard time getting that, that should be a real sign for you. And WSIB is another one. He should be able to send you a clearance certificate right away. Now give them time. And they're obviously busy during the day. Now this is also a public register search on the WSIB website. You can go online and notice if they're active or sorry clear for clearance certificates or not available for clearance certificates. If they're not available, that means they haven't paid their bill, or they're not there. And remember, as I said, this is required. So, you want to make sure you can check this out and you can do this from home.
• Which systems do you use? So this is what I'm talking about, do they use paper systems? Do they have tongue cars? They use computer project management software. How are they going to communicate with you? Which we'll go into a little bit later. This is just a great interview to see what kind of contractor you're dealing with. A guy that's going to come late to the floor. This is not nearly as important as the guy. That's going to do a hundred thousand dollars renovation.
• What level of experience do you have in this field now? So, this is where you're going to ask them general questions. How long have you been in this field, where did you learn? What is your apprenticeship? This is one of those things where you're going to see how much experience they have. They've been in the field for 20 years, obviously that's good. If you have a guy that was just installing drywall with his dad, he might not be a good guy to be running a hundred thousand dollars job, but he might be a great handyman for you.
• This is the important one. How will we communicate during the project? So, this is something you want to get really clear in the beginning while you're deciding to work with a contractor, you're going to text email, are you going to call, and you've got to set these terms out because if you have a contractor who doesn't like being bothered well, and it's driving you nuts because you might be really nervous and want to get updates. You want to set those guidelines at the beginning? I want an email every Friday. Okay. No problem. Or I want daily updates. Now, if the contractor is not willing to do the daily two required, now it's probably not a guy you want to deal with. So, just something that's set in stone in the beginning of the project and make sure both of you have abided by.
• And this is back to the crew, Who will work on my job site? Some general contractors don't have a single person working for the staff, they just hire subcontractors and that's okay. If they work with them regularly, how will they be managed? Does your general contractor have a PM or is he going to manage himself? Does he have time to manage himself? So, it's just something you want to identify in the beginning.
• And this one's just the one I think about. What do you think about my project? Do you have a contractor that's excited to do this work or does he just look at it as another paycheck? This is something that you just want to feel out. And this is just for yourself. This one, there's no great questions for, but I feel like this one's kind of important.
• What is your paperwork process? You want to see how the rest of the scene of a guy, hands you a number on the back of a business card with no explanation of what he's going to do. That's probably not someone you want to work with. A lot of the older guys really fought going to computer systems, right? And most of us should be on computer systems. They, where you can track all this stuff, but at least do they have written contracts right now? Is the scope of work clear?

If you're going to be comparing contractor quotes, you need a clear scope of work. You can continue, go apples to apples and make sure the dollars make sense. And I thought this one was funny.

I'm just going to go quickly into the steps of construction. This is designed out for a duplex conversion, but this really can be to any construction parts, just modified. I'm going to show you. I have my own checklist written in this presentation. I don't have time to go through it, but this presentation will be available for anybody that asks for it. Just, reach out to me. I'll send it to you.

This is pre construction. This is where we're going to do measurements, drawings and permits, estimates and contracts and communicate between the two people. Now, honestly, this is probably the most important stage of the project. Getting it planned out well in the beginning will make for a smooth process.

And this is just my checklist that we go through in the company. Some of it's even internal like invoicing or zoom meetings and stuff like that. This is just my checklist, but I feel like anybody could take this and adapt it for their own. If they want to self manage a project.

Checklist Stages

• Stage One, for me is, Demo, Identification means that, any issues that we weren't seeing, because we hadn't demoed yet. This is a good time to get them identified, speak to the client and make sure how we are going to rectify them. Then we move on to Framing and Structure. This is my checklist. Again, I will send this out for anybody that has. 
• Stage Two, this is the important one. This is HVAC, Plumbing and Electrical. This is not somewhere you want to cheap in my opinion, I know I'm an electrician. I know I'm biased, but this will cause you the most money in the end. If you don't do this right in the beginning. 
• Stage Three, Insulation and Sound Separation. Now, if you're not doing a conversion, it sounds’ separations, probably not going to involve, but almost every project is going to have installation right after you want to get the expected.
• Stage Four, Drywall, Mud and tape, obviously pretty self-explanatory but a key process in this project and my checklist again.
• Stage Five is the Finishing Stage. This is the pretty stage where it all comes together. And everybody's favorite part. Again, big long checklists, primer flooring, trim doors, kitchen, bathroom. There's a lot that goes on in this stage and it all happens pretty quick. So, it's something that any sort of material selections will all need to be planned out before this happens. And this is like a three page checklist is quite a bit going on. 

And then Timelines, for a typical conversion:
Stage 1, two to three weeks,

Stage 2, three to four weeks, that's the trade stage. A lot of stuff happens.

Stage 3, installation. That's only about one week's time or less.

Stage 4, one and a half to two weeks. Unfortunately, Monday it's time to drive and 

Stage 5, three to four weeks. And that's where we get it wrapped up.

This is something where I am just going to go into quickly. This is you got to know what you want. Are you hiring a contractor, self, managing your project? And if you don't know what's best for you, I'm going to go through a few steps. Ask yourself the following questions. How much time do I have to dedicate for this? Because, quite honestly, let's just go if you want to do a duplex conversion.

