The Design Builder's Blog

How Contractors Can Make More Money, Faster and By Doing Less

With only so much time in a day, contractors need to maximize the revenue and or gross profit they earn each day in order to cover business overhead costs and contribute to their desired net profit goals.   Selling and producing more work is certainly one option to consider.  However, why not implement ways to increase the selling price and earn more gross profit without having to do any more work in the field or add anymore labor costs at the job site.

Options to consider

If you want to increase your sales volume and earned gross profit you can either produce more work or increase the selling price of your projects.  Here are a few things to consider:

• Producing more work at the job site means you will need more labor and the project will take longer.  Finding and keeping more employees busy can be challenging.    
• Increasing your selling price doesn’t have to be limited to raising the prices of what you sell.  Increasing your selling price can also be accomplished by increasing what is included in the selling price.
• Assuming you mark up everything you sell, if you find the right prospects and sell them higher price point products than you have used in the past, your average sell price goes up and the gross profit earned on each job goes up as well, without adding more labor or days to the project schedule.
• Also, consider that selling product options can be another way of increasing the sell price and earned gross profit, again without having to add any more time, do any more work or add any more labor to get the work done.

Here’s one example of what I am talking about 

At a recent Remodeler Summit event I participated in for Marvin Windows and Doors at their Warroad MN manufacturing facility, contractors learned about Marvin’s new option of prefinishing the interiors of their window and door products.   By selling this option to their customers, contractors can increase the cost of each window they sell by offering an additional service to their customers.  And, they can do so without increasing the production time of a window project and without having to add any additional on site labor to their projects.   The windows are prefinished at the factory, under controlled conditions and can either be prepainted or have a clear finish applied.   Because the prefinishing is done off site, all the mess of prepping and finishing is avoided, no extra job labor is needed and the smell of any finishing products is avoided at the job site.  Selling prefinished construction products can be a win-win, both of the contractor as well as the homeowner.  Selling prefinished products means more gross profit earned for the contractor without doing any more work.  The home owner benefits because more work is done in less time, with less mess and disturbance to their home and their daily lives.

Here’s one more example

At a tour of Reliable Truss and Components Inc., a division of National Lumber in Mansfield MA, I found out they offer prefabricated custom structures and components.  Using this service contractors can have components of their projects prebuilt and even prefinished in a controlled factory environment.  The components are then delivered to the contractor’s job site ready to install.   Partnering with a vendor who can offer this type of service helps the contractor earn more money by doing less work in several ways.  

• The contractor can earn gross profit on the labor as well as the product being provided by the vendor.
• At the same time, the contractor can be earning gross profit on the labor and the products being installed by his own crews while they get the project ready for installation of what is being built off site.
• Some vendors, including Reliable Truss, will also come prepared with the equipment needed and help your crew install the prefabricated and prefinished items at the jobsite.

It just keeps getting better!

Both examples above can help contractors earn more money in less time.   Both examples offer ways contractors can get more work done without having to add any additional talents or skills to their crews.  Both examples also eliminate or reduce the need to find and bring in sub contractors to do work the contractor’s own crews either don’t have the talents for or might not be cost effective at doing.

I bet more and more contractors will be thinking this way as the increasing costs of labor and the lack of available skilled labor puts pressures on their businesses and their profits.

How Should Remodelers Be Prequalifying and Selling To Generation Y?

A recent guest blog posted here at the Design Builders Blog was written by a Generation Y member.   The author, Mark Brown, offered some advice for contractors on how to work with Gen Y employees.   His blog created quite a discussion with over 38 thoughtful comments as of posting this blog from contractors and employees from all generations.   One contractor praised the blog and the discussion but also brought up another very valid consideration for contractors and remodelers: How to sell to Gen Y clients?  The answer to that question is probably a very big conversation and a very involved one as well. 

One thing is for sure.  Trying to force Gen Y to buy remodeling (or anything) the way you have always sold to other generations isn’t going to work.  That said how about bringing the answer down to a few simple but big picture considerations to help get the conversation started and offer some direction.  With a new direction in mind, you can then seek out and get the remodeling sales training you will need to sell to this new customer type.

If you can’t beat Generation Y, why not join them

The members of Gen Y are used to getting information instantly and for free.   Almost every one of them has a smart phone and can Google any subject or topic to find instant answers or information, all at no cost to them.   And they can get that information at any time of the day or night they want it.  That desire and internet content available about anything you can think of has definitely defined how Gen Y does their research and makes their remodeling or home improvement buying decisions. 

For contractors who have always sold to the generations born prior to Gen Y, the idea of providing instant and free information about a remodeling project for some young kid who isn’t ready to buy or make a decision without first checking you and your suggestions out online using social media throws a monkey wrench into any veteran contractor’s long standing selling process.  Those changes probably also all but kill a contractor’s sales closes rates when it comes to Gen Y remodeling and home improvement prospects.

“The reality to recognize is that Gen Y isn’t going to change.   So, contractors need to change how they both market to and sell to Generation Y if they want to do business with them.”

Save yourself a lot of time, give them what they want

If your construction or remodeling business doesn’t have a web site, stop reading right now or recognize and commit to the fact that you better get one up right away if you want to sell to Gen Y.  Done right, and it must be done right, a contractor’s web site  offers a place to give Generation Y, and any other generation for that matter,  the information they need to work through their decision making process and prequalify your business as a good option for them to consider.  If you’re strategic and you put the right information on your site, you won’t need to waste your time doing live sales calls with someone who would never have bought from you anyway and or who isn't far enough along yet in their decision making process to make any commitments that will include money.

What Information Should a Contractor’s website have on it?

