15 BUSINESS BASICS FOR REMODELERS
Count on these tested survival strategies to keep your business in the black.

Know your numbers. Price smart. Plan ahead.

You hear the hard and fast rules of business management at every turn, but do you follow them? Or do you find yourself — especially during these heady times — looking for shortcuts to a healthy bottom line?

Whether you’re ready to prime your company for growth or immunize it against failure, follow these 15 business basics to keep your company on the straight and narrow.

1. GET WITH THE PLAN: You wouldn’t drive in an unfamiliar area without a road map. You can’t run a business without one, either. First write a mission statement that describes your company’s goals. Follow up with a business plan to accomplish them.

Think macro and micro. With a financial target in mind, outline the volume, profit, sales, staffing, and spending required to hit the mark. Determine what needs to change. Perhaps you want to reduce your overhead, snare more leads, and increase your close ratio. Maybe this is the year you bring your drywall work in house. Break each smaller goal into specific tasks. Include a timeline, too, so you can monitor progress.

Don’t let your business plan become static. This document governs your operations, which are sure to change from time to time. Evaluate and update it regularly to keep your company focused on its goals.

2. BE PICKY: If you took every job that came your way, you wouldn’t turn a profit. Certain projects can end up costing—not making—the company money. It pays to be discerning.

Besides, in this boom market, you can’t do every job that comes along. Chances are you don’t have the staff to handle them — at least not well. So don’t oversell. Defer a job if you can’t complete it on time.

That old saw, “Don’t start what you can’t finish,” holds especially true for remodelers. “If you know a contractor who will do a good job for the clients, recommend him or her. It will come back to you,” says Wes Neu of Neu Construction Services, St. Louis.

When you get down to choosing, pick the profitable jobs. Walk away from ones people want for free.

How do you know which ones will make money? John Gallagher, owner of Exterior Design, Naperville, Ill., prequalifies clients over the phone. “If someone says, ‘This is a free estimate, right?’ I probably won’t sell to them,” says Gallagher, who specializes in exterior replacement.

Be just as selective about your clients as you are your jobs. Stay away from clients who want to control the project or who want to use their own subs.

A good way to head off problematic clients is to simply say you’re too busy to take on the job. No one can argue with a packed schedule.

3. MANAGE YOUR MONEY: Tracking accounts receivable and accounts payable is key to staying on top of your numbers. Michael Sweeney sums up business survival in two words: “Get paid!”

To keep collections as current as possible, Sweeney, owner of Sweeney Construction Corp., a full-service firm in Madison, Wis., explains to customers up front how his billing and draws work, even though it’s already spelled out in the contract. Before mailing bills, Sweeney calls his customers to remind them that invoices will arrive shortly.

Of course, you have to pay bills, too. To make sure you have enough cash on hand, don’t spend money that isn’t yours.

Most of the money you’re holding belongs to your subs and suppliers. You are simply holding it in trust until they have completed their work.

“Know what your share of the pie is,” says Patrick Benkowski, co-owner of Custom Design Associates, Greendale, Wis. “If you take too large a portion for yourself, the pies will stop coming, and you will literally go hungry.”

4. WATCH YOUR OVERHEAD: Think before you spend. When contemplating a purchase, ask yourself if the expense supports your company’s mission. In other words, be conservative.

When times are good, it’s tempting to buy another truck or copier. But unplanned purchases become a liability if you don’t have the work to justify them.

Discipline is especially crucial as you increase volume. Diversified Construction, a $3 million remodeling company in Minneapolis, doesn’t buy anything on impulse. Instead, the company structures payment plans to take advantage of discounts and often pays bills on presentation to keep down costs.

“We’re probably a salesperson’s worst nightmare,” says Brian Petersen, Diversified Construction’s chief operating officer. “We pass on a lot of deals and one-time offers because the expense isn’t right for us at the time. We tie all spending to our business plan.”

5. PRICE RIGHT: Determine how much profit you need to manage cash flow, and then price accordingly. Figure markup according to your market, area of expertise, travel time, and any other variable that will cut into your bottom line.

Is the site difficult? Is the schedule fast-tracked? Plug such special factors into your price and, if needed, charge more to account for your time and resources. And don’t forget that small jobs require a larger markup than big ones.

Jay Herbert, owner of John Herbert Inc., Freeland, Md., reminds remodelers not to overlook follow-up costs when pricing, either. “Be sure to charge enough money to be able to do your service and warranty work,” he says.

