These 12 Hard Questions Can Help You Decide if You Own a Remodeling Business or a Low Paying Job
Are you pretending to be a remodeling business owner but in reality you are actually just a "job owner"? The questions below are tough and may make you feel real bad about yourself depending on how you answer them. But that’s not why I assembled them. Don’t kid yourself. If you are not cut out to be a business owner recognize that reality now. Don’t wait until you lose you all your money, your home and maybe even your family. If being in business is not your calling keep in mind the industry is desperate for good employees. Real remodeling business owners offer good jobs with great pay and benefits. Answering these questions might just be the best thing you do for yourself this year.
- Are you one of about 85% of remodeling business owners who have no clue regarding how to calculate your required markup and gross profit margin (WAG)?
- Are you one of those business owners who uses a convoluted scheme for marking up different things at different markups even though you have no idea whether you are buying or selling jobs (WAG)?
Are you one of those business owners who doesn't know the difference between markup and margin, or worse you think they mean the same thing (WAG)?- Are you one of about 80% who do marketing without a marketing plan?
- Are you one of those business owners who has no idea whether you made or lost money until your taxes are done in March or April by your “historian accountant” (WAG)?
- Are you constantly getting tax filing extensions because your books are a mess and or because you don't have the money to pay the taxes you were surprised to find out you owe (WAG)?
- Is your business up to its eyeballs in debt and you have no idea how or why you got there, or how you will ever get it paid off (WAG)?
- Are you, or will you be, one of the 52% of Americans ages 62-65 who have less than $25K saved for retirement?
- If you divided your total pay Wage plus net profits) by the number of hours you worked this past year are some or all of your employees making more per hour than you?
- Are you able to still say you’re still in business because of your wife’s job and health care plan?
- Do you brag that you do no marketing and totally rely on referrals but at the same time complain about the jobs and customers you get?
- If you answered yes to most or all of the above are you ready to do something about it?
As 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.
The 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.
I often hear contractors say they offer fair pricing. When I ask them what they mean by that most really can't provide a logical answer, or their answer is subjective. It got me to thinking about what fair pricing really is. I came up with three considerations I think make a contractor's pricing fair to their customers, but also to their business as well as their employees. Let me know what you think.
I would suspect most contractors work for customers who have good jobs offering decent pay for the job performed, workers compensation coverage, benefits like vacation and holiday pay so they can enjoy life, health insurance so they can stay healthy and retirement contributions so they can save for a comfortable retirement. I bet if their employers took any of those things away from them “it wouldn’t be fair”.
Since selling my remodeling business in 2004, many remodelers have asked me for help and insight about how I did it and how they too could sell their businesses some day. They ask great questions. The challenge is that there is no easy one size fits all answer. In this article I will share a few big picture considerations to help guide you. In a follow up article I will discuss typical buyer types you can consider as possible prospects to sell to.
If you’re considering selling your business some day you will need to consider the types of buyers out there as well as their typical motivations for buying one business versus another. In my next blog I will discuss the two typical buyer types you will want to consider as you make you plan and write your for sale ad.
Upon a little reflection I’ve realized there are a lot of ways to organize a contracting business, none of which are the “gold standard” and all of which either purposely or inadvertently express the personality of the owner. At your inner core are you a manager or a craftsman? Are you a little of both? Are you neither? Generally, I’ve noticed successful people have figured out who they are and how they add value to the equation. Then they’ve set up a business system to capitalize on their strengths. 
If you are excited about putting a team of specialized professional craftsmen together to construct a series of varied job types where organization & management are key elements of production & profitability, you’re a good fit for a general contractor operation. A GC set up is generally best for larger jobs like a custom home, a larger addition, or a whole house remodel job. Sometimes smaller jobs that require a higher level of craftsmanship like a special faux finish on walls, or custom built in cabinetry, or precision stone work are best left to the specialist sub contractor. Higher end bath remodels are also a good fit for a GC with a loyal team of trade contractors. You absolutely must develop a team that you work with regularly so you can be assured of consistent quality and integration between trades.
