Almost every contractor who just entered the datacom business says the same three things. 1) "I make a lot more profit on data wiring than I do on power wiring, at least on a percentage basis." 2) "It really is nice work." 3)"Managing a data business is a lot different than managing an electrical construction business." And, you can accept these three statements as at least frequently true.
With that in mind, let's move off our usual technical discussion of communications and spend a little time on the business issues.
Trade knowledge and business knowledge
No matter how well you know the technical aspects of data communications, you cannot use that knowledge to make money without having good business knowledge. Most of us in this business have started with technical knowledge and learned about the business aspects almost as an afterthought. Not many of us spent as much time learning about business as in apprenticeship school-that's a mistake (if our goal is to make money).
Although we can't spend a lot of space on business skills in this article, we will give you a short list of must-read books. Spend some time with these books. Remember, running a business without business skills is difficult-you'll usually pay yourself wages, but not much more.
Here are six business books you must read:
The Richest Man in Babylon, Clason
Atlas Shrugged, Ayn Rand
Think and Grow Rich, Hill
Million Dollar Ideas, Ringer
The Third Wave, Toffler
The 22 Immutable Laws of Marketing, Reis and Trout
These books will not teach you the calculations for amortizing your assets; you can pay an accountant to calculate your quarterly ROI. Instead, these books will teach you the fundamental principles that underlie all profitable businesses everywhere.
Getting business "Where do I find the jobs?" This is the dilemma electrical contractors face when entering the data market. There are no plan rooms that cover much data cabling.
Data work comes from scattered sources. That means you'll have to spend a lot of energy finding customers. The average electrical contractor spends less than half of 1% of its sales volume on advertising. In the data business, you'll have to do a lot better than that. In fact, you may want to have a full-time outside salesperson. Here are a few likely sources of business:
Solicit your existing electrical customers. Although the amount of work you can get from them will vary, depending on their businesses, almost all of your commercial and industrial customers use communications systems, as do many residential customers. Also, these customers typically upgrade their systems every several years.
Subcontract to another contractor. When a local electrical contractor takes on a big project, there'll usually be some fiber-optic, networking, or other type of data-communications work included in Division 16 that will have to be farmed out. If your company can come up with a good price, the local electrical contractor may subcontract the work to you. This is often how a company gets its start in data work.
Get referrals from distributors and component dealers. These people often have customers asking them about installers. If your company supplies the vendors with some sales and promotional information, you may get numerous referrals. This is especially true if you have some very specific or unique services to provide.
Make sales calls to local businesses. Any medium- or large-sized company within your reach needs someone like you. If they have or want computers, telephones, or Internet connections, you have something to sell them. Find out which person at the company is in charge of these systems, and pay him or her repeated visits. (You must show your face repeatedly-see the marketing book mentioned above to get the reasons for this.) Usually this person has the title of MIS (Manager of Information Services), or something similar. Find out what he or she needs, what is planned for the future, and what's important. You'll usually find price is not the chief concern.
The critical point here is you want to build a long-term relationship with this person. This is not a one-time-shot proposition where you try to get as much out of the job as you can. You want to be exchanging values with these people-you provide valuable services to them over a long period, and they give you money in return. These people desperately need a responsible, reliable, honest contractor to keep their systems up and running. If you're really good at what you do, and
are reliable and honest, they'll love you. (And pay you on time.) Use direct mail. This is essentially a good way to prospect for leads, following up with personal sales calls. Begin by sending promotional literature to every potential customer in your area. Then, follow the mailing with telephone calls to the recipients, and then with another mailing. (Perhaps with more phone calls, also.) And, be patient. Ad campaigns such as this take time. Results are often slower than you might expect, but are usually fairly successful.
Are you a contractor or a consultant?
As a supplier and installer of communications systems, you're both. Datacom customers expect you to understand their systems and be able to come up with answers to their problems. In other words, they expect you to be half-contractor, half-technical expert. You must have a broad understanding of electronic systems to intelligently discuss all of your customers' problems and find solutions for them. You don't have to be an expert in all types of electronic systems, but you must have a broad general knowledge. The idea is not to have every answer (which is nearly impossible), but rather to be able to understand the problem and know how to find the necessary answers.
Find your suppliers You can't just stop by the supply house on your way to the job in this business.
Sure, datacom supply houses are springing up all over the country, but they haven't made it to most small towns yet. Until they do, you'll have to give special attention to obtaining the materials you need.
You can pick up some of your material (or have it delivered) from local suppliers. You may have some of it delivered by UPS or Fed-X. You may also have to make allowances for unreliable supply channels. For instance, you may get a price on an optical NIC (Network Interface Card) of $100 each. If, however, you are not sure of the reliability of the supplier, you may be better off using a more reliable supplier who charges you $110 each, preferring to spend an extra ten dollars per connection than to risk delaying the whole project.
