New Venture Lab: Equipping Christian Entrepreneurs

"The fence guys are here!" I exclaimed to my wife incredulously this morning.  They’ve shown up two days in a row and the surprise was clearly in my voice.  The "fence guys" have been a frequent topic of conversation on our hobby farm over the past several months.  The "fence guys" are the fencing contractors that are building the white plank fence around our horse pasture and our farmstead.  Believe it or not, this all started last June, when I selected this contractor over two others after receiving their proposals.  The owner of the company was very credible during the sales process.  His proposal was the highest of the three, but the way he described the materials he would use and the care his crew would exhibit and his guarantee of satisfaction, was all very compelling.  July and August were fairly wet and we were doing some road work, so the project kick-off was in September when the owner showed up with two crew members and put in the first 96 feet of fence.  At the end of the day, he surveyed the work they had accomplished and pronounced that they would finish in about a week or two.  (There was a total of approximately 1,600 feet of fence and gates to be put in place.)  I was elated that they would be finished by mid-September.

But, here we are in the month of March -- some seven months later -- and the fence is only 80% or so complete.  What we have observed as a family has been almost comical, except the fact that is has interminably delayed our acquisition of horses and cattle and that it spells doom for the owner of the fencing company.  There have been many good lessons for me to teach my children about entrepreneurship through this experience:

• Wrong Compensation Structure - We are paying the contractor by the foot for the fence, but he is paying his crew by the hour.  This misalignment means the crew has no incentive to work hard and work fast, but merely to drag things out at a leisurely pace.  And given the bad economy, the crew is likely intentionally stretching out the project to continue on the payroll.  If the crew was also paid by the foot (or the “job”), the owner could lock in a margin and the crew would work as hard as possible to make as much money in as short a period of time as possible.
• Lack of Supervision - The contractor has only shown up one or two other times in addition to that first day, so his two-man crew has worked unsupervised all this time.  What that means is late arrivals, long lunch breaks and early departures as no one is “pushing” the crew to finish the job.  Their typical day (when they do come) is to show up at around 7:30 a.m. take a lunch break at around 10:30 a.m. -- they take off to town for an hour or more -- and leave for the day at 12:30 p.m.  This problem would not be so bad if the compensation was by the foot instead of by the hour, but combined with the wrong compensation structure, this is a disastrous situation for the owner.  Given the current structure, the owner should at least come out with the crew at the start of the day and come at the end of the day to review their work and quickly correct any issues.  Most contractors in his position would spend their day driving around from job to job to check on their crews.
• Numerous Delays Due to Poor Planning – While the weather has been challenging with a good measure of cold or wet days that would make the work difficult, the crew does not show up on many of the best, sunniest work days.  Whenever I call to check on their absence, the excuses I get have ranged from "the equipment is in the shop for repair" to "its hunting season" to "one of them had a dental appointment", etc.  Many of these delays could have been avoided with better planning.
• Lack of Organization and Focus – The crew only shows up one or two days a week at most and in the month of January and February only came one day each month.  When they do show up, they spend the first hour or so just walking around talking, trying to figure out what to do next.  They appear to always do the easiest remaining portion of the fence and leave the most difficult for later.  This has them bouncing around from one end of the farmstead to the other with no apparent method or plan.  The owner should map out a work plan in terms of what section of fence they will work on next so there is less wasted time in getting started each day.
• Lack of Communication – We never know from one day to the next if the crew will show up to work, because the owner rarely ever calls to "manage" my expectations.  Usually after several days of no shows, I will track him down on his cell phone or at home and try to pin him down on when they will show up next.  I’ve tried to coach the owner a few times on the issues that I am observing, but he has staunchly defended his current system without taking in the entire picture.  He is anxious to get the job finished and he says it’s the only job he has going on at the moment and that he needs the money, but there is some sort of breakdown between what he wants and what his crew is doing.  The owner has claimed to only be two days from being finished each time we’ve talked in the past three months, but yet the work stretches on.  The owner should be contacting me each day that the crew will not be here so I clearly know what to expect, and he should clearly communicate his expectations to his crew for the work to be performed each day.  Based upon a clear grasp of what work is left, the owner should be able to realistically forecast a completion date.

The good news for me is that I am making progress payments as they complete defined stages of work, so the owner does have the incentive to finish the job (if he can make it financially through the end of the job), but there are clearly several issues at work here that provide good lessons for any entrepreneur. 

The bad news for the owner of the fencing company is that this project is grossly unprofitable for him and if he continues like this for long, there is no way he will be able to remain in business.