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Getting Your Remodeling Business Ready to Produce More Work

Posted by Shawn McCadden on Sun, Apr 01,2018 @ 05:15 AM

Getting Your Remodeling Business Ready to Produce More Work

Remodeler estimating systemGrowth in consumer spending on remodeling during 2018, and beyond, is expected to skyrocket.  This means that remodelers will have the opportunity to grow their businesses, and if done well; will make a lot of money.   But is your business ready for the work?  If you are already working too hard for too many hours will increasing volume just end up with you in divorce court and or on blood pressure medicine?   Below I offer a vision, and some suggestions, for what you can do to be ready.  If you already allowed yourself to get in too deep, then perhaps my suggestions can help you create a plan to get things running better than you had ever imagined.

It all starts with estimating.

Estimating might as well be the center of the universe for remodeling contractors.  Using a defined process and key information, your production team can conquer that universe.  If you grow your business without an advanced estimating system you risk dropping into a financial black hole. Your estimating should not only help provide a profitable selling price, it should also create, document, and organize the information your production team needs to build independently, without constantly bothering you or your salespeople.  Done well, it should also help you predict your cash flow needs, and therefore your payment schedules. This way every job finances itself using your clients' money to pay bills on time, not yours.  Successful estimating will also help your production team identify and schedule all the resources needed to complete the project weeks, or even months, before they are actually needed at the job site.

A real estimating system includes job costing.

First, an estimate is not Remodler job costingwhat you give to a prospective client. That is called a price.  The estimate is really the contractor's best guess on what the project will cost their business to complete before overhead and profit are added.   That's right, it’s just a guess.  To continuously improve the accuracy of that guess, particularly as your business is exposed to new products and construction methods, or brings on new untested employees, job costing will be the only way to reduce the risks of estimating.  Imagine going six months or a whole year before realizing you were using inaccurate information.  Imagine the benefits of offering profit sharing if your team brings jobs in on budget.  But, what if your budgets are never adequate and there are no profits to share, and when your employees ask why you can't tell them?

This all requires a well set up financial system.

Remodeler financial systemEven if you are a good estimator and you never miss any of the sticks and bricks, if you do not know which labor rate and markup to use you may be buying jobs instead of selling them. Without a well thought out list of estimating and matching time card work categories (sometimes referred to as phases), you will never know how well your team did compared to your estimated labor assumptions in specific areas.  Also, without the right time card categories, how will you know and or confirm how many non-billable hours of pay you will need to add to, and cover, inside the burden labor rate you assume and charge for their billable hours?  

There are plenty of things to work on as you grow a remodeling business.  However, if you don't get the estimating of your jobs right growing your business will just help you lose money faster.

 

Don't Underestimate Your Estimating System Workshop LEARN MORE

If you would like to learn more about improving estimating at your remodeling business consider attending one of our estimating workshops typically offered in Massachusetts.   You can even get MA CSL Credits by attending.  Shawn McCadden can also come to your group, company, remodeler education conference, or remodeler trade association to conduct the workshop.  For more information contact Shawn today.   

 

 

 

Topics: Business Financials, Job Costing Considerations, Profit Sharing, Estimating, Business Growth, Financial Related Topics, Estimating Considerations, Breaking $1Million

If One Of These People Asks, Can You Explain How Your Remodeling Company Does Business?

Posted by Shawn McCadden on Mon, Aug 10,2015 @ 01:01 PM

If One Of These People Asks, Can You Explain How Your Remodeling Company Does Business?

How a contractor does businessMost contractors can't explain how they do business, they just make things happen.   In a smaller remodeling business, say up to about $5-700K of installed work, this may get you by.  But as you grow your business, particularly if you want to grow past $1M in installed remodeling sales, the list of people below will want and or need to know how you do business.  

Would you be able to explain it to them?  Or will you let them tell you how it will happen?