Good question.  It has a lot to do with how Generation Y makes remodeling decisions.  I’ll offer some advice and suggestions on that topic in a follow up blog to be titled “If you don’t or won’t offer Generation Y Prospects what they want they will go away”

How Will The Fiscal Cliff and the Elections Affect Remodelers?

The threat of a year-end perfect storm of expiring tax cuts and massive defense and domestic budget cuts could push the economy back into a recession.  A recent article on the Fiscal Times website offers some insight into this possible reality and points out that many voters are clueless about the cliff and are in for a shock.  Another article posted on Reuters warns the cuts could cause the loss of nearly 1 million jobs across the country.   Remodelers trying to work on business planning, marketing and budgeting for the New Year may also be in for a shock if they make decisions without first considering the cliff and the outcome of the elections. 

Making any business decisions in a down economy can be difficult and risky.  

Unfortunately in addition to a bad economy we also have a lot of uncertainty about what the government will or will not do.  I think the problem, at least for those who keep an eye on the economy and the political arena, is having any confidence in making long term investments and decisions.   The fiscal cliff could really challenge the economy if across the board cuts are made as planned. And because the current administration has not clarified or committed to what will be cut, we don’t know how or in what market areas the economy will be affected most.  Unfortunately, true discussion about all this by our elected leaders won’t even get started until after the elections.

The economy and remodeling could take quite a hit if our politicians can’t come to an agreement.  And, even if they do come to an agreement, what will it be and how will it affect the economy?  If it gets pushed off into the future again, it will leave all businesses including remodelers in this unconfident position for a long time.  If consumers remain unconfident, and or get laid off as a result of the cliff, they probably won’t be spending money on remodeling.

Remodelers need to be very cautious about investing in capital assets.   

If the current tax deductions for capital asset purchases go away, the cost of those assets will in effect increase.   Waiting to make such purchases is a gamble.  If remodelers invest in capital assets now before the deduction possibly goes away, the question to ask is whether they will be able to meet the payments on those assets and or actually be able to make use of them if the economy does not improve or gets worse?  If they wait to see what happens they may miss out on the tax savings if the deductions are eliminated.  Making the right decision is hard without knowing who will be elected or which party will be in control after the election.

Should remodelers consider hiring more staff if they are seeing a work backlog building up?  

In my opinion, as long as they are selling work at a price that meets their overhead costs, remodelers must decide if they will use the gross profit to hire office and management staff and reduce their workload, hours and or stress; or work all those hours and keep the gross profit as their own compensation.   On the other hand if they are not selling at prices high enough to support the overhead, hiring more staff or buying more assets are not sound financial options.  I suggest waiting to see what happens with the elections and the cliff before making any long term business investments.   If you have money you are willing to invest, I suggest using it to improve your marketing and sales skills.   Those are investments that can help a business regardless of the economy and can even give you an advantage over your competition when it comes to capturing the limited amount of work available during a down economy.

Harsh Realities About Retirement for Remodelers and Their Employees

The harsh reality I am pointing out in this blog post is the fact that for most remodelers and their employees a comfortable retirement is really just a fantasy. 

For these individuals, ignoring this fact so far during their careers is the reason they are lacking adequate funds to retire and my prediction is that they will continue to ignore this fact.   However, remodelers are not alone.  Most Americans are in this same predicament.   When they reach retirement what will their lives be like and who is going to pay for their living and medical expenses?   One answer; the next generation of working tax payers, assuming they have jobs.  With such a financial burden on the next generation, they too may be destine for the same harsh reality.

Business owners are obviously too busy running jobs to even think retirement.   Employees are often living and thinking day-to-day, often working for cash.  This is a huge mistake.  While you may love what you do, your body may not allow you to do it forever.   Consider the day when you will no longer be physically able to work in the field and or your declining physical abilities will result in lower productivity and therefore reduced compensation. 

Just the facts  

Here are some harsh facts that I hope will wake up those who are currently sleeping when it comes to retirement planning.  These facts and others can be were found in an article on the Fiscal Times web site titled “5 Shocking Predictions about Retirement in America”

• In the U.S. seventy-seven million baby boomers are slated to retire in the next 20 years, with approximately 10,000 reaching retirement age every day.  At the same time 401(k) accounts have been drained by the recession, pension systems are strained, and Social Security coffers are near a breaking point.
• According to a study by the Transamerica Center for Retirement Studies 54 percent of workers in their 60s said they haven’t saved enough to sustain themselves for the rest of their life.
• The Employee Benefit Research Institute recently found that just 14 percent of those surveyed were very confident they will have enough money to live comfortably in retirement.  Even more shocking, sixty percent of workers reported that the total value of their household’s savings and investments (not including the value of their home and any official retirement benefit plans) was less than $25,000.
• Another report from the financial industry think tank LIMRA, found that 49 percent of Americans aren’t saving for retirement at all. 
• The Employee Benefit Research Institute (EBRI) reports that for those who are 10 years away from their planned retirement age, more than a third have saved less than $25,000.  That’s $875K away from the EBRI’s suggested $900,000 that a typical person would need to live out his or her years.

Will your children be able to support you?

Oh, and if you are assuming that the government will be footing the bill for your retirement, that doesn’t look very good either.  The latest annual trustees’ report for Social Security predicts that the program’s trust fund will be depleted by 2033, three years earlier than they estimated last year. When the fund runs dry, the government will only be able to pay 75 percent of the promised benefits to retirees.  This of course assumes our children will have jobs and earn enough to generate the taxes the government will need to meet the 75%.

• Are you confident in your abilities to earn enough for your own retirement?
• Are you confident that the government will be able to finance the lifestyle you want to live when you can’t work any longer?
• Are you motivated to do something before its too late?

Don’t fall into the trap of running your business to the point that it runs you and your employees into the ground!