Be ready for lots of subcontracts This is one thing you'll have to get used to. There are so many new specialties (with more springing up all the time) that no one person or company can keep up with all of them. Instead, you'll have to come up with a variety of experts to fix problems for your customers.
(Remember, they rely on you to get their problems solved.) You'll want to keep and update a list of specialists: someone who can write software code; someone who really knows Java; someone who can program a router; someone who qualifies as a firewall (Internet security) expert, etc. Also keep in mind these specialists must be reliable as well as technically competent. You'll have to develop your list by experience, and by talking to the manufacturers of the various new systems, who can refer you to specialists in your area.
Being able to find these people makes the difference between taking care of all your customers' needs and being able to solve only a couple of their problems. This makes a big difference to the customer. All other things being equal, they'll always do business with a company that can solve more of their problems.
Eventually, you may find it best to cut back on the number of permanent, full-time employees you keep, and hire more specialists on a per-project basis. This has advantages for both parties.
You'll end up having fixed expenses for the labor (zero risk of labor overruns), and will have far fewer hassles with motivating employees, supplying them with tools, etc.
The specialists (frequently former employees) will get a lot more money (on an hourly basis) for their efforts, as well as the freedom to set their own schedules, pick their own work, etc. Besides, if times get bad, they can always go back to being an employee.
You'll probably be able to get the best workers this way. The most productive workers know they are more valuable than is an average worker, and deserve extra pay for their efforts. They can do this by subcontracting key parts of construction projects from their existing bosses.
For an employee to leave his or her employer and become an independent is fairly difficult for electrical contracting (especially difficult in union-controlled companies), but relatively easy and common in the datacom arena.
Bidding telecom projects You'll be asked to furnish many types of bids in the communications market. Most of them are lump-sum bids, or unit-priced bids. However, you'll also encounter another type of bid, the RFP.
RFP stands for Request For Proposal. In many specialties (and in the data networking business in particular), an RFP is almost equivalent to bid documents, except not as detailed. It will give you the general details of the project, and ask you to furnish a complete design, schedule, and price. As you can see, completing the RFP process is very similar to making a design/build proposal.
When you prepare RFPs, take some precautions not to do the design work for the customer (free), only to have a competing contractor do the installation according to your design. In other words, don't divulge every aspect of the design in the proposal.
Are you ready to get started? If you're just getting into datacom work, prepare yourself for a slow start. A new business usually takes a while to get moving, and growing too fast can be especially dangerous. If your first sales efforts don't get you any business, try again and keep going. Don't get scared if your first results are slow in coming. If you've done your planning well, your work will pay off before too long.
Once you begin to get work, be sure to go slowly. These are new types of projects to you and your workers. Many new, confusing, and difficult situations will certainly arise. You'll need time to deal with these as they come. If you move slowly, you can resolve these difficulties without creating problems for your customers. If, however, you go too fast, you won't be able react to problems fast enough, and you will disappoint your customers.
Once you get past your first series of projects, you can begin to expand. Even so, do not expand too quickly because handling a number of projects at the same time will present additional obstacles, such as having higher bonding limits, hiring additional qualified workers, ensuring adequate cash flow, etc. Don't be in a hurry; in a year or two, you can be very profitable.
Make sure you have good supervision
When you begin to take on projects, you must know how to supervise the work your people do. Because we're familiar with power wiring, we think of supervision primarily as making sure the work gets done on time. Making sure the work is done right is a consideration as well, but it's not the biggest thing in our minds. With communications work, however, getting it right is more of a concern than getting it done in time.
The problem is this: Mistakes, in communications work, are difficult to detect. A mistake that could keep the entire system from working might not show up until you completely install and turn on the system. So, properly supervising a datacom installation means you must make sure all your work is good. Yes, you should complete it on time; but on time is meaningless if you have to replace it. A good supervisor will make sure:
Workers do all terminations correctly
Workers have all the right parts.
Workers don't rush.
Workers have a well-lit work area.
Workers have correct test equipment and use it. Cable marking is very important: Mark every run of cable and every termination because you don't want to lose track of which cable is which. Here is where you should waste money on cable markers and numbers and waste time on written cable and termination schedules. It's important.
Don't be afraid of looking over the shoulders to make sure things are right. Terminating communications wiring is fine work.
Testing and more testing
This is a big difference between traditional electrical contracting and datacom work. It requires a lot of time and expense for testing and documentation and simply goes with the territory. If you want to be in this business, you'll have to get used to it.
Most communications work requires you test every conductor of every cable. You then have to document the test results and submit them to your customer before you get paid. This takes time and effort.