To grow a successful construction business these people in your path will need to know how you do business: 

Prospects:  
If in the past they have had a bad or good experience with another contractor, savvy remodeling customers already know what worked or didn't work for them and their project. Before they hire you they will want to know how your business operates.
Customers:  
If they have already bought from you without knowing how you do business they may have bought on price and have already assumed how you will do business. It’s probably not the same way you are assuming.
Employees:
lead carpenter system workshop click here If employees don't know how you do business they will be challenged to take on responsibility as the business grows because they will never be able to assume what you want them to do or say at job sites and or with customers.  If they take the risk of doing so, and then you chastise them for what they did, they will probably never take that risk again and or may look for a different job.
Recruits:
Finding good employees these days is challenging.  Finding a real lead carpenter or production manager is near impossible.   Try this example.  You find a real lead carpenter, and while interviewing that candidate starts asking you questions about how your business and your lead carpenter system work. Will they gain confidence in working for you or will they come to realize they should look elsewhere?   Good lead carpenters know what they need from the business and how it should happen so they can actually produce projects on their own, from the job site.  (Check out this Lead Carpenter System Workshop for business owners)
Architects:  
Explaining how you do business to an architectBe careful here.  If you don't explain how you do business before winning the bid on an architect driven remodeling project you might just be told how you will do business.  Examples include how and when you will be paid, what will be considered a change order vs. what you should have assumed to be included, what margin you can earn on change orders, and what hoops you will need to jump through before receiving progress payments and final payments.  Be sure to carefully read any AIA Contracts before signing them.
Sub Contractors:
Good trade subs are hard to find. If you find a good one but don't clarify how you do business with your subs before you hire they will likely be telling you what they expect after you are already committed to them.  At that point you may have no other choice than to suck it up if you want to keep your job on schedule and your customer happy.   A lack of clarity and consistency regarding your payment policies is probably the most common reason subs will lose interest in working with you on your next project.
Vendors:
Again, be careful here. Be sure to explain how your sales process works and how you price materials before sending prospects and clients to vendors to pick things out.  By doing so they can become part of your sales team.  If you don't, in a sincere effort to help you, they may actually create problems for you.  Examples might include quoting wholesale prices, giving pricing breakdowns, or suggesting products you prefer not to use.  If the prospect never even shares you sent them there, and you didn't let the vendor know they were coming, the vendor may even recommending a different contractor just so they can be sure to get the sale.

 

Can't explain how you do business?  

Thinking of growing to or past $1M and need a defined way of doing business that works for you?  Consider joining our upcoming Construction Business Owner Peer Group and Education Program.  By participating in the 4-month program you'll get structured education to help you as well as great insight and suggestions from your peers.  

 

Topics: Working with Vendors, Business Management, Recruting, Employee Advancement, Business Growth, Differentiating your Business, Marketing, Marketing Considerations, Prequalifying, Breaking $1Million

Checklist for Getting Ready to Hire Your First Remodeling Salesperson

Posted by Shawn McCadden on Tue, Jun 30,2015 @ 07:00 AM

Checklist for Getting Ready to Hire Your First Remodeling Salesperson

checklist-wrI have been working on the content we will be sharing with the attendees participating in our Construction Business Owner Education and Peer Group Program scheduled to begin in Bedford, MA in September at Middlesex Community College. One of the very important things that hands-on contractors who seek to become construction business owners need to get ready for is bringing on sales staff to help the owner sell an adequate volume of work as the business grows.   Below is a 10 item checklist contractors can use to help them get ready for this critical step in the growth of their businesses. From my own experience of hiring my first remodeling salesperson many years ago number 10 is the most important.

 

