Union or Non-Union?

How to make the right choice.

I often get asked whether a contractor should unionize or not. I always respond with three questions:

"Which market are you planning to serve?"

"Which trade are you talking about?"

"How thoroughly do unions dominate your area?"

The point of my questions is this: Can you be competitive if you are unionized?

Your chosen market plays a huge role in your decision.

Governments typically require contractors to pay union-level wages on government-funded projects. Being unionized actually gives you a cost advantage as the average union worker is more productive that the average non-union worker (that's my personal experience anyway).

Commercial developers rarely show preference to union contractors. Since non-union shops' primary competitive advantage is low cost, they have a leg up when chasing small and light commercial work.

If you are doing mostly residential work, unionizing will probably price you out of the market. Case in point, how many home owners are willing to pay an extra $30 an hour for the benefit of using union workers? Few. Very few.

If you operate in a city that is heavily union, the talent pool of non-union craftsman will be small. You may need to unionize just to find enough skilled people to do your work.

If your trade requires great skill and craftsmanship (masons, finish carpenters, pipe fitters, etc.) you may be best off going union.

If your trade is flooded with cheap labor, you might as well stay non-union. Any trade that is flooded with non-union workers will have a cost profile that is way below that of union shops.

If you have grown large - you may need to unionize just to find enough skilled workers easily.

If most of your work is in small towns requiring considerable travel and true craftsmanship, then you should consider unionizing.

The truth of the matter is that when quality and professionalism are valued and the typical job runs several days, if not several weeks, consider unionizing.

If you decide to sign the operating agreement, be careful of your timing. The union labor pool is deep, but every hall has its share of slugs. You know what I mean, low effort, unreliable workers.

If you unionize during a construction boom, odds are that the workers you get from the hall are not individuals that are going to work out well for you. It is better to unionize when the hall is full and you have a decent amount of good work. You will have the opportunity to sort through the available craftsmen and staff your company with ones who are both professional and productive.

WARNING No. 1: Be sure you are ready to run a union shop before you sign the bargaining agreement. Once you sign the bargaining agreement, there is virtually no going back. Once union, you are locked into staying union unless you are willing to completely shut your company down and jump through a lot of hoops.

WARNING No. 2: Make sure you have a solid line of credit at your bank. Your payroll costs will jump quickly. I've seen three companies go bankrupt when they unionized simply because they didn't have the cash to withstand the heavy hit they took when converting over.

Ron Roberts, The Contractor's Business Coach, teaches contractors how to turn their business into a profit spewing machine. To receive Ron's FREE Contractor Best Practices Newsletter visit www.FilthyRichContractor.com.