The Design Builder's Blog

Remodelers: Can You Answer These Questions About How You Do Business?

One way I help my clients remodel how they do business is to first get them to actually document how they already do business.  For most they think they know how they do business until I start asking clarifying questions as they attempt to explain.  I did this exercise one time with a $3M+ remodeler and his management staff.  The owner told me before we started how impressed I would be with how they do things and work as a team.  About 30 or so minutes into the meeting he came to realize only he knew how to explain it and none of his staff were on the same page as he.   He then, in a frustrated tone, asked his staff: “How does anyone around here get things done if none of you can explain how we do business?” 

One employee quickly jumped in and said something like: “Well we have to ask you every time and it seems you have a different answer each time so we stopped assuming and decided to just ask every time rather than risk being wrong”.

Below is a list of considerations regarding how you can do business as a remodeler.  The list starts with an initial inquiry from a prospect and is broken out by typical steps of the process up through wrapping up a remodeling project.  There are lots of things to consider related to each step depending on the type of work you do, who your target customer is and how you do or will decide to do business.  Keep in mind your decisions in each step can or will affect other steps.  Please assume it to be a partial list.  I hope you find the list to be a helpful way for you to get started thinking through how you do business. 

Steps related to selling and completing remodeling projects:

1. Original contact:
   • How will prospects contact your business and then how will your business respond.
   • You will need ways to respond to inquiries from email, Voice Mail, showroom/office drop-ins and or your web site’s contact page.
   • One goal of this step should be to manage prospects’ expectations about what will happen next and when.
2. Initial phone conversation
   • Who will call the prospect back and when?
   • Should it be a trained gate keeper or the salesperson?
   • What are the purposes of the initial call: for the prospect and for the business?
   • How will the business decide whether to agree to a first sales call?
   • Will your business establish and agree to an agenda and purpose for the meeting before you commit, or will you figure that out when you get to the prospect’s home?
3. First sales call
   • Will this be at your place of business or the prospects home?
   • Who has to be there besides your business and how will that be decided?
   • How long will the first visit take and why?
4. Decision time:
   • What does the business need to know about the prospect and their project?
   • Will you have them make a decision about whether your company is a good fit before or after you commit to and invest hours of your time developing an estimate and or proposal?
   • Will you require them to share their decision making process about the project and price before you attempt to get them to make a decision, or will you deal with all that at the same time you are expecting them to make a decision?
5. Deciding if the prospect and project are qualified and if so for which service the company offers
   • If they are not qualified how will you let them know?
   • If they are qualified what will you offer them?
   • Before you commit to prepare a proposal will you require them to commit to a presentation meeting or are you willing to hit send and wait to see what happens?
6. Design/Preconstruction agreement with a fee or free estimating and proposal generation
   • Will you charge them to create plans and specs, create them for free, or expect them to already have plans and specs?
   • If you will offer design how will your process work, when does it begin and end, and what does it include?
   • How much will you charge and when will you collect the money: in full before you start, hourly as you go, after you already did all the work, other…?
   • If you create plans and specs who owns them?
   • Will you leave them behind if they do not buy from you?
7. Proposal presentation meeting
   • Who has to be there and if not there will you automatically reschedule and take your package with you?
   • Are you expecting a decision at the meeting? If so, what should/will your business do to help them make a decision?
   • If not expecting a decision at the meeting how long is your proposal and price good for?
   • If you charged to prepare the information will it be applied to the project price or is it considered a separate fee and service?
8. Pre-construction and pre-staging
   • Will you expect all product selections be made before offering a fixed price?
   • Will you schedule the job if there are any open selections to be made?
   • Will you get enough money at deposit to pre-stage the job with required materials, will you use your own money to pre-stage, or will you wait until you start the job to gather the materials?
   • Will you require clients attend and participate at a preconstruction meeting?
9. Construction
   • What type of payment schedule will you use: % complete, milestone based, time based?
   • Will you finance the job for the client by billing after you complete a milestone or will they need to pay you in advance for each milestone so your company always has positive cash flow?
   • Will you use a production manager driven system to get the work done or a lead carpenter driven system?
   • Will you follow OSHA and RRP regulations?
10. Project wrap-up
    • Is the final payment due on completion or substantial completion (do you know the difference?)
    • Will you allow a punchlist or require a precompletion list?
    • Do you have a process and supporting form you and your customers can use to both agree and confirm the project is complete?
11. Warranty
    • When does the job end and the warranty begin? (What does your contract say about this now?)
    • Have you clarified warranty responsibilities depending on who provides the materials?
    • Will making the final payment be a condition of doing any warranty work?