Contractor’s Checklist: Getting Ready To Hire Your First Remodeling Salesperson

  1. Make sure you already have a Marketing System already in place that generates enough quality leads for you and your new salesperson before you hire.
  2. Make sure you have decided on and have already implemented a Standardized and Documented Sales Process so previous customers and their referrals will enjoy a consistent experience and you can manage your new salesperson’s use of your system.
  3. Make sure you do a budget to determine the Markup and Margin you will need to sell and produce at to cover the cost of your new salesperson as well as the additional business overhead that comes with the changes.
  4. Hire a remodeling salespersonEstablish Sales Goals and a Performance Based Compensation Strategy you can share with candidates as you interview them and your business will use once they are hired.
  5. Make sure your financial system is setup as needed so you can accurately measure produced gross profit margins on sold jobs. It should also be set up to help you and your new salesperson accurately calculate sales commissions earned.
  6. Make sure you have the ability to perform Estimated to Actual Job Costing so you can be sure jobs are being properly estimated by or for your new sales person. Commission based sales compensations plans are impossible without this ability.
  7. Be clear on who will do the Estimating and how it will and needs to be done (formatted) so your production team gets what they need to build sold jobs on their own.
  8. After you do all of the above write a detailed and clearly explained Job Description for your new salesperson position so you can use it to attract, evaluate and manage your new hire.
  9. Have Quality Audit Forms ready to go that you can use to capture feedback about your new salesperson’s performance from the prospects who do not buy as well as the customers who do buy.
  10. Establish the “Go-No Go Criteria” you will use so you have predetermined how as well as when you will make the absolute decision to keep or replace your new hire.

 

As I indicated above I decided number 10 proved to be the most important consideration after debriefing my learning experiences with hiring a first salesperson. As one sales seminar speaker once quoted at a seminar I attended early in my career:

“Never carry an employee longer than his/her mother did!”

 

 

Topics: Sales, Remodeler Education, Success Strategies, Recruting, Business Growth, Sales Considerations, Breaking $1Million

Checklist: Is Your Remodeling Business at Risk of Becoming Mediocre?

Posted by Shawn McCadden on Thu, May 21,2015 @ 10:12 AM

Checklist: Is Your Remodeling Business at Risk of Becoming Mediocre?

Improving a remodeling businessAs you grow your business day to day management and leadership considerations can quickly creep up on construction business owners.  Profitably growing a remodeling business to any volume, but in particular growing past the $1M threshold in produced work, definitely requires advanced business skills.   Growing and running your business by the seat of your pants is a sure way to create a mediocre business that will never generate maximum profits. This article offers several ways business owners can determine if they and their businesses are headed for mediocrity.  It also offers options to help you and your business get back on track.

 

Mediocrity Definition

 

Here is a checklist of indicators that your business is becoming mediocre:

  • Your business lacks written policies and procedures.
  • Even if you have policies you do not have predetermined consequences for violating them and or you do not enforce them.
  • You complain about things customers and or employees do or don't do; but then do nothing about them.
  • Concerned employees point certain concerning things out and you do nothing to address and or correct things.
  • Your employees point things out to you and you actually make them feel guilty for doing so or that they are annoying you by pointing them out.
  • Your customers offer feedback or complaints and you make excuses for why things happened, rather than embrace their help and use what they share with you to make improvements or corrections.
  • Long term customers stop doing business with you and you don’t bother to ask them why.
  • You create artificial harmony by ignoring culture deficiencies and or tension between team members and pretend everything is OK.
  • When something happens you always find a way to make it someone else's fault rather than take responsibility as the leader.

 

If these things are happening at your business you have two options

Construction employee complaintThe first is to let them keep happening.   If you allow things to continue you will likely lose customers, compromise your brand, have high employee turnover and you will never fully achieve creating a successful and profitable business.   Eventually, when your family and others ask you why you never really succeeded in business, you will again have to resort to rationalizing why it was someone else's fault.

Your other option is to recognize these things are happening and start addressing why they are happening.  Only until you know and recognize why they are happening will you be able to work on preventing them from happening.  

 

Preventing these things from happening may require two different solutions

The first is to stop certain things from happening all together by no longer tolerating them.   Put your big boy or girl pants on and be the leader you should be.   To hold others accountable make sure you create and follow through on consequences.

The other is to change how you do things so they just don't happen anymore.  Put policies in place and make sure they are enforced.   Those policies should also include clear consequences for violating them.

Lots of remodeling businesses are becoming mediocre as they try to grow in this improving economy. Will you join them or will you stand out from the crowd by becoming the reference standard for what it means to be a professional contractor in your marketplace?

 

Want help growing your business in a profitable and manageable way?

