In the fall of 2015, Brian Elias saw a labor problem looming. Sales were strong, but Elias, founder of 1-800-Hansons, an exterior replacement company with seven locations in southern Michigan and northern Ohio, was worried about not having enough installers and measurers to keep up with sales.
All of Hansons’ field crews are independent contractors, which gave Elias two choices: find new installers and hold the line on the unit prices he pays for installation of windows, siding, and roofing, or raise his rates to entice seasoned installers to do more work with him.
“Everybody’s afraid of raising prices, but when demand exceeds supply, you have no choice,” Elias says. “If you sell a job and have nobody to install it, what’s the point?”
Elias already had a pretty good idea of the going rate for the work he was offering, but he called around to double check. Based on what he discovered, he bumped rates up between
5 percent and 25 percent per window opening or per square of siding or roofing. It worked. Within a few weeks, he’d signed eight or nine additional crews. Although Elias didn’t target specific competitors, he knew that some installers would jump at the chance to make more money. “People were picking up significantly more in their paycheck doing exactly the same work,” Elias says. But he was careful not to pull away too many. “I don’t want to hurt somebody,” he adds. “I believe in karma.”
The hard part, according to Elias, was bringing pay rates into line across the board so that all crews, new or existing, were paid at the same rate for the same kind of work. “Nobody will feel good knowing that the guy next to him makes more than he does,” Elias says. The exception is for contractors who run more than one crew—they earn a little more per unit.
How did the higher rates affect sales? Elias raised prices to cover the increased costs, but the ability to schedule jobs faster gave him an advantage. “There are three things consumers worry about: duration, communication, and cleanliness,” Elias says. “If it takes too long to schedule the job, we’re in trouble before we even start. Because we had the manpower, we were able to start sooner than our competitors were.”
So far it’s working: 1-800-Hansons’ revenue for January 2016 is up double digits over last year.