What Are The Elements To Consider To Achieve The Right Office Design Layout?

The layout of your workplace is extremely important, because the wrong layout can restrict staff and hinder productivity, while the right layout can help your team to carry out their tasks more effectively and boost productivity and even creativity. For this reason, it is important that you plan your layout carefully and make the right choices.

In this article, we take a look at some of the most crucial elements you and your office design company will need to consider when planning the layout of your office space.

1. The Size of Your Team

In terms of pure office space planning, one of the single most important considerations is the size of your team. If your team consists of around a dozen people, a small, shared space may suffice, but your needs will obviously be rather different if you are employing more than 100 people.

Where possible, you want to try and make sure your layout is future proof too. This means taking into consideration the potential for growth and, therefore, the addition of more staff members.

2. The Nature of the Work

Next, you need to think about the nature of the work carried out by your business. If you primarily require people to stay focused on individual tasks, an open plan design may damage productivity, because staff may become distracted. Instead, it would make sense to try and give staff access to quiet spaces.

However, if you require constant collaboration between employees and teams, the open plan design may be better. If you have a mixture of needs, or if you have staff who work on a variety of different devices, you may want to create a design that allows people to move freely between different spaces.

3. The Views of Employees

One of the best ways to ensure you get the right design is to speak to staff during the office space planning stage of the process and ask them for their opinion. What do they like about your current layout? What do they dislike? What could you introduce to make them happier, or better able to carry out their daily tasks?

Some of the suggestions you get back may not be feasible, but you may also get some great ideas and become aware of problems that you weren't previously aware of. The main people you hope will benefit from a great design are your employees, so it pays to give them an input.

4. The Personality of Your Team

The final element to consider is the personality of your staff members - how they think and what they enjoy. According to John Holland, employees generally fit into one of the following six categories:

• Conventional - Organised, orderly, enjoy working with numbers and records
• Enterprising - Ambitious, competitive, enjoy selling and persuading
• Artistic - Non-conformist, expressive, enjoy creative work
• Investigative - Analytical, intellectual, enjoy studying and problem solving
• Realistic - Physical, practical, enjoy working with machinery or tools
• Social - Supportive, conscientious, enjoy helping other people

Identify the personality types in your building and work with your chosen office design company to create a layout that suits their needs. If you have a lot of artistic people, you might consider an unconventional layout, but if you have mostly investigative types, they will need conventional private spaces for concentration.

Guest blogger:  Reno Macri is a founder and director of a leading exhibition and event company Enigma Visual Solutions, specializing in retail designs, interiors, graphic productions, signage systems, event branding, modular exhibition stands design, office space planning and much more. He specializes in experiential marketing and event productions. He enjoys sharing his thoughts on upcoming marketing ideas and design trends. Feel free to follow him on twitter.

Now Might Be a Good Time to Remodel How and Why You Do Marketing

On April 2^nd, 2015 I presented a half day marketing workshop titled "Choosing and Targeting the Right Customers and Projects Types for Your Business". The workshop was billed as the keynote session for the Builders Association of the Twin Cities (BATC) annual trade show in Minneapolis.   At the workshop I shared new ways contractors can think about and do their marketing so they can attract their desired customer and job types. It’s what I call strategic marketing.   For those of you who missed the workshop here are some of the key points we discussed at the workshop.

Take advantage of the timing 

The economy and residential construction are both picking up.  At the same time the majority of attendees agreed with me in that we are not yet confident that the pace of the current surge will be sustainable considering the uncertainties businesses and consumers still have about the economy.  With that in mind this is however a good time to take advantage of the surge to concentrate on developing market share in a strategic way.  It’s my opinion that most contractors would benefit from becoming a specialist in what they do and how they do it.  After all specialists typically command higher prices than generalists.  And, true specialists are always in demand, even in down economic times. Now is a good time to specialize, as long as you also work on branding to establish and maintain your position as a specialist in your desired market areas.