Options:
Consider joining our Construction Business Owner Peer Group Program scheduled to begin in September to be held at Middlesex Community College in Bedford MA.

 

 

If you prefer on-on-one help specific to your business email Shawn now to set up a time to discuss your business and the help you are looking for. Or call Shawn at 978-726-6531.

 

Topics: Employee Relations, Business Management, Success Strategies, Business Growth, Sage Advice, Business Considerations, Breaking $1Million

Design and Spec Considerations for Remodelers Looking to Break $1Million

Posted by Shawn McCadden on Wed, Feb 04,2015 @ 08:57 AM

Design and Specification Considerations for Remodelers Looking to Break $1Million

contractor_with_couple-wrIf your goal is to grow your remodeling business past the $1Million installed sales volume threshold the business will need a design and or specification process.  That process must support the ability to perform a "handoff" between the salesperson and the production team that will build sold projects.  Without adequate plans and specifications the production team and a project's lead carpenter will be constantly contacting the salesperson for the information needed to build what the customer is expecting.

Even if you do not plan to offer design services, or even if you work from plans created by an architect, it is likely the projects you build still require design and or specifications at some level. For example replacing a back entry porch and stairs can involve designing the railing style, or specifying the decking materials your business recommends to the homeowner to serve their expressed purpose.

Here are several design and specification considerations remodelers should address if their plan is to grow past $1Million. 

Be honest about the level of design you can offer

Skills needed to offer remodeling design servicesBe honest not only to your customers, but also with yourself.   I fortunately recognized very early in the building of my business that I was not a designer.  I can build any design you give me, I just don't have the right talents to design renovations at the level my target customer expected and deserved.  So, if you do offer or plan to offer design services make sure you find the right talent to do so.  That person could be an employee, or as in my case, that person could be a subcontractor.  Don't risk having your client tell you they don't really think you or someone else from your team is a designer.

 

Manage your risks before you offer design

Insurance coverage for remodeling design servicesFirst, make sure you can legally offer design service where your business operates.  Next, make sure you and or your employees have the right construction, product and building science knowledge and experience to offer design and or specification assistance.  Value engineering for a prospect may help you sell a project, but what if you suggest or substitute products that compromise the design, the structure and or the purpose of the project?   You may own the end result and it could cost you a lot of money.  Consider professional liability insurance coverage; sometimes referred to as Errors and Omissions coverage, to protect you from such risks.

 

Make sure designs and specifications are complete

Creating remodeling specificationsThis may seem like an obvious point but here me out.  If your goal is to bust past $1Million your plans and specifications should include not just what might be needed to sell the job and or get a permit.  Your plans and specs should really be communication tools that your production team will use to build from.  Measurements, product sizes, rough opening dimensions, center lines and clearances all become critical when building, and even more critical if you want to protect your margins and project schedules.   With the right plans and specifications you can protect your profits and only have to build the project once.

 

Summary

Design considerations for remodelersAs produced volume increase for a remodeler, that remodeler must decide between being a contractor and a construction business owner.  As a contractor you can do all of the above yourself, but breaking $1Million will be challenging, require lots of work hours and may not be practical depending on your target project types.  As a construction business owner your role will be to profitably run the business not the jobsite.  If that is your goal make sure your team members will be creating the information each department needs to successfully sell profitable projects and perform their assigned responsibilities.

 

read blog articles about breaking 1 million

Topics: Plans and Specifications, Design Options, Working with Design Professionals, Insurance Considerations, Breaking $1Million

Sales System Considerations for Remodelers Looking to Break $1Million

Posted by Shawn McCadden on Fri, Jan 23,2015 @ 06:00 AM

Sales System Considerations for Remodelers Looking to Break $1Million

Passing $1Million in RemodelingWell before attempting to break past $Million in installed sales remodelers and home improvement contractors should already have an established and tested sales system in place.  The system should be well defined. Those involved with selling, as well as supporting the sales department at your business, must be trained and held accountable to using it correctly and consistently.  

