Getting Your Remodeling Business Ready to Produce More Work
Growth in consumer spending on remodeling during 2018, and beyond, is expected to skyrocket. This means that remodelers will have the opportunity to grow their businesses, and if done well; will make a lot of money. But is your business ready for the work? If you are already working too hard for too many hours will increasing volume just end up with you in divorce court and or on blood pressure medicine? Below I offer a vision, and some suggestions, for what you can do to be ready. If you already allowed yourself to get in too deep, then perhaps my suggestions can help you create a plan to get things running better than you had ever imagined.
It all starts with estimating.
Estimating might as well be the center of the universe for remodeling contractors. Using a defined process and key information, your production team can conquer that universe. If you grow your business without an advanced estimating system you risk dropping into a financial black hole. Your estimating should not only help provide a profitable selling price, it should also create, document, and organize the information your production team needs to build independently, without constantly bothering you or your salespeople. Done well, it should also help you predict your cash flow needs, and therefore your payment schedules. This way every job finances itself using your clients' money to pay bills on time, not yours. Successful estimating will also help your production team identify and schedule all the resources needed to complete the project weeks, or even months, before they are actually needed at the job site.
A real estimating system includes job costing.
First, an estimate is not 
what you give to a prospective client. That is called a price. The estimate is really the contractor's best guess on what the project will cost their business to complete before overhead and profit are added. That's right, it’s just a guess. To continuously improve the accuracy of that guess, particularly as your business is exposed to new products and construction methods, or brings on new untested employees, job costing will be the only way to reduce the risks of estimating. Imagine going six months or a whole year before realizing you were using inaccurate information. Imagine the benefits of offering profit sharing if your team brings jobs in on budget. But, what if your budgets are never adequate and there are no profits to share, and when your employees ask why you can't tell them?
This all requires a well set up financial system.
Even if you are a good estimator and you never miss any of the sticks and bricks, if you do not know which labor rate and markup to use you may be buying jobs instead of selling them. Without a well thought out list of estimating and matching time card work categories (sometimes referred to as phases), you will never know how well your team did compared to your estimated labor assumptions in specific areas. Also, without the right time card categories, how will you know and or confirm how many non-billable hours of pay you will need to add to, and cover, inside the burden labor rate you assume and charge for their billable hours?
There are plenty of things to work on as you grow a remodeling business. However, if you don't get the estimating of your jobs right growing your business will just help you lose money faster.
For most contractors estimating is like the center of the universe or the sun, with things like sales, cash flow, profits, job schedules, and payment schedules orbiting around it and depending on it for survival. Here are seven easy to accomplish ways contractors can improve the speed and accuracy of doing estimates. Putting even a few of these in place can change your world!
If you look at a kitchen tonight but don't get to do the estimate for it until next week how fresh will the details be in your mind? Try to get it done as soon as possible. I found scheduling a specific time slot for getting it done into my schedule helped with this. Otherwise doesn't estimating all too often end up being the red headed step child who gets ignored? Forget or miss one thing and your profits may not be there.
As I had discussed in this 
If you have been getting business by providing free estimates for everyone who calls your business you are most likely wasting a lot of money making time. Are you really an expert in your industry if you have been letting those who buy from you tell you how to run your business? If these things have been happening to you it’s time to recognize the value of your time and expertise. It’s also time to limit offering them to only those who find value in what you offer, how you do so, and are willing to pay you well for your expertise. Here are three ways successful contractors reduce their lead flow, improve the quality of the leads they get, and sell more jobs at higher prices. Yes, it is true, read on!
Because the information is presented in writing at your web site prospects won't be able to interrupt you as the typically do when you try to explain your process to them at live sales calls. If written well they will either recognize that your process works as a solution for them, or they will know why it’s not right for them. This can help you eliminate defending your process as you try to explain it to them live and in person. If they don't like your process after checking out your web site they won't waste your time.
Even if you are not ready to charge for them, before committing to preparing plans, specs and a proposal make an agreement with your prospect. Let them know that to prepare a proposal for them you require coming back to sit down with both of them to review, discuss and get a yes or no decision on your proposal and about working with your company. Remember, you will have more time to do this because by being more selective you will be creating fewer estimates and proposals. Those who won't meet with you probably aren't interested enough in working with you anyway. Perhaps they were just hoping for more free ideas from you before hiring the cheapest contractor or performing the work themselves. If they won't commit to meeting with you to review your proposal that's one less you have to do; freeing you up to concentrate on those prospects who respect you as a professional and value your process.
If you are still running free estimates and playing a numbers game of leads to appointments to sales then I have something valuable to share. In the past I believed that if I did not actively pursue new clients, and provide free estimates, I would have no income. It was a numbers game; 5 leads - 3 appointments -1 sale. Sound familiar? In this article I share my lesson in letting go; finding the faith to trust a system to qualify prospects, and the positive impact it can make for your business as well as your cash flow.
As a result of that temporary relationship I learned how to create a trained support staff at my own business and secured steady work for my team. By learning how to use and sell paid consultations our leads turned into project development retainers which then turned into profitable construction contracts. That temporary relationship was also a big success for the partnering firm; they had a record earning year and made a lot of money.
I no longer run around from appointment to appointment. I now have the time to focus on creating more ways to provide paying prospects with value early in the process. Our business is running with more consistency and cash flow has increased. For every consultation I go on now we have a 70% close rate to a full construction contract, a 20% conversion to a design/material contract and about 10% of our prospects don’t move forward. 
Guest Blogger: Cynthia Murphy, CKBR, is a Certified Kitchen and Bath Remodeler and co-owner of 
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.
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.
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. 
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. 
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.
I had to add up all the numbers with a calculator multiple times before having enough confidence to give it to my prospects because I didn’t always get the same number!
Eventually, after a lot of experimenting using the yellow pad I eventually incorporated what I had learned into an Excel Estimating spreadsheet I created on my own. Doing so definitely improved the speed and accuracy of my estimating methods. The end result also provided the majority of information the production team needed so they could build the job without me around, leaving me time to sell more work.
The contractor includes the time/cost to do the estimate inside the estimate as a line item.
How many times in your career has a homeowners asked you for a “Ball Park” price for their project. And, how many times did your Ball Park price end up being nowhere close to the actual price of the project? 
So why do prospects get offended when you tell them you charge for estimates? Did they expect you to work for free? Do they work for free at their jobs? I doubt it. 
A point of clarification which should already be obvious