Here are some specific tactics contractors can consider and use to strategically build market share

Pick your customers, don't let them pick you:

Stop taking just any customers and jobs.  Be selective about who you will let become your customers.  For example why not only work with people who would say they are "working with" you, not those who would say you are "working for them".   Also, be selective about the project types you go after.   For example why not attract people who want high quality products.  If you sell using one markup across all cost categories the gross profit dollars earned on material intensive projects due to higher price point products is an easier way to meet overhead and net profit goals, both now and in the future, particularly when compared to selling and producing labor intensive projects.

Stop competing, differentiate:

Being different comes with pros and cons

If you decide to use these example strategies many prospects will go away.  However, the ones that see value in your differences will become cogs in your new referral generating machine and will pre-sell the value of your differences to their referrals so you won't have to.  I call those types of referrals "layups".

Think of how you do marketing in a new way

The old traditional marketing methods of trying to find prospects who want your services now and interrupting them to get their attention no longer work.  Today consumers are the ones deciding how they will find and qualify their project ideas as well as the contractor they will work with.  Instead use inbound marketing tactics that help consumers find your business.  This should be one of the two primary purposes of your marketing and can be accomplished on your web site using SEO tactics and good content on your site’s pages as well as your blog.  The other primary purpose of your marketing, particularly at your web site, should be to help prospects decide if what you offer and how you do business are right for them.  In other words your marketing should help them prequalify themselves so they either want to contact you or know they shouldn't.

Final Thought- Marketing shouldn't just be limited to creating leads

At the workshop I also shared one more new way to use your marketing; to advance the sales process.  Consumers want to gather information and ideas about their project, but they want to be sure they are getting accurate and useful information.  Savvy contractors are now using the content at their web sites to educate consumers before they call to setup an appointment with a contractor.  This saves both the prospect and the contractor a lot of valuable time.  In addition to offering project and product related information, you can also educate them about how and why you do business the way you do.  This can not only speed up the sales process, it can also help clearly differentiate your business and therefore improve the quality of your leads.

Want To Sell Your Construction Business Someday- Consider These Buyer Types Today

In a previous blog about selling your construction business I had suggested business owners write a for sale ad describing the business they plan to sell in the future. In this blog I describe the two typical construction business buyer types that became obvious to me as I worked towards selling my business.  By considering your target buyer you can make better decisions about what to do and put in place as you build your business to get it ready to sell.

First is the investor. 

This person will want to buy a business that pretty much runs on its own, needing little hands-on attention from the buyer. This buyer will be looking for time tested systems and industry best practices already in place and well documented.  This buyer will also be looking for a business that already has technology and software in place to proactively predict and measure business activities.  This buyer will also be looking to keep most or all of the existing employees in place. To attract this buyer type make sure you assemble a great team of high performing and self directed employees who work well together and embrace the systems and technology you will put in place.

This investor buyer will need a leader/manager to run the company. Before offering your business for sale to this buyer type I suggest you transfer the leadership and the day to day management of your business to a well qualified employee over a period of time. During the evolution you can test and prove his/her effectiveness as a general manager in advance of selling.  By taking adequate time to accomplish this important consideration at my business both me and my employees felt good about and respected the new leader, before I fully transitioned out of the day to day.

Some key advantages of selling to an investor can include a high selling price assuming you have a great business with future growth potential.  And, this buyer will also have the funds or can get his/her own financing for the purchase. My experience proved this could be a great way to go, but due to the reputation of our industry, the pool of potential buyers was very limited. I think this is still true today, but may not be the case in the future.

The second type of buyer will be the owner operator. 

Likely an entrepreneur, this type of buyer will want to take over an existing business and jump right in physically working in the business.  This buyer will want to see steady profits and a strong customer list, but as an entrepreneur with energy to burn will also be looking for growth potential. 

Having systems and employees in place will be important, but you might want to assume that this buyer will likely change or evolve the systems you have put in place.  As a result the employees described above might not like and/or agree with the changes. In particular experienced management employees may not tolerate any loss of the independence they have already earned in performing their day to day roles. If you plan to sell to this type of a buyer, I suggest you assemble employees who desire to follow a leader and will go with the flow. 

Also consider selling to this type of buyer will not command as high a price when you sell. On the other hand you will likely find more potential buyers because of the lower price.

The best of both worlds?