It’s also imperative to get a salesperson other than the owner in place and productively selling well before passing the $1Million threshold.   Doing this is important because the owner's time will most likely be pulled away from sales for more important activities as the business grows.  

Here are several important sales system related considerations for business owners looking to break past $1Million in installed sales.

 

Decide on how fast you want to grow your business  

Growth can't happen without sales, sales won't happen without talented sales staff, and having enough quality leads won't happen without a strategic and effective marketing plan in place.   All three of these things must be worked on consecutively and put in place as soon as possible to support a fast pace of growth. Remember, the biggest cause of remodeling business failure is growing the business faster than the systems needed to support that growth.


Choosing a sales system for remodelersDecide what Sales System you will use

I suggest you choose a known and proven sales system and sales trainer you feel will be a good match for your desired brand as well as your target customer type. If you are preparing to grow your business I recommend the owner take the training first. Then, after the business owner embraces the system new sales staff can be sent to the same training and trainer.

 

Put sales goals and metrics in place.

The markup your business uses to price projects should be based on two interdependent factors: the volume of business you plan to do and the combined cost of overhead plus planned net profit. By creating sales goals for the business, as well as each individual salesperson, you can track against those goals to be sure you will meet your planned volume of sales. Also, by having individual goals for each salesperson, you can support them and hold them accountable to achieve the goals and or decide you need to find their replacement. Hitting the goals will be important because coming up short on installed sales will mean you will come up short on the gross profit dollars you needed to earn to grow your business.   Your financial system should be designed to support measuring sales volume by salesperson and determine their commissions earned.

 

Summary: Remain committed to using the system!

Remodeling Sales system considerationsI want to stress that consistency of and with your company's sales approach will be really important as the business grows.  Without consistency it will be difficult for the owner to become a sales manager, or transfer sales management to someone else, because each sales person may approach selling in a different way.   And, without consistency of sales approach, repeat customers and their referrals may not experience what they expected when a new salesperson visits them. Plus, by having a consistent sales approach that successfully helps prospects buy the right solution, you can market the advantages of that sales system with confidence prospects will experience what they expect if they respond you your marketing.

 

(Note: This is the eighth 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 published articles in the series.)

 

read blog articles about breaking 1 million

Topics: Margin and Markup, Sales, Business Growth, Sales Considerations, Creating Referrals, Breaking $1Million

Marketing System Considerations for Remodelers Looking to Break $1Million

Posted by Shawn McCadden on Wed, Jan 21,2015 @ 06:00 AM

Marketing System Considerations for Remodelers Looking to Break $1Million

marketing for remodelers to help grow the businessMost remodelers, but certainly not all, rely heavily on referrals and repeat customers as they grow their businesses.  This may keep a contractor doing a low volume of work busy, but relying so exclusively on referrals won't be adequate if you want to become a construction business owner, break the $1Million installed sales threshold and develop a constantly growing business.

The fact is waiting for the phone to ring, having no idea what type of prospect will be calling your business, or what types of projects they will be looking for is a risky and uncomfortable way to grow a business.  Remodelers who attempt to grow without a marketing system in place will experience a roller coaster like ride of sales volume from year to year as well as season to season throughout any one year.  Plus, when leads are slow business owners may compromise on their pricing and even who they allow to become customers.   Doing business this way can be very stressful and frustrating for the owner as well as the employees.

To successfully grow past $1Million at your remodeling company, and sustain that growth from year to year, a strategic marketing plan and system are needed. Here are several important marketing related considerations remodeling business owners will need to address if they want to get up to $1Million. They will also need to already have these things in place to profitably grow past $1Million and comfortably sustain that growth.

 

Decide your niches

Creating remodeling leadsThere are many customer types out there all with their own expectations when it comes to working with a remodeler. Successful remodeling businesses are those that strategically decide who they will be and who they will serve. If you choose to work for people who buy on price and expect more than they are willing to pay for, you will get more work from them.  And because people tend to hang out with other people just like them, your past customers will refer you to more customers just like them. Before you do marketing to grow your business decide and define who you want as your customer. Also, think about the project types that make sense for the business you want to develop and grow. For example pull and replace kitchens and bathrooms may not be sexy or all that challenging to you, but remember you are building a company and a team of employees to complete what your company decides to sell. If you decide to build complicated and or highly detailed projects you will need the appropriate systems and staff to estimate, sell and produce that level of project to the expectations of your targeted client type. Choose wisely.

