By Ron Pestone
The second reason joint venturing makes sense is to share expertise and knowledge. No company is great at everything and no company is competitive in all areas of the market. Say there is a very large HVAC project out for bid, for the right two companies it might make all the difference in successfully bidding the project and producing it if they team up and do it as a joint venture. First they pool their bonding and now can actually bid the project and second they use their expertise to get an edge in the bidding. If one is a sheet metal contractor and the other a piping contractor, each strong in their areas of expertise you have a winning combination that has an excellent chance of landing the project.
On the right large electrical project you might build a successful joint venture with a low voltage contractor, a high voltage splicer contractor and a conventional commercial electrical contractor.
Many times in large bridge work the joint venture will be a steel contractor and a civil contractor. The list goes on and on and the possibilities are endless.
Joint venturing also give contractors the ability to enter into portions of the market they would like to try but have no experience in. Maybe you are a commercial electrical contractor who would like to get his feet wet in Transit [subway work] but have never worked this part of the market. Instead of taking your first job all alone and probably taking a bath you joint venture with another successful electrical contractor who specializes in Transit work. Now you produce the project, learn the ropes, made a few dollars and haven’t been skinned alive. It’s a great way to immerse yourself in a new are of the market.
The third and in my mind the most important reason for joint venturing is sharing knowledge, experience and talent. Let me stop right here and put to bed the nonsense that by letting another contractor into your house you will wind up giving up your trade secrets and in doing so will in effect fall off the edge of the world. Let me give you a little tip, THERE ARE NO SECRETS! No matter what the trade we are all assemblers. We purchase equipment and material and we install it all on some owner’s site and hope to get paid.
If you are a brick layer and use the same labor extensions for ground work and parapet work you are going to go broke. This is not a trade secret. Every professional in the world knows this.
If you are a mechanical contractor or electrical contractor bidding on a huge renovation where much of the existing piping or conduit remains and do not look at the ceiling before you bid the project and decide to bid the project as new work you have a good chance of going broke. Every mechanical and electrical contractor in the world knows this. It’s not a trade secret.
If you are an excavator bidding on a large project without looking at the borings you are playing Russian Roulette. This is not a trade secret.
Think about it. What are all the secrets? What does everybody not know, that you know? You think you are the first guy in the world to produce installation drawings and have a layout guy implementing them? You think you are the first guy in the world to ask for a discount when you are buying? You think you are the only guy in the world who know how to deliver a plan and spec job that complies with the contract documents by re-engineering the project for consolidation, simplicity and shorter runs? In what trade does a contractor not know what an average day of installation for his journeyman is? You think you are the only guy in your trade who knows the wage rates and the costs of the benefits? Or do you think you are the only guy who knows how to handle submissions and change orders?
The list goes on and on. The truth is everyone in the business knows a lot. The little secrets you are determined to keep to yourself, half the world knows about. And some of the secrets you know you should not only keep to yourself but more importantly never implement because they are likely to be the map to the poor house.
Years ago a guy I know who opened up a masonry company with his brother, he called me and asked if I would take a ride with him to look at a school job he was doing because he felt he was getting into trouble. This guy had the gift of gab and was an excellent salesman who was very easy to like. What he knew about masonry I wasn’t sure. But I liked the guy and if I could help him, why not.
He picked me up and we walked the job together. First thing I noticed was none of his guys seemed to be dying of overwork Now mind you he was the owner and I was a guy walking with him and none of his men knew who I was and yet they were working like they had lead in their pants. I started getting a little hot under the collar but it was early in the walk thru and I said nothing. Then we came to where his guy was mixing the mortar and I saw hundreds of bags of redi mix, no sand or lime. I asked, “Where the hell is the sand and lime?”
He looked at me and said, “It’s much more cost effective to mix with redi mix than the old convention way.”
I couldn’t help it; I blew my top, “Are you crazy? Mortar for masons has been mixed one way for hundreds of years. They do it that way because it works and it’s the most cost effective way of doing it! Do yourself a favor and get rid of the crap and bring in some regular mortar, sand and lime and mix it the old fashion way. Guys will understand you know what you are doing.”
I liked the guy but we wound up in a heated discussion and he insisted he could prove it on paper. He though he had discovered a secret and he fought like hell to defend his secret. He knew he was in trouble, that was why he had called me and despite everything like a deer caught in the headlights he refused to move. I tried to explain to him the way he was mixing mortar sent a message out to the entire job he didn’t know what he was doing and if the other trades thought that they would drive him into the ground for their own ends. Then I told him fire the foreman, hire two new corner guys an pay them a couple of hundred a week extra to set the pace for the rest of the dead heads. And most importantly find a laborer who knew how to mix mortar the old fashion way, the way masons liked it and give him a little extra on the side. Long story, short, we remained friends, he took a bath on the job and within a year he had filed for bankruptcy. Sometimes the smartest thing to do is become the very best at what has been proven to be successful for many years. Some of the most successful contractors in the world got there using this basic approach.
Don’t Forget: We Build America