If you don't have 10 to 25 hours to dedicate to this project, it's not something you should be doing. How much experience do I have? Do you feel comfortable with that? What will be sacrificed in order to dedicate this time or family time, work, time, making money, time, finding other deals, time, that kind of thing.

Are you comfortable managing subcontractors? Most contractors have big Eagles, right? Are you comfortable dealing with that? And do you have the budget to hire a GC? That's something that's really important to begin when you gotta run your numbers, you gotta know what you can do on this project because every single day, you're all, I wasn't expecting customers. Why do I understand that? That's why it's best to work with somebody in the beginning and reverse engineer your projects.

Project timelines. Now self-managed projects just in my experience, take two to three times longer to complete, unless you have experience. Of course, this is just when you try it out to complete compared to hiring a GC but you're likely to save 25% to 35% of the overall budget. So, it's a ying and a yang type thing.

If you're going to self manage a project, implement some systems. If this is something you're trying to scale, this is something you want to run these projects, you want to have scheduling software communication, that kind of stuff in place so that when the project goes, it's ready to.
I'm just going to show you some simple example systems to use. Company Cam, one of my favorite and it's daily updates, organized job site photos, daily logs, markups. I'm actually going to show you mine in the store. This is teamgantt.com. You can use a free trial and basically you just take the steps to a conversion or a renovation project. Type them in here and build a timeline. You can see it on paper. Basically that workflow monday.com is something,

If you're going to do two or three projects, it's probably worth investing a little bit of money. And because it's a cool program, I tried it out. It just wasn't built for contractors, but there's a lot of great things you can do with it. Like cards, scheduling a Gantt chart and making sure they've got everything organized.

Here's another one. This is free. I played with it a little. That's not quite for where I'm at, but it used to be trello.com. It's free. It's basically a card system, to be done, working on done, the task, assigned a personal collaboration. It's really cool. And it's free. It's a great way to manage things. Just remember, “if you fail to plan, you plan to fail”. And that is so important when it comes to a renovation project, you plan in the beginning of a really smooth. And you want to have constant communications.

If you're going to self-manage your project, you need to be constantly communicating with the people that you're hiring before, during and after to make sure that it's all going to on-time. And on-budget because, if one person falls behind, you're going to throw the whole thing behind. And here's the thing that I always talk about, know what you want when you're starting these projects. If you're someone that looks at the scale of a business, do a bunch of properties. Do you have time to manage your projects?

And maybe you have somebody on your team that can do it for you. That's great. That's a way to scale up, but if you're going to be trying to do everything yourself, find deals. I have a job, we're family and try to renovate. It's probably not realistic. So, it's something you want to identify before you get into this. That's the end of that presentation. I'm just going to have a little fun to show you this program.

This is called company cam, and I think it's a great investment for anybody that wants to self manage your projects or contractors. It's not expensive. It's $15 a user. You can add subcontractors, you can add team members to it. It organizes everything by your jobs and all your things. You don't have to type it in every time it's GPS-located on an app. Right now, This is today. I can go here. I can see what my team did. It's even got a log section, so I know what they did that day.

I could see all the photos that happened. I can catch mistakes and say, I don't like something. I can just go here. You can go to edit photos and I can put text or I can draw on it. Don't like this and I can just save it and see. And another best thing about this as client communications. I can just click here, and here. And my customer wants to see what he did today.

Sarah: Can you just also mention, like how many projects are you able to take on at once and also what areas are you covering?

Jon: Sure, for us, we're usually running between 14 and 25 projects at a time. We work well into London, anywhere in between kits or other Cambridge, all that fun stuff. We're working on expanding out to Windsor, but we're not there yet. We're just building out some systems.

This, Company Cam when I recommended this. It's cheap, it's user based, but it's a great way to manage your projects from afar. Even if you're at home and you have a subcontract. I'm just sending a job right now. All this is just GPS tagged. I know who uploaded the photos, so I can go in here. I can see everything that happened today. I can see everything that happened yesterday. If I see mistakes, I can click on them. I can draw on it. I can add text. I can draw here. I see a problem here. I could say, fix that by saving it. My team sees it.

And so the reason why I'm showing you this is, I just think it's a great software that it's not super expensive, and it's super easy to use that real estate investors, especially the want to self projects to save money, could use to communicate with people, to keep track of things, to see how their projects are from afar.

Anybody who wants to know more, please reach out to me. I'll show it to you. It's a super fun project. And it stores all your photos so you can watch the project for my Dan. I can see everything that's going on a daily basis. And I think it's a great tool for people to use Zen. It's not expensive. Anybody wants to know about it. Reach out to me. I'll show you the whole presentation again. Anybody wants this presentation just to go through it, feel free. I'll send it out to you.

Sarah: Okay we'll add your email. There we go jon@blackjackcontractinginc.com. If you want to contact Jon, feel free to reach out. And I will say, I've seen many of your projects, Jon as I do my BRRRR community back in the day, we used to have field days and your projects are awesome. So, great job. Let's see someone’s comment for Jon, guys that was really great.