 

Develop a marketing plan

Marketing is only a cost if you don't know why you are doing it and or if you are doing it wrong.   By having a marketing plan and a way to measure against the pre-established goals in your plan, the money you spend on marketing is more likely to be an investment with high ROI.  Keep in mind a list of marketing tactics you intend to employ is not a marketing plan. Tactics should only be considered and developed after you have decided what you want to accomplish.  To help with the delegation of marketing related tasks the business should also create a marketing calendar identifying not only when defined marketing tactics will be used, but also when supporting activities must be scheduled, delegated and completed to support the on time delivery of the tactics to be used.  I refer to this as "franchising" your marketing because your system and calendar will help you manage the day to day work and activities required to keep it going without the need for micromanagement of the staff doing it. By having a plan you can also estimate the cost of your plan and include that cost in your overhead budget and calculated markup for pricing jobs.

 

Be strategic about how you do your marketing

Target marketing for remodelers Your marketing should serve two very important purposes.  The first is to help your target customer type(s) find you. The second is to convert leads into sales. The marketing tactics you use should support these two goals. One marketing tactic that can be really effective at accomplishing both could be your company web site.  For example, done well, SEO can be used so prospects searching online for certain services and contractor types can find your business, and find it on the first page of search engine results. Goal #1 achieved. But once you get them to your site you also need to differentiate your business from other businesses in the marketplace or risk being seen as a commodity. As discussed above, if you know your target niches you can then offer them additional information about those differences and can include customer testimonials as to why those differences were important and mattered to them.  The right information will help prospects decide if your difference matters and they should contact you, or that your difference doesn't matter enough to pay for it and they should look elsewhere.  

 

Summary

With the right marketing in place growing a remodeling business past the $1Million threshold is much easier and far less risky.  Choosing the right customer types and job types will make it much easier to develop cost effective and highly targeted marketing tactics.  By franchising how it gets done the owner can gain more time to work on other high value activities that keep the business healthy, profitable and growing. The right remodeling consumers want different and they will pay more for the right difference.

 

(Note: This is the seventh 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.)

 

Topics: Business Growth, Differentiating your Business, Marketing, Lead Generation, Marketing Considerations, Breaking $1Million

Financial System Considerations for Remodelers Looking To Break $1Million

Posted by Shawn McCadden on Mon, Jan 19,2015 @ 06:00 AM

Financial System Considerations for Remodelers Looking To Break $1Million

Financial reports for contractorsGrowing 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:

Identify what the business needs to measure and how it will be measured.  This is important because the business must have apples to apples ability for comparing estimated job costs and overhead expenses to actual cost and expenses.   Without a well thought out and accurate chart of accounts in place job cost reports will be misleading and estimated gross profit margins for sold jobs will not be comparable to the profit and loss reports the system creates.  I bet most of you don't job cost your actual labor costs for each employee using the same burdened labor cost strategy employed when estimating those labor costs.

Find or create a fast and accurate Estimating System:  

Yellow pad estimatingAs the business grows and more employees are added to share the workload the owner must be able to delegate tasks he or she probably did them self as they grew the business.  These delegated activities might include things like product selection, product procurement, production management, and even the responsibility for doing the estimating.   The yellow pad estimating method will not be adequate anymore.  A more advanced estimating system using spreadsheets and or industry specific estimating software will be needed and employees will need to be properly trained to use it.  The right system will speed up the estimating process and provide the information the entire team needs to build projects on their own without the need for constant micromanagement by the estimator, salesperson production manager and or the business owner.    

