Can you cheat your way to the top? (Do you need to cheat to survive?)

In both Canada and the U.S. some troubling government regulations and tax policy changes are causing grave concern for the renovation/remodeling industry.

In Canada (at least in Ontario and British Columbia, two of the largest provinces), the issue is the Harmonized Sales Tax, or HST.  The HST completes the transition for transaction-based taxation to a European-style Value Added Tax; where the ultimate consumer pays the 100 per cent of the tax, while all taxes on business inputs are credited.  The tax, to be effective, needs to be on a wide variety of goods and services — including many exempt from the former provincial retail sales tax, so the “cost” of a renovation project is about to jump 8 per cent to 13 per cent.  (The real picture is much more complex, of course, as renovation contractors can claim many input and working tax credits on materials, supplies, and other business services, so if you believe the government officials, the true net additional cost is about two to three per cent, maybe.)

In the U.S., meanwhile, remodelling contractors are facing the real challenge of new Environmental Protection Administration lead abatement rules, which will create major, significant additional costs for work on many older houses.  The new rules appear to be cumbersome, expensive to follow, and difficult to decipher.  Mark Paskall at the Contractor Coaching Partnership writes about his first-hand experience in preparing to comply with the new rules, and it is scary.

Industry leaders on both sides of the border fear these regulations and tax policy changes will drive the underground economy; the world of cheaters, hacks, and people who work for cash without insurance, ethics, or any form of regulation.  And these risks are real.  It seems when taxation or regulation reach a certain level, the temptation is to throw the rules out the window and Government obtains diminishing returns.

But is cheating really the way to go?  We’ve seen plenty of examples of how business and financial leaders formerly at the top of the pecking order have been brought down to earth — or more bluntly, been put in jail — for criminal violations of trust and integrity.

I wish I could wave a magic wand and suggest simple answers.  The Canadian tax changes actually will create a much fairer and ultimately more balanced system, one which encourages smart investment and savings, and generally good and visible business practices (you certainly cannot obtain the input tax credits, invisible to consumers, unless your business is properly registered and pays the intermediate taxes.)  The tax system is much like our health care system, which causes grave anxiety among Americans, but actually reduces business risk and cost in Canada to such a great extent that entrpeneurs here — despite the mythology — are much better placed for start-ups and operations than south of the border.)

The new EPA rules in the U.S. will, I think, create real opportunities for remodeling contractors who study them carefully, plan their compliance strategies, and develop internal systems and working processes to reduce costs while observing the rules.  The sooner you learn and understand the rules, the better you will be able to adjust your processes to “work the system” and develop effective consumer-oriented marketing resources to explain why they are in place and the risks in hiring non-compliant contractors.

But we aren’t all angels, and sometimes we need to cheat, or at least bend the rules, to survive, don’t we?

I’m certainly won’t suggest that I have an outlook of moral or business perfection, but hope readers here will appreciate that solid marketing strategies can, to a great degree, overcome the struggle against hacks and cheaters, by allowing you to legitimately encourage consumers or other businesses to pay more for your services/products than the competition; while ensuring you have the business and sales volume you need to survive and thrive.  Marketing is only part of the picture, of course.  You need solid internal business processes, the ability to hire and manage your employees and sub-trades, and plenty of skill in your trade or profession.

You can learn more at the Webinar on Feb. 16, Taking Your Construction Business to the Next Level, with Bill Caswell.

Popularity: 4% [?]