Financial System Considerations for Remodelers Looking To Break $1Million
Growing a remodeling business past $1Million a year of installed sales comes with new costs and expenses as the number of employees and overhead related activities naturally increase. Just like estimating the cost of a remodeling project, the business owner will need a practical plan for growing the business and an accurate estimate of the costs related to growing it. Then just like a remodeling project the business needs a way to measure how well things are actually going against the plan and budget.
Without the ability to measure as the business grows the owner will experience a lot of financial anxiety.
Here is a list of several important financial system related items the business should put in place before growing past that $1million threshold. Remember, this is supposed to be what I refer to in the second article in this series of articles as the Take-Off Stage. Either the business properly prepares to take off and grow profitably or it risks disorganized chaos and lots of frustration attending the Lumberyard School of Hard Knocks.
Create a Financial System Strategy:
Find or create a fast and accurate Estimating System:
Create and document an Accounting and Bookkeeping System:
Growing your business should be profitable and should not be left to luck or chance.
Without an accurate financial system in place your business will, unfortunately, be like the majority of other remodeling businesses in our industry. Over 80% of remodelers have no idea of the true cost of being in business. These businesses use what is referred to as the WAG method, or "Wild Ass Guess Method” for estimating direct cost and even the markup percentage to use on estimated costs when pricing the jobs they sell. If that describes you and your business put the things I describe here in this article in place at your business before you seek to take-off past $1Million in remodeling. Growing your business should be rewarding and profitable. Entering the unknown without being properly prepared can be costly and may even lead to the demise of your remodeling business.
(Note: This is the sixth article in a series of articles written specifically for remodelers who want to successfully break past doing $1M/year in installed sales. Click here to see a list of all the articles in the series that have been published.)