Second is that the supply chain is finally spending money again on marketing to and investing in their remodeling contractor customers. Although still not as busy as they used to be, trade shows this past year have grow in size again as more manufacturers and distributors are back participating at the shows. Also, since about early this past summer, the number of manufacturers, distributors, dealers and trade associations contacting me about speaking at their events has also dramatically picked up. The supply chain is once again spending money to educate their staff as well as their contractor customers, as a way to grow their businesses as well as their customers’. 
think sums things up
This language is best used at the beginning of your proposal
I also suggest you consider the possible liability you take on by creating specifications and or project plans and leaving them with a prospect that does not do business with you. By doing so you may have put yourself into a position where the prospect or another contractor actually works from them. If they have challenges when building the project and decide those challenges were caused by your plans and or specs, they may have legal rights to sue you. Regardless of whether you feel you are innocent or guilty, you will need to cover your own legal expenses if you get to court and most likely will not be able to re-coup your legal costs even if you are found innocent. If you are found guilty you may even be required to pay the legal expenses incurred by the person suing you.
The press release alleges that the violations occurred while James J. Welch & Co., Inc. was acting as the general contractor performing renovations on a project at the former Frisbee School in Kittery, Maine. At the time of the renovation the Kittery site was a child-occupied facility and therefore was subject to Renovation, Repair and Painting (RRP) Rule. 
In Feb. 2012, after receiving the anonymous tip, the EPA and the Maine Department of Environmental Protection performed an inspection of the site. Based on the inspection, EPA determined that the general contractor did not ensure that a company hired as a subcontractor to replace windows at the school, New Hampshire Glass, was complying with the required work practices required under the RRP Rule. 
The nightmare both of these businesses are going through should serve as a warning for other business owners. Both general contractors and sub contractors need to know each other’s responsibilities when it comes to compliance with the RRP Rule. By understanding the rule the GC and the sub can then come to an agreement about who will do what and when they will do it to make sure that both of them are in compliance while doing the work, as well as creating and maintaining all required paperwork and documentation. If you do not already have these things under control at your business I suggest you read my September 3, 2010 RRPedia blog titled: 
Many remodeling contractors may be operating their businesses illegally without even knowing it. In addition to construction supervisor licensing, most states now have some type of licensing or registration requirements for contractors who offer and or perform home improvement work. Home improvement contractor licensing and regulations govern how contractors conduct business, not how they build or renovate at the job site. Fines and penalties for lack of compliance can be substantial, including losing your right to conduct business. The specific details of home improvement contractor laws and regulations are different from state to state, so it’s a good idea to make sure you’re aware of and understand requirements where you work. 
When you serve anyone and are willing to build anything your business misses an opportunity to really stand out. Lots of businesses already follow that model. If you follow it too you will be just another one in the crowd. Instead, by choosing specifically who you will work for and what work type or types you will concentrate on, you can then create and build a brand that attracts your targeted niche. Make sure the niche market you choose to serve can support the required margins your business needs to do so and make sure to consider the skills required to sell to that niche. Remember, the economy will be soft for at least several more years, so choose niches and work types that will be in demand in your market. As Mick Jagger of the Rolling Stones sings: ““You can't always get what you want. But if you try sometime, you just might find, you get what you need”
Don’t be different in the same ways other remodelers are different. Sounds stupid but why copy another business and call that being different. Besides, when you’re just like all the other companies the only differentiator in the eyes of the consumer might be price. Instead, be unique. Find ways to really stand out from the crowd in the way you do things and or the things you do. For example maybe you only hire female field staff to build your projects. Maybe you and your employees always wear company uniforms and name badges with your picture on it whenever you and or they show up for a sales call, service call or the first day at a new project. Or, maybe you will only install American made products (assume that is really possible these days!). As Jerry Garcia of the Grateful Dead once said: “You do not merely want to be the best of the best, you want to be considered the only one who does what you do”
You can’t do it all on your own and still have a life. As the legendary Canadian Rock Band Bachman-Turner Overdrive sang: “I've been taking care of business, it's all mine. Taking care of business and working overtime”. If running your business requires too much time away from the things you actually work to have or enjoy, you need to change how you do business.
