The Design Builder's Blog

Breaking Past $1M in Remodeling: Getting Ready To Do It

(Note: This is the third 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 article in the series that have been published so far.)

In a previous article I discussed how important it is that a remodeler decides whether he or she wants to remain a contractor or become a construction business owner before passing the $1 Million threshold in remodeling. Again, either choice can be a good one, but if you want to keep growing your business and offer growth opportunities to great employees, you need to become a construction business owner.

In yet another article I stressed the point that putting off that decision can lead you and your business from controlled chaos into disorganized chaos. The disorganized chaos happens because the labor intensive and disparate systems being used that got the business to $1M are no longer adequate to handle the increase in activities that come with the additional growth and inherent risk.  You can read my article titled "Invest In Your Remodeling Business Now Or Pay Forever" for more on this topic.

Before you decide to become a construction business owner

Becoming a construction business owner can be very rewarding for many reasons.   It’s also not a very easy thing to do successfully. It will take time, money, patience, vision, leadership skills and diligence.   Before you make the jump check out the business owner considerations and the business goals below. These are the kinds of things you will need to work on to help get yourself and your business on the path to successfully break past $1M and increase profits at the same time you grow.

Remember, growing your business faster than your systems can handle is the most common reason for construction business failure.

Business Owner Considerations during the Take-Off Stage:

• Owners should seek to put a more refined structure in place for the purpose of better, faster, and more accurate information. This is a critical step towards the owner’s ability to evolve away from the micromanagement of employees.
• The owner should develop measurement milestones and incremental check points relative to a achieving a refined long term vision for the business.
• The owner must learn to recognize, adapt to and take advantage of changes in the market place, because a lot of changes will happen over the time it takes to grow the business.
• The owner should seek to add mid level management employees as soon as possible assuming earned gross profit and/or reserve funds can support the required overhead.
• The owner must focus on implementing critical and timely business adjustments identified by business reports, trends and the opportunities brought to light due to an advancing schema.

Goals during the Take-Off Stage:

• Develop the ability to track business activities without relying on the hard drive capacity of the owner’s CPU (brain and memory).
• Start the process of developing written job descriptions for how business should be happening.
• Increased use of standard repeatable methods and create supporting documentation and forms.
• Give salespeople the support they need to support sales less on their own, sell more and keep them selling profitably.
• Develop standard contracts and agreements, reviewed by legal counsel to protect the business.
• The ability to collect supporting data company wide electronically.
• The ability to manipulate and interpret the data.
• Add and ramp up a full time sales person to relieve the owner of some sales volume, allowing the owner to concentrate on other high level activities.
• Train and allow lead carpenters to be owners of their projects and managers in the field.
• Identify a production manager candidate, preferably from within the existing lead carpenters.
• Mentor the production manger candidate into a full time role.
• Accumulate cash reserves adequate to finance your ability to grow into the next stage.

Breaking Past $1M in Remodeling: Typical Characteristics of the “Take-Off Stage”

(Note: This is the second 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 seriesthat have been published.)

Every remodeling business and its owner are different from other remodeling businesses and their owners. This is because remodeling businesses are typically not designed, they just happen.  As a result, both the business and the owner evolve forward based on and limited by the skills and knowledge the owner brings to the business.  

Successful growth of the business depends on the owner

Hard working entrepreneurs have what it takes to get the business going, but most entrepreneurs lack the business skills, practical experience and insight to successfully grow a remodeling business past $1Million. This doesn’t necessarily mean they shouldn’t do it or they should replace themselves as the business leader.  It does however typically require they get the outside assistance and guidance needed to help make the required changes happen.

This stage of business growth is what I refer to as the “Take-Off Stage” for a remodeling business because either the business takes off successfully, or it doesn’t.  Another way of looking at it might be either the business owner commits to doing it and doing it right, or accepts the status quo of accidental and unplanned growth.

In this article, from a high level perspective, I want to share some typical characteristics of a remodeling business on the doorstep of the Take-Off Stage.  If your business has already started on and or put these items in place your business is at that critical point where you must decide to remain a contractor or become a construction business owner.  Putting off the decision can lead you and your business from controlled chaos into what I call disorganized chaos; where discovering and dealing with fires everyday overwhelms the business owner and prevents proactive business growth activities.

Typical Characteristics of Take-Off Stage

• Produced volume somewhere between about $750K to $1.2 Million of installed sales. Note: Volume can range because for example if your markup is really low (10%) you might be installing as much work as a remodeler using a very high markup (75%)
• Through experience an advanced schema has developed in both the owner and a few key employees. As a result:

• Computer and software use has increased dramatically, but consists of segregated off the shelf solutions.
• The owner is working many hours, performing multiple job descriptions and for the most part is just keeping up with day to day activities.
• The owner realizes what he he/she is currently doing will not take the business to the next level.

(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 that have been published.)

As a remodeling business seeks to grow past the $1million a year threshold things can very difficult for most business owners.  Taking the jump can even be fatal for the business. I call it the “Take-Off Stage” because either the business takes off successfully, or it doesn’t.

The typical challenges most owners experience during this transition include having the right skills to make the jump successfully and getting it done quickly enough.  The growth has to happen quickly enough so the increased volume produces the gross profit needed to cover the additional related overhead expenses required to first make the jump and to sustain it.

At the doorstep of approximately $1M remodelers must make a decision

Will they remain contractors or will they become construction business owners? 

Either is a good choice, but being a construction business owner is much more involved.  It can also be much more profitable.

 It’s the best time to introduce the structural and behavioral changes the business and the owner will both need to make.  

 

Growing past the $1M mark without putting significant changes into place is a huge risk

The reason most small businesses fail is not because they are not profitable, but rather because they grow faster than the business can successfully implement the systems needed to manage that growth.

 
Want help making the $1M Jump?

If you what help here is what I am setting up to help you.  Over the next two weeks or so I will be publishing blog topics specifically written to help remodelers who want to grow past $1Million a year.  In the next article I will share the typical characteristics of the Take-Off Stage.   After that article I will share some important considerations for the business owner and a list of goals the business and the owner should consider committing to and working on to get ready for the growth. 

Then, following those articles I will post a series of articles.  Each article will specifically discuss one of the seven business systems I have identified as critical to the successful and profitable growth of a remodeling business.  Again each one will be written for the purpose of helping remodelers with what they will need to consider and put in place to help them break $1M profitably.

The list of systems to be discussed will include:

1. Financial
2. Marketing
3. Design
4. Sales
5. Production
6. Personnel
7. Communications.

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