The Design Builder's Blog

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

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.

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

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.

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?

How Long Does It Take Before A New Construction Business Sees A Profit?

I came across a great question asked by a group member while participating on LinkedIn. I replied to the question on LinkedIn, but also thought it would make for great info to share with other contractors who might be asking the same question.

Here is the question:

I'm sure we all have heard, "It takes a business 3 to 5 years before it profits." Does this apply for our industry? How long should it take when you start your own business before you start to see a profit?

Here is my expanded answer

Great question. Thanks for asking it. The answer depends on how you define profit.   Many factors can be considered.   Let me offer a few here.

What you charge will be a significant factor

Being profitable does have a lot to do with knowing what you need to charge so you can and will earn a profit. If a business is guessing at their rates earning a profit is a guess as well. Probably more like a HUGE RISK!

Also, consider that investments you make in your business for the tools, equipment and other larger and long term use stuff are just that; investments.   The cost of those items, at least for tax purposes, is not typically assumed to be cost covered in one year of doing business, but rather the cost is typically spread out over several years. The idea is that these items are "invested in" using profits so they will eventually help provide more income and profits than they originally cost.

To summarize, the more you charge the more profits you can earn and therefore the faster you can pay off your investments and show a profit.

Profit is not measured only by how much you have left in the bank at the end of the year

Also consider, as a business owner you may personally be measuring your profitability including the costs of any investments for a one year period. As a result may not see a profit in the bank at the end of the year.  However the money spent on those investments is still considered profit for business and tax purposes. This is the case because when filing your taxes the government sees these investment type purchases as assets paid for with profits.  To get tax deductions for these assets you are allowed to depreciate the assets over time to reduce their value and take tax deductions for them over several years or more. Essentially, for tax purposes, the government measures your profit by combining the money you earned and still have; along with the assets you bought using any profits, as your total taxable net profit. Also, any money your business paid out to you the owner as profit distributions over the year will be considered part of your business’ total taxable net income.

These are a few reasons why a lot of business owners have to report profits earned but may not have any money left in the bank to cover the taxes on those profits. When this happens a lot of contractors view their businesses as not having earned any profit. I suggest as the business owner you can view it any way you want, but the government will still be taxing you and or your business.

Make sure you give enough attention to these important tax considerations

Again, great question to ask. I hope this article helps.   Being a business owner means you have to understand how to manage and protect the profits you earn, but at the same time manage how you will be taxed on that same money.   By not knowing or ignoring these considerations you can be working hard to make money while profits that could have stayed with you are going out the door to the government as taxes. That said there are a lot of great reasons to have a proactive accountant helping you and your business instead of a historian type accountant who only files your taxes for you when everything is already said and done for the year.

Now, go on out there and generate some profits so you have to pay even more taxes next year!

But, don’t pay any more than you have to!

Sales System Considerations for Remodelers Looking to Break $1Million

Well 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.

Decide 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!

I 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.)

Marketing System Considerations for Remodelers Looking to Break $1Million

Most 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

There 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

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.)

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:  

As 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:

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.)

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

Newton’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

If 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;

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.

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

There 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

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:

Again, 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

(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.)

What Should You Do To Improve Your Remodeling Business In 2015?

It’s that time of the year when many forward thinking Remodeling Contractors contemplate and commit to the strategic business improvements they will make in the New Year.  If you want to grow your business and or make more money in 2015 having a plan to help you get there will make it much more likely to happen.  

If you already know what changes you need to make assembling your plan will probably be easy.  But if you aren't confident about what to do you might just invest your time and money in the wrong areas.   

Here are three important considerations to take into account before you commit to a plan:

First, make sure you work on the right areas in your business.

This may seem obvious but unless you already have a lot of business training and experience will you be sure you are working on the right things and in the right order?  For example it might not make sense to work on your sales skills if you’re  to not confident you will be properly marking-up your estimates cover your new overhead costs as you grow.  By making this mistake you might just be buying jobs instead of selling them and the growth could put you out of business.

Second, work to get your business in balance. 

To help clarify what I mean by this suggestion ask yourself if your business has systems or a system.  If you have systems maybe each system is working OK on its own, but by looking at it that way each might not be contributing as much to the overall success of your business as they could.  On the other hand if you work to balance the advancement of each of your business systems in the right order they could better unite together to form a system that produces far greater results.  Think of it like the cross pollenization of plants where, working together in balance, one plus one can equal three.  But, sticking with the plant analogy, if you only water and fertilize half of your crop the weak plants will not be contributing as much pollen as the healthy ones and the overall harvest at the end of the growing season will have suffered.

Third, recognize your own weaknesses as the business' leader and commit to a plan of self improvement. 

For example if you add employees so you can get out of the field will your personal management and mentoring skills be adequate for the task at hand?   If you end up being a micromanager instead of a leader you may end up holding back inspired employees who want to grow.  If that happens you could lose them as well as the investments you made in attracting them in the first place.  Remember, most employees don't leave because they are not happy with the company they work for; most employees leave because of the boss they work under.

Do a business assessment before you commit to changes

Creating a solid plan for what you will do to grow your business is not easy for most remodeling business owners.  Depending on your business experience it may actually be impossible to do.  To help you assess where your weak areas are and what things you should work on you can download my free Remodeling Business Assessment Worksheet.   By filling it out, it can help you see where your business is out of balance.  In the example to the right the business is producing work faster than it is selling it, probably due to a lack of sales staff.  With this information the business owner will have a much better idea regarding what areas to work on to help get the business in balance and grow it.  

If you download and fill out the Business Assessment Worksheet please share some comments here about your experience using it and what it might be indicating to you.   I bet what you share can be very valuable for other business owners.

Once you have your business in balance you will be closer to having a “system” instead of “systems”. 

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.