Recently I interviewed three large contractors to find how their business had changed to better understand how distributors, manufacturers and reps might possibly better serve them.

Two of the contractors were members of NECA, with the third being nonunion. My original intention was to expand beyond the three to determine if there might be a difference between being union or not. I found, for the most part, they had very similar concerns and faced the same issues.

Electrical Contractor Issues

Lack of Profitability. Margin Restrictions on Change Orders

1. Each contractor’s greatest new challenge is the lack of profitability on jobs. This is caused, mostly, by new contracts designed by general contractors that deny increased profitability for change orders. Change orders are frequently necessary because bids are mostly sent between 50-70% completed. The contractors bid on what is given to them, but far more is needed later. The contracts from the GC often allow for only a 5% overhead allowance.
2. The lack of a complete drawing means even after “winning a job,” the contractor, and hence the distributor, rep and potentially manufacturers, are asked to again bid the same job with the additional information.
3. In order to get paid on time, it becomes imperative for the subs to take extensive pictures of their work. Why? The GC will often charge them for clean ups, and the cost can be significant. If pictures are not taken as evidence, the GC will often deduct from any monies due that often are not justified. The photos help the contractors mitigate deductions. For these contractors, serving many of the larger GCs means defending against unwarranted deductions. It no longer is a “team” effort by any of the subs. It’s now “us versus them.”

A typical example is a GC that agreed to pay monthly less the undeserved deduction with his commitment to “even up” at the end of the job. When the end came, the GC would settle on 60% of the disputed claims, causing the sub to lose money on the job.

Safety

Another major difference is safety. It’s not only internal to the sub, but also essential to the general contractor. Why? There are various safety issues on any construction site. The General is often held liable for occurrences. Every morning safety issues are discussed prior to the day beginning. Meetings lasting a half hour to an hour where every worker is on the clock, but they are not working. Much of the contractor’s time at these meetings are with insurance people and not electrical personnel. The general and insurance people want to ensure that they are not held responsible in case of claims.

The union contractors have confidence in their people. However, it is often the case, when utilizing bench electricians who are not full-time, they are confronted by claims for injury on the job that are frequently not confirmed or justified. Another case of defending against possible claims.

Distributor Support & Manufacturer Visibility

The two union contractors are located in similar geographies. They are happy with the distributor support they receive and grateful that they have the same distributor salespeople they have had for many years. They have confidence in the support they receive. Both state they do not see nearly as many factory people or representatives as they did in recent years. The third is in a different geography and has an opposite opinion. He claims his distributor people have continued to change, and he has little relationships with any distributor, especially those with headquarters in other areas.

Lack of Quotation Speed

They each are concerned over the lack of speed on quotes, especially lighting and gear. Their lighting packages are, in their opinion, held until the rep / lighting agent is sure all the bidding contractors and distributors for a project have contacted them. They believe the rep / lighting agent will then choose who to give the better pricing. Each claims they have lost jobs due to the slowness of responses.

Where’s the Gear?

The gear concerns are based on terrible delivery information. They are given a schedule, and they are never contacted until the date is missed, and the contractors have to make calls to reschedule their labor and possibly equipment. This costs the contractor serious expenses on jobs with penalties for not meeting schedules, and then trying to schedule equipment and manpower to receive the product are missed.

GCs Buy Direct

Another contention is many GCs are purchasing products such as switchgear and even lighting, depending on the job size. The contractor is responsible for purchasing less material, with the majority of dollars including fluctuating wire and conduit. Since pricing can vary greatly from the time their bid is placed, the pricing pressure now is completely absorbed by the electrical.

Contractors Using AI

Each contractor I interviewed is utilizing AI. At this point more as a check against their quotes on bids. However, they report that AI has been extremely accurate, and they see that as an easy transition within their business soon. One used the term “we also utilize AI as support for the narrative.” This enables him to make sure, regardless of the document, all of the necessary information is included in their project management documentation. An example is the safety check lists. They need to be both accurate and consistent.

What Contractors Are Doing to Improve Their Business

The contractors each see their current issues as more permanent and have taken steps to potentially gain additional income streams.

The nonunion contractor has purchased various other nonunion electrical contractors to expand his territory. He has recently purchased an industrial contracting company. This has enabled him to grow his industrial and utility businesses by adding new customers and supporting those with other plants in his areas. It also has helped his utility business within his expanded territory, more reflecting that of the utility he supports.

The two union contractors have expanded with low voltage security, utility, and traffic control divisions. Both enjoy larger industrial business where they have told their main customers to come to them almost as a general contractor. An example was one told me of a customer who needed a new roof. He got it done for them. He does no roofing but outsourced the work to a roofing company.

All three experience cash flow issues. Each is known to pay their bills on time, regardless of whether they are being paid by their customer. Their belief is that when they have additional monies, they must find a way of making the money work for them. Less money for the principals and more into investments … the business.

Additional concerns are no different than anyone’s with rising costs on everything. Each contractor has over 100 trucks on the road, and fuel costs this year has forced them to look at various cost analyses, including more AI development to automate workflows and analyze their business to identify savings opportunities.

These are their issues and concerns. If anyone might have solutions, perhaps it’s time to become advocates for those we truly care about in addressing to management ideas you might have.

The challenge, as one commented, is distributors educating their salespeople to ask questions and be able to bring solutions.

As one stated, “We are pretty loyal to our distributors and only hope they might be to us. We can use some help in sitting with people that might be able to assist us. It’s not always pricing from our vendors that determines where our business goes.” Each have customers where service and stability allow them to make money together. “We have a smaller GC that sometimes comes to us for help on a job to lower pricing, and he regularly allows us to make money on other jobs. Why wouldn’t we help him when he needs it?”

Often decisions are now made from senior management rather than through purchasing. One contractor told me, “when I started, we made money with our hands. Today we make money with our heads, and we need help understanding how to cut costs while maintaining our key people and services.”

As I reflected on this, if our associates are only calling on our customer’s purchasing departments and not understanding the pressures contractor management are facing, we may be losing key opportunities, and perhaps do not have as strong a relationship as we think we do?

Take Away

While I only interviewed three contractors as the effort was for this posting, the issues were surprisingly similar and may be reflective of your customers. Your salespeople should be asking your customers similar questions and then you can aggregate, or categorize, feedback.

Alternatively, Channel Marketing Group helps distributors learn more about their customers via our Uncover strategy which is a unique customer satisfaction initiative based upon learning what is important to your customers, how you perform in their eyes, and then integrates qualitative feedback where we ask the questions … and yes, they can be very forthcoming. Contact us for more information.