The sale of my business was in several ways a hybrid of the two models described above. I ultimately sold to my general manger. He had already earned the leadership role and had participated for many years in the direction, growth and day to day management of the business. All of the practical experience he gained during that evolution prepared him to be a well trained, experienced and motivated candidate to buy and continue growing the business. To make the purchase practical I had to finance the sale. In my case I felt financing the purchase was worth the risk because the buyer had proven his competency, trustworthiness and ability to not only maintain the business, but also grow it in a strategic and manageable way.

Selling a Contracting Business: Are You Building Yours On Speculation, Or Is It A Custom?

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.

What kind of business should you build?

Most remodeling businesses were not designed, they evolved. Each business will be unique because each owner is unique and has unique motivations that drive the evolution of his or her business. In addition, each buyer will be looking for specific characteristics when assessing which businesses to look for and ultimately buy.   These are facts that became clear to me as I thought about and planned for the eventual sale of my business.

Rather than share specifics about what I did, I think you will find more value in the related considerations I discovered that helped shape the direction I eventually went in. Perhaps by considering my suggestions below, you can make a plan for and evolve your business in a specific direction to increase its potential salability and value.

Begin with the end in mind

First, I suggest it is best to be thinking of your exit strategy now so you can keep your future options open. By planning now you can identify what you will need to do to get your business ready for sale in the future.  The idea is to always be getting your business ready to sell, even if you never sell it.  If you do it right, in addition to the selling option, maybe someday it will be worth keeping. If you keep it you can collect the net profits, while someone else leads the business and manages the day to day.

Put your strategy in writing

To get started, I suggest you write an ad today to describe the company you will be offering to sell some day.  When writing your description, think about the things that will make the business worth more money and at the same time more attractive to your target buyer.  By writing the ad I suspect you will be able to identify and list the positive characteristics your business already has and should work to keep. Then you should list those characteristics you will need to work on and or add to make your for sale ad valid by the time you want to sell. 

Consider who you will 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.

If you haven’t done so already consider subscribing to my blog so you will be notified by email when new blogs are posted.

Why Building a Backlog of Work Could Cost Some Contractors a Lot of Money

Builders, remodelers and lumber dealers often get in trouble with lumber framing packages by overlooking the obvious…the volatile lumber market. Most contractors and lumber dealers do not have the luxury of pricing a job today, signing it tomorrow and buying the required materials the next day. By the time a job is priced, signed and the lumber gets delivered to the jobsite 30, 60 or even 90 or more days may have passed and lumber prices may have changed as much as 20%. At the Estimating Workshops I did this concern comes up quite often and attendees often share how their profits are affected as a result.

An educated guess is much better than a Wild Ass Guess!

Matt Layman is the publisher of The Layman’s Lumber Guide. I met Matt through LinkedIn. His expertise is forecasting “when” lumber market pricing will change. Having and using the information he assembles through his research can help contractors and lumber dealers price future jobs involving framing materials with precision.

According to Matt lumber prices are reported twice weekly.

He says some weeks do not change at all. However he also points out that 70% of the time they do change by an average 2.5% each week or 10% per month.   Based on those realities a contractor who estimates a framing package using today’s lumber costs at $10,000 may end actually paying over $13,000 for that same package 90 days later. For those of you who understand how margins and markups work, not only will the contractor have lost the $3300 due to price increases, but also the gross profit margin on that difference. At a 50% markup that’s another $1650 of gross profit that could have been included in the sell price to help cover overhead and profit.

If as a contractor you buy a lot of framing materials you may want to consider subscribing to Matt’s monthly publication called the Lumber Market Blueprint. I also think lumber dealers serving contractors could share this information with their customers on a regular basis. Doing so would be a great service that could help differentiate them in the marketplace.

The image above is an excerpt from the February issue of Matt’s Lumber Market Blueprint. Notice that the information not only includes his predictions for the next 30, 60 and 90 days, he also offers some insight as to why he makes his predictions. I suggest by knowing the why’s behind his predictions you can consider your own pricing adjustments if for any reason conditions change dramatically during the month.

I appreciate Matt allowing me to share this information with you.

If you are a contractor do any of your lumber dealers share this kind of info with you?   If so, it would be great if you shared the name of the dealer with us as well as an example about how the information has helped you.

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.

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.