Fear of Commitment

Many emerging contractors in the green industry mistakenly turn administration into a chicken-before-the-egg issue. They believe they have to grow large enough to afford to bring someone into the office, when in fact they need administrative help to thrive and grow.

Some are trying to do the right thing: keeping overhead expenses low by burning the midnight oil, catching up on phone calls and paperwork themselves. Some stubbornly refuse to trust someone else to do the work. And others simply avoid certain office duties altogether. In all these cases, the decision to finally bring in help is usually made only when problems become full-blown crises.

Consultant and former contractor Dickran Babrigan says these scenarios are all too common. Owners are right to be cautious about expenses, especially when creating non-production payroll positions. On the other hand, administration is hardly a good area in which to cut corners. If you don’t have someone on board to assist with a growing administrative burden, you’ll lose track of costs and they’ll spiral out of control—along with everything else.

Babrigan says, “Owners don’t realize how much damage they can inflict on themselves when they try to do it all themselves. They think they’ve got it under control, but the billing is gradually slipping farther out every month. Then they’ve got cash flow problems, and the dominoes begin to fall.”

And unfortunately, he adds, too many contractors mistake the solution for the problem. “A lot of owners see creating an office position creating additional costs and headaches instead of being a solution to problems. They don’t know what kind of person to look for or how to train them, because a lot of administrative duties are usually outside their expertise. They see it as an added burden both in terms of money and management, a necessary evil to be put off as long as possible.”

The latter is precisely the opposite of how it should be. Filling the administrative role can and should be accomplished as early as possible, both as immediate relief for the owner and as a building block for long-term success.

And it should be done with the same care and due diligence as other important parts of the business, like grooming field managers or growing a loyal client base. “You have to approach it systematically and with a plan,” says Babrigan.

The big picture

As a broad rule of thumb, according to Babrigan, owners should begin thinking about staffing an office when they reach about $200,000 in sales. Of course there are many qualifications and exceptions to this rule, including how many accounts you’re servicing; whether the company’s services are administratively intensive, like construction; and whether there are enough opportunities in the market to increase sales and cover the additional overhead.

He says that the decision making process starts by looking at the big picture. “You have to ask yourself what there is to gain versus what it’s going to cost, and put the numbers together.

“If you think the market is soft you can only increase annual sales by $20,000 or $30,000, or if you’re having operational problems in the field and can’t handle the extra work, then maybe it isn’t time to take the leap. But if the opportunity is there and you can go after it by getting the administrative stuff off your plate and giving yourself more time to sell, then it makes sense.”

On the cost side, one must be realistic and careful to take everything into account. Don’t think you’re going to get by hiring someone for minimum wage without creating more problems than you’re trying to solve, says Babrigan. You should expect to pay a competent office manager at least as much as a lead foreman depending on duties and workload. Also factor in benefits, taxes, workers’ comp., etc., as well as office space, if you don’t have that already.

Dissecting duties in the office