As the economy is improving in mid-2016 we are seeing a disturbing trend of Business Consultants asking Contractors to make them a part owner of their Construction Companies in exchange for their services.
I had seen this nightmare come to life several times beginning in the 1970's when I started my Construction Company. It usually happens just as the economy starts to improve and demand for construction services is far greater than the supply of Contractors to fill the need.
There are a lot of seminars being put on by less than honest people promoting Get-Rich-Quick-Schemes for Business Consultants to take advantage of honest hard working contractors!
There Are Several Parts To This Scam:
- They Make You Think They Know More About Running Your Business Than You Do
- They Want You To Pay For A Life Insurance Policy Naming Them Beneficiary
- They Have A Network Of People Who Need Work Done At Low Rates And Provide Kick-Backs
- They Slowly Get Control Of Your Construction Company And Work You To Death LITERALLY!
Please do not misunderstand, most Business Consultants are good solid, decent hard working, honest people just like you and me. The ones you want to watch out for are the "Pirates And Thieves". I will not say what I think, but you can figure it out for yourself.
Plumbing Contractor Who Almost Got Scammed And Lost Everything
In the 1995, a Plumbing Contractor in the Seattle area had a decent sized business with seven trucks and over twenty employees and earning a very comfortable living. He and his wife were not the smartest people on earth but they were not stupid either.
One Fine Sunny Day A Couple Of Slick Salesmen Came To Their Office With A Plan That Would Make Them RICH MILLIONAIRES Beyond Their Wildest Dreams!
Their grand plan was to get paid $7,000 per month each, plus expenses and they would take over the day-to-day operations and install their people to answer the phones and dispatch the plumbers to the service calls. And they wanted the owners to take out a Life Insurance Policy for $500,000 naming the salesmen as beneficiaries in case something happened the Plumbing Company could keep on running.
They absolutely guaranteed to generate so much money that their costs would be minor in comparison to all the new money coming in because they knew everything about how a construction company should be run.
To prove it they wanted to put on a uniform and act like plumbers and show the real plumbers how to increase every dispatch by offering to do more work on each service call.
Generally, it is good business practice for a professional technician to survey everything and perform a proper diagnosis before prescribing a solution.
If you take you car for a tune-up, and the mechanic noticed the hoses and belts are worn out it is prudent for them to let you know about it and then let you decide to have it fixed or not.
In this case, the two "Salesmen" were only interested in selling as much as possible without any regard for the customer.
When I was brought it to review the opportunity for the owners of the firm I ran some "What If Scenarios" using the reports from their accounting system and Excel and determined how much the new "Salesmen" would have to generate to cover their cost.
It turns out the Plumbing Company would have to double their annual sales which would bring a whole lot more headaches because of the principles involved in Expansion Isoquants. When a business grows too fast, it runs the risk of running out of cash, and the internal systems may not be capable of handling the growth. The biggest obstacle is not understanding The People That Got You Where You Are Cannot Take You Where You Are Going!
They sent the "Salesmen" down the road and continued operating a moderately successful Plumbing Company for many years to come.
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About The Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Accounting Specialist. This combination of experience and skill sets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant, and construction accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and Xero accountants to the benefit of all of the construction contractors he serves across the USA. Visit http://www.fasteasyaccounting.com/randal-dehart/ to learn more.
Our Co-Founder Randal DeHart - Is a Certified PMP (Project Management Professional) with several years of construction project management experience. His expertise is construction accounting systems engineering and process development. His exhaustive study of several leading experts including the work of Dr. W. Edward Deming, Michael Gerber, Walter A. Shewhart, James Lewis and dozens of others was the foundation upon which our Construction Bookkeeping System is based and continues to evolve and improve. Check out our Contractor Success Map Podcast on iTunes and Follow Randal on Google+
