In an Industry with a High Failure Rate, More Contractors Should Take Notes from McDonald’s Managers
For a struggling business owner, having access to a contractor consultant can make all the difference in the world. Thomas Capizzi, Jr., serves as president of Capizzi Home Improvement, which dominates the local market in Cape Cod, MA. He can attest to that fact.
He believes education, training, and belonging to a network of successful contractors is what makes or breaks a business.
We recently interviewed Capizzi, who has been a member of Certified Contractors Network since Richard Kaller founded the organization in 1996. Kaller was Capizzi’s mentor, and Capizzi credits him with providing the education and networking opportunities that have helped make Capizzi Home Improvement so successful.
Learning from McDonald’s
Immediately, the conversation shifted to McDonald’s.
“Before you’re allowed to buy a Burger King or McDonald’s, you have to prove yourself to them. They don’t care if you have all the money in the world. You have to prove to them that you have the business acumen and the savvy, along with five years experience, because they do not want a blemish on their record. They don’t want a store opening and then closing because a manager is mismanaging the store. They don’t allow that to happen.
If only we could have something like that for contractors. If contractors weren’t allowed to get licensed and go into business without having what McDonald’s puts onto their new franchisees, we’d have a whole different environment of contractors. But we have nothing like that– we have no barrier for entry into our business.”
Although fast food management is a skilled position, Capizzi isn’t suggesting contractors put on bright red shirts and cover a drive through shift. He’s talking about what the fast food industry gets right, that the construction industry gets wrong.
He’s a true renaissance man, so Thomas Capizzi would know. He manages the leading home remodeling company in Cape Cod, MA. Capizzi Home Improvement made Qualified Remodeling Magazine’s “Largest 500 Remodeling Companies” list 12 years in a row.
He’s sold $26,000,000 worth of home improvements, and he’s won numerous awards– one for achieving the highest personal sales record in the United States, several years in a row. He’s also a teacher, speaker, real estate investor, and race car driver.
Capizzi teaches sales, financial management, and business strategies to contractors across the country. When Thomas Capizzi tells you to look to McDonald’s for inspiration, you look to McDonald’s for inspiration.
“Anybody can get a builder’s license. It’s an open-book test. And you get a truck and tool pouch. That’s it. Therefore, you have hundreds of thousands of contractors out there working, starting from that baseline, which is bad.”
“If you think about the real, right way to go into business– what I just relayed about McDonald’s, it’s extremely stringent. They do not want to allow a store to be mismanaged. It looks really bad for McDonald’s. So they have every mechanism in place you can imagine to almost guarantee success. And we have the exact opposite in our industry,” Capizzi says.
Two Remedies for a High Failure Rate
What else do we have in our industry? A high failure rate. Contractors commonly refer to a study that claims 96% of contractors fail within two – five years (accounts vary). Thomas Capizzi subscribes to this failure rate, because he’s seen it in action.
“We have a 96% failure rate for contractors… We’re either the worst or second worst, we take turns. Business failures. 96% of us. I mean, think about that. 4% of us stay and the rest come and go.”
Even if it’s not always exactly 96%, it’s still bad. The Small Business Administration says “About half of all new establishments survive five years or more and about one-third survive 10 years or more.”
Additionally, US Census data shows that only 36.4% of construction businesses survive their early years.
Before Capizzi found Richard Kaller, his mentor and CCN’s founder, he was on that road, too.
“… prior to that time spent with Richard and others, I was kind of lost and floundering,” Capizzi says.
He’s seen both new and long-standing businesses flounder in the same way.
“I’ve witnessed a lot of contractors that have been in business for 10, 20, 30 years, pretty much struggling, financially and mentally. They’re exhausted, because they don’t have the education and tools they need to be in business,” he says.
So, what are the remedies for those financial and mental struggles? According to Capizzi, it comes down to two things: education and a support network.
“You have to realize that in our industry, there’s very little education out there. Very few networks out there. Now there are a couple, but back then there were none. It’s still minimal. If you think about almost any other industry, there’s continuing education. There are associations. But there’s not much in this industry.
The frustration is that I, or any other contractor in your town, live on an island all alone, at least in business. Most people in this industry started from grass roots. They worked with their hands out in the field, then found themselves self-employed, then got one or two employees, and morphed into a business– but most didn’t go the way of obtaining education to be a business owner.
They didn’t go and get an MBA, or go to college, or get any real-world experience to acquire any business acumen, marketing skills, selling skills, production systems– certainly nothing like the companies you see on CNBC that have the most educated people managing those businesses. It’s the opposite, so a lot of people find themselves going from knowing how to install products to running a business doing $2mil or $3mil a year, managing employees.
They never really got the education to be a business owner, so you have a very hard-working, frustrated, not-profitable business and business owner.”