Contracting in the Datacom Arena

In many ways, data contracting is similar to electrical contracting. However, there are quite a few differences. Here are the most important aspects of data contracting; paying extra attention to those areas that differ substantially from electrical contracting. I make a lot more profit on data wiring than I do on power wiring, at least on a percentage basis; It really is nice work; Managing a data

In many ways, data contracting is similar to electrical contracting. However, there are quite a few differences. Here are the most important aspects of data contracting; paying extra attention to those areas that differ substantially from electrical contracting.

I make a lot more profit on data wiring than I do on power wiring, at least on a percentage basis; It really is nice work; Managing a data business is a lot different from managing an electrical construction business." Almost every contractor who just entered the datacom business says the same three things. And, you can accept these three statements as at least frequently true.

With the above in mind, let's move off our usual technical discussion of communications and spend a little time on business issues.

Trade knowledge and business knowledge. No matter how well you know the technical aspects of data communications, you can't make money without having good business knowledge. Most of us in this business started with technical knowledge. But we spent more time in apprenticeship school than learning about business. That's a mistake, if our goal is to make money.

While we can't spend a lot of space on business skills in this article, here's a short list of "must-read" books:

  • The Richest Man in Babylon,


  • Atlas Shrugged,

    Ayn Rand

  • Think and Grow Rich,


  • Million Dollar Ideas,


  • The Third Wave,


  • The 22 Immutable Laws of Marketing,

    Reis and Trout

These books won't teach you calculations for amortizing assets: You can pay an accountant to calculate your quarterly ROI. Instead, they teach 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. Plan rooms don't cover much data cabling.

Data work comes from scattered sources. That means you'll have to spend energy finding customers. The average electrical contractor spends less than half of one percent of sales volume on advertising. In the data business, you'll have to do better than that. You may want to have a full-time salesperson. Here are some likely sources of business:

Soliciting your existing electrical customers. Though the amount of work you can get from them varies, almost all commercial and industrial customers use communications systems, as do many residential customers. These customers typically upgrade their systems every several years.

Subcontracting. 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 for the contractor to farm 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 started in data work.

Getting referrals from distributors and component dealers. These people often have customers asking them about installers. If your company supplies the vendors with sales and promotional information, you may get numerous referrals. This is especially true if you provide unique services.

Making sales on local businesses. Any medium- or large-sized company within your area needs someone like you. If they have or want computers, telephones, or Internet connections, you have something to sell them. Find out who is in charge of these systems, and visit that person repeatedly. Usually this person has the title of MIS (Manager of Information Services). Find out what the MIS needs, plans for the future, and what's important. You'll usually find price isn't the chief concern.

Begin building long-term relationships with these people. You'll want to exchange values with them; you provide valuable services, 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 reliable and honest, and good at what you do, they'll be happy (and pay you on time).

Using direct mail. This is 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 phone calls to the recipients, and then with another mailing. (Then, perhaps with more calls.) Remember: Be patient. These ad campaigns take time. Results are often slower than you might expect; but they're usually 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 as well as be able to come up with answers to their problems. You must have a broad understanding of electronic systems to intelligently discuss all of your customers' problems and find solutions for them. No, you don't have to be an expert in all types of electronic systems. However, you must have a broad general knowledge. The idea is not to have every answer. Rather, it is understanding problems and knowing how to find answers.

Find your suppliers. In this business, you can't just stop by the supply house on your way to the job.

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. However, if you're not sure of the reliability of the supplier, you may be better off using a more dependable supplier who charges you $110 each. Spending an extra $10 per connection is better than than 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. Talk to the manufacturers of the various new systems, who can refer you to specialists in your area. Taking care of all your customers' needs makes a big difference. They usually do business with a company that can solve more of their problems.

Eventually, you may find it necessary to cut back on the number of your permanent, full-time employees, 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 far fewer hassles with motivating employees, supplying them with tools, etc.

  • The specialists (usually 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.

  • Another advantage is you'll probably be able to get the best workers this way.

The most productive workers deserve extra pay for their efforts. Companies can finance 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 contractor is fairly difficult in electrical contracting (especially difficult in union-controlled companies), but relatively easy and common in the datacom arena.

Bidding telecom projects. You may need to furnish many types of bids in the communications market. Most of these are lump-sum, 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.

Ready to get started? If you're just getting into datacom work, prepare yourself for a slow start.

If your first sales efforts don't get you any business, try again. If you've done your planning well, your work will pay off before too long. 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. However, if you go too fast, you won't be able react to problems quickly enough, and you may disappoint your clients.

Once you get past your first series of projects, you can begin to expand. Even so, do not expand too quickly, as 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 carry out good supervision techniques. When you begin taking on projects, you must know how to supervise your employees' work. Since we're familiar with power wiring, we think of supervision primarily as making sure the work gets done on time. With communications work, however, getting it right is more of a concern than getting it done in time.

The problem: In communications work, mistakes 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 (This is by far the most important part of supervision);

  • Workers have all the right parts;

  • Workers don't rush;

  • Workers have a well-lighted work area; and

  • Workers have correct test equipment and use it.

Cable marking is important: You must mark every run of cable and every termination because you don't want to lose track of which cable is which. Go ahead and look over your employees' shoulders to make sure they're doing things right!

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. If you want to be in this business, get used to it.

Most of this work requires you to test every conductor of every cable. You must then document test results and submit them to customers before they pay you. Start off your data contracting business right. If you already have a good knowledge of the trade, make sure you have a strong knowledge of business as well. It will take time and effort, but it will pay off in the end.

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