Create and document an Accounting and Bookkeeping System:

To support the financial system that was designed to best serve the business as it grows, a software system to support it must be setup and put in place.  Keep in mind that financial software like QuickBooks is not a financial system, but rather the tool that will be used to support that system.  Software like QuickBooks can be setup in many different ways.   Setting it up correctly is probably a task far more involved and time consuming than most business owners, bookkeepers and even most accountants are skilled to tackle.  Make sure you use a qualified expert to help you in this area.  Also, the business will need to create and document an administrative system for how financial information will be collected, coded, entered into the system, filed and verified.  This is needed so trained employees can follow the system and the business owner can be confident about the accuracy and timeliness of information when reviewing financial reports.

Growing your business should be profitable and should not be left to luck or chance.  

Financial system for remodelersWithout 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.)

 

 

 

Topics: Business Financials, Estimating, Business Growth, Financial Related Topics, Estimating Considerations, Business Planning, Software Related, Breaking $1Million

Correct These 3 Remodeling Business Dysfunctions Before You Grow Past $1M

Posted by Shawn McCadden on Fri, Jan 16,2015 @ 06:00 AM

Correct These Three Remodeling Business Dysfunctions Before You Grow Past $1M

Dysfunctional remodeling businessNewton’s Law of Momentum states that “A body in motion tends to stay in motion and tends to continue in the same direction.” Remodelers who downsized their businesses during the recession might want to consider Newton’s law.  

Your remodeling business may be back in motion again now that the economy is improving, but if you continue in the direction it is currently headed will you reach your personal and professional goals? And, if you were already at or had crossed the $1Million per year threshold before you downsized, thinking back, was it really the right path to be on to help you keep growing profitably? If you are not realizing the success you hoped for when you started your remodeling business you might want to consider and address these three indicators of a dysfunctional remodeling business before planning any additional growth.

 

Dysfunction #1: Constant Crisis

If you wake up every day wondering what fires you or your employees will have to put out you’re probably already deep into constant crisis.   Lack of planning and a lack of standard operating procedures causes constant crisis. Once in constant crisis it can be difficult to get out because addressing each crisis eats up the time your business needs to plan, develop and implement procedures that would have prevented the crisis to begin with.   For example, if you keep underestimating or under pricing your work because you lack a quick and accurate estimating system you will forever be trying to find ways to reduce your production costs to make up for it.   Also, consider it might only be a matter of time before employees, subs and vendors get fed up with constantly having to do and give more because your lack of planning has become a way of doing business, rather than just a phase you’re working through. Maintaining constant crisis often leads to staff and sub contractor turnover. Losing and replacing resources will help keep you in the constant crisis whirlpool as well.

 

Dysfunction #2: Tolerating Relative Success

Building a successful construction businessIf you have convinced yourself that your business isn’t really all that bad when you compare it to other dysfunctional businesses that are worse off than yours, yours will never achieve true success. Being less bad is not good. Rather than judge your business on relative success, you should judge it based on absolute success.   Again this requires planning, but also requires establishing metrics against which you, and anyone else who reads your plan, can measure whether your plan is working and is actually leading you towards predefined success. Keep in mind that being better off than you used to be might not be a great place to be either.   Think of it this way;

“If your business is ten feet under water and drowning, but your improvements get you to two feet below the surface; your business is still going to drown!”

 

Dysfunction #3: Broken Behavior-Consequence Strategy

If your business requires you to do almost everything because if you want it done right you have to do it yourself, your business is dysfunctional but so are you.   If employees or subcontractors can’t or won’t do and or follow through on certain tasks, why are they still there? What sense does it make to establish rules for doing business if you don’t also establish clear and actionable consequences for not following them? For example, why give a salesperson a commission for closing a sale if he or she hasn’t completed all the paperwork required to hand the project off to the production team? Or, if employees don’t get their time cards in on time and or fill them out correctly, why do you pay them on time?

 

Owning and running a remodeling business requires leadership

Without proper and adequate leadership from the owner a business can quickly and easily become dysfunctional. If any or all of these indicators are happening at your business it’s time to step back and away from your situation long enough to develop an “outside view”. You should definitely do this before you allow your business to pass $1Million in installed sales.

 

Perhaps consider these words of wisdom I found on a bumper sticker:

 

“The minds that created our problems are not likely the ones who can help us solve them.”

