Erik Tinker | Crain's Phoenix

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Erik Tinker

Background:  

Tempe-based Tinker Development is a custom, luxury homebuilder that launched in 2012. Tinker is dedicated to its customer’s deadlines and budgets, and to delivering high-quality workmanship.

The Mistake:

I wasn’t able to properly or efficiently manage my subcontractors and I was losing profit by subbing out.

When I started out, I had a fear of losing new business. I wanted to succeed and I worried about not taking every job that came my way. I worried that I would go out of business, which made me overly ambitious. 

I was taking on a lot of jobs and scrambling to pick up subcontractors. It bit me in the end because I wasn’t able to properly or efficiently manage those subcontractors. I wasn’t able to build great relationships with them because I was targeting so many remodels. Once some of these guys were done, they were gone. They would take off, like they do with so many builders and other people in the industry.

I eventually regrouped. I lost a bit of money and took a step back. However, I saw a demand from Realtor friends who wanted additions and bigger remodels. I was unlicensed at the time, but the work I was doing, such as interior remodels, didn’t require a license. I was essentially brokering out. I would hire other contractors and I was the middleman. I was doing all the legwork on these projects and I realized that I was losing profit by subbing out. 

So, I went and got my license. I started doing additions for friends in the real estate business. One thing led to another and I got the opportunity to start doing spec building. In the Arcadia area, I was doing 3,300-square-foot homes. I met a lot of good tradesmen and I stuck with them. I built a good rapport. I was patient and stopped taking on side jobs and remained focused on my niche.

Since then, those tradesmen have followed me as I’ve gone up into Paradise Valley. I just finished a 7,400-square-foot home there that’s on the market for $4.175 million.

I use tradesmen based on reputation and referrals. Quality is more important than having inexpensive labor.

The Lesson:

The lesson I learned was that profit is not always the bottom line. Credibility is of the utmost importance. This means that it’s OK to say no to a project if I simply don't have the manpower.

I'm careful about selecting my projects. I use tradesmen based on reputation and referrals. Quality is more important than having inexpensive labor. In doing so, I have tended to utilize the same tradesmen on all of my projects. I know that I can rely on them and I know that I will always receive a superb product upon completion.

Everything has since taken off. We built the Paradise Valley home in eight months, which is almost unheard of. It stunned the architect and all the brokers. I built my first luxury home – 7,400 square feet and selling in the millions – in just eight months. I’ve almost finished the framing on the house next door in just five weeks and I used all the same tradesmen. 

A lot of people in this industry, such as flippers or spec builders, always try to beat down the subcontractors to get the lowest cost. When you do that, you get lower quality tradesmen and it costs you more in the end because they either take off or run into financing problems. Then you have to find another tradesman, which ends up costing you more in the long run.

My lesson is to stick with the tradesmen who I’ve built a good rapport and who I’ve built camaraderie on the job site. If they’re within 5 percent of the other bids, I stick with my guys because I know how well we work together. I have no problem paying a little more for my guys. Cheaper contractors can ultimately cost you more in time and money.

Photo courtesy of Erik Tinker

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