Today I delivered a web site to a small welding company in Phoenix, to whom I have served as a marketing consultant under a City-financed technical assistance program. They’re the original mom and pop, and this was their first web presence. I thought I would
close out their file, since they now had a web site and marketing materials,
but they had a few remaining questions, and by the end of an hour with them, I was almost in tears.
They are really struggling, and their plight is not unlike those of thousands of small businesses that are certified as MBE(Minority Business Enterprise) SBE (Small Business Enterprise) and WBE (Woman Business Entreprise.
The owner of this business, certified as MBE/SBE has been a welder for fifteen years. He
has always done business on a handshake. His certifications allow him to satisfy certain contracting requirements large organizations have in order to get government contracts.
Recently, a large company that
he has been doing business with for a long time ran out of work and
stopped using him, which pretty much sunk his business. He ran out and got small repair jobs for subsistence. Now the big company is
back, and they have a job for which they want him to foot $5000
in advance for materials. It’s a construction fence around a new county courthouse building.
He is the MBE SBE sub-subcontractor
on the job. Both companies up the food chain from him need the MBE set
aside dollars, which is why they use him–that and his experience and
willingness to be on call 24/7.
But they don’t want to sign a
contract with him in which they have to pay a third up front, or pay
for the materials in advance, or in any way help him with the working
capital — even though if he doesn’t participate he could have the job
shut down. Last time he worked with a company as their token MBE,
they started the as a Time and Materials job and changed it on him in
mid-job, wiping out his profit. When he read the contract he had
signed, he realized the larger company hadn’t signed their end, and
This is often how subcontractors get treated, especially in a down economy. The larger companies have trouble getting financed, and they try to finance themselves on the back of sub- and sub-subcontractors.
explained to him that in a bad economy, he can’t be the bank, and that
some clients he couldn’t afford to work for. At the very least, he had to make
sure the contract was signed on both sides.
I also suggested that his female partner
who doesn’t have the relationship with the client and who keeps the
books, should be the one to insist on money up front for materials and
a signed contracted before the nice guy shows up to do the job.
I suggested, to, that they call the General Contractor on the job, who
needs the SBE/MBE dollars even more, and explain the situation.
the end of the meeting, they had tears in their eyes talking about the
difficult economy and how the little guy is taken advantage of. No one had every told them it was all right to ask for money! I told
them they could call me all summer, and I urged the welder also to go back to
school and sharpen his pipe welding skills, since a lot of the stimulus
money is for that kind of work.
Long and short of it, I agreed
to take phone calls from them over the summer to help them get
comfortable with this change in their business. There’s more than one side to this sage of entrepreneurship.