If you can’t or won’t eliminate the reasons for dysfunction, find someone else who can.

 

(Note: This is the fifth 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.

Topics: Business Management, Business Growth, Business Planning, Sage Advice, Breaking $1Million

Five Remodeling Business Myths That Get In The Way Of Growing Past $1M

Posted by Shawn McCadden on Wed, Jan 14,2015 @ 06:00 AM

Five Remodeling Business Myths That Get In The Way Of Growing Your Business Past $1M

Myth_or_Truth-wrThere are many remodeling business myths that seem to have become truths for way too many remodelers. That’s too bad. Believing those myths may be holding them back from being able to grow their businesses. Allowing these myths to remain in place will definitely prevent remodelers from successfully growing their businesses past the $1 Million installed sales threshold.

 

Schema leads us to believe what we experience as true

In an April 2010 Remodeling magazine article I defined and discussed schema. We all have our own schema. Schema is our way of interpreting things and information based on our past experiences.   Without previous experience with something one cannot have schema in that area. We can also have a limited schema about certain subjects if our experience in those subjects is limited. With limited schema our definition of what is true may also be compromised. In other words, if you have schema, but it is limited, you may end up believing something to be true, even though it is a myth.

 

I suggest the video below makes my point

 

 

Here are five remodeling business myths that are easily debunked with some schema

Myth #1: I have to be competitive on price to sell jobs:

If you don’t do marketing to expose how your business is different you will be perceived by consumers as being the same as most other contractors. That puts you into price competition to get jobs. Check out these two articles and try what is suggested to gain some new schema on this topic: Generic Contractors Are Fading Away, Brand Names Are Shining and Why Some Contractors Can Raise Their Prices But Most Others Can’t

 

Myth #2: Home owners won’t pay for estimates:

Most contractors say they can’t charge for estimates in their market place because all the other contractors do them for free. First, that is not true, many contractors successfully charge for estimates. Second, remember your mother: “If all the other kids jump off the bridge on the way to school does that mean you should jump off too? Maybe learning some ways to do it and them giving them a try could change your perspective about charging for estimates. This article can help get you started: Tips For Contractors On Ball Park Pricing and Charging For Estimates

 

Myth #3: Contractors have to wait until each phase of work has been completed before getting paid for each phase:

pocket_change-wrAgain, will you jump off the bridge, too? Will Delta Airlines let you pay after you land?   Completing remodeling services without being paid for them before you do them is in my opinion foolish, and a huge risk for most remodelers.   It instantly creates cash flow challenges in a business where cash is king. Breaking $1M without good cash flow might be the death of your business. Here is how you can create payment schedules that keep you ahead of your customer: Payment Schedules That Create And Protect Cash Flow

 

Myth#4: There are no good employees out there to hire:

Finding good employees is tough and doing it well requires a well thought out recruiting process. However most remodelers get bad employees because they don’t establish well thought out job descriptions before seeking to hire. When that is the case the job description is often being created during the interview, perhaps by the candidate. Check out this article published in JLC magazine for some help in this area: One Simple But Powerful Tip For Hiring The Right Employees 

 

Myth #5: If I give my employees too much training they will leave and start a business of their own and become my competition:

I personally found just the opposite happens. If you don’t give them enough insight and schema regarding what it takes to own, run, lead and finance a business they will leave to start their own. In addition to the training offer them leadership positions at your business, along with a good performance based compensation package. Doing so will make it more likely they will stay. These two articles will offer you some options to address this myth. The first was published in Remodeling magazine: Shared Responsibility: Advantages of Creating a Team of Leaders and Helping Employees to Think Like Owners

 

Looking to gain some schema?

By participating in the Construction Business Owner Education and Peer Group Program beginning in March you can gain the knowledge you will need to try new ways of doing things. The program also includes one-on-one assistance and coaching to help and guide you as you work through the changes.

 

(Note: This is the fourth 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.)

 

 

Topics: Success Strategies, Worker Training, Business Growth, Opinions from Contractors, Leadership, Sage Advice, Breaking $1Million