You may occasionally have to engage in competitive pricing to maintain market share. But be careful. Don’t drop prices so low that you lose your profit. Predatory pricing doesn’t work. You’re not working for free, after all.

6. STRESS SERVICE: The customer may not always be right, but he or she always comes first. “You don’t have to have a master’s degree to figure out that taking care of customers is the main thing in business,” says Ken Moeslein of Swing Line Windows, Pittsburgh.

The most successful retailers learned that long ago by treating their customers like royalty. You should, too. But that doesn’t mean you have to be subservient, just smart. Do what you agreed to do — and then some. Happily surprised customers are repeat customers.

“Most people are taken aback when I tell them we’ll be there on time because they think contractors are always late,” says Brent Pendleton, owner of Pendleton Builders, a design/build firm in Draper, Utah. Pendleton enjoys a reputation for timeliness because he schedules jobs correctly.

Being timely is especially important for commercial projects, according to Vaughn Miyauchi, vice president of SC Pacific Corp. Kapolei, Hawaii. Material delivery is crucial, so Miyauchi sticks with punctual suppliers. SC Pacific often ends up working overtime to complete commercial jobs on schedule.

As mentioned above, be prepared to go the extra mile for your clients. Jim St. John of FWD Builders, Grand Prairie, Texas, is two months into a six-month project for a client who’s four months pregnant.

“Basically, we do whatever she wants,” he says. She has a 1-year-old, so the crew takes extra care to clean up thoroughly
so the toddler won’t pick up cups, nails, sawdust, and the like.

7. LISTEN UP: One of the best ways to ensure good customer service is to master the art of good communication — with clients and employees alike. Listen to your clients to determine exactly what they need, from project start to finish.

When Tom Aleto of Aleto Construction Co., St. Louis, first asks clients to describe what they have in mind for a remodel, he listens carefully.

“Don’t interrupt clients during the first flow of information,” Aleto warns. “If you ask them a question in the middle, they’ll lose their train of thought.” When that happens, they’re likely to forget to mention an important detail that’s best handled up front.

At Custom Renovation, West Des Moines, Iowa, salespeople explain the entire remodeling process to customers. That way, the staff can minimize surprises when the salesperson passes the baton to the production manager.

The field crew also keeps notebooks at job sites so customers and production teams can jot down questions and comments for each other.

When a face-to-face meeting isn’t possible, don’t rely solely on the phone for effective communication. The market’s bursting with pagers, cell phones, hand-held radios, e-mail software, and other communication tools that drop in price as they increase in popularity.

But you don’t have to have the latest high-tech gizmo to improve communications. Some tried-and-true tools still do the job.

Richard Pagotto, president of Richland, Roseto, Pa., makes sure his subs have fax machines. “We send them drawings and updates,” he says. “We can tell them not to go to Job A but go to Job B in the morning.”

Richland even loans fax machines to homeowners to ensure constant communication during projects.

8. CHECK THE GAUGE: Nip communication glitches in the bud by soliciting customer feedback and gauging satisfaction. Don’t assume quiet clients are happy. They may be too shy, stressed, or irritated to tell you the bathtub came in the wrong color or a sub drove over their lawn. And you may lose their next job.

Be proactive throughout the process. Moeslein of Swing Line Windows visits jobs whenever he has downtime. He tells homeowners he dropped by to inspect the work, but he’s really there just to chat and gauge their satisfaction.

There’s a hidden benefit, too. “They’re really impressed when the company president shows up,” Moeslein says.

Custom Renovation’s executive vice president Ron Schroeder sends a three-page customer feedback form to clients after every job. He asks them to rate sales, production, and the company as a whole using a 1-to-10 numeric scale.

“For everything below a 9, I call to find out what went wrong,” Schroeder says. He also asks if they’d recommend the firm to others.

9. KEEP GOOD EMPLOYEES: Given the current labor shortage, good employees are becoming increasingly scarce. To keep the ones you already have, “pay the daylights out of them,” says Jim Brielmaier, owner of Michigan Building Specialties, Adrian, Mich.

But Brielmaier, who reports little turnover among his 40 employees, does more than offer good wages. He also compensates his employees with vacation pay, holiday pay, a 401(k) plan, and a profit-sharing program. And he sends them to professional seminars, helps them buy tools, and makes sure they have a good quality of life.

“If I see they’re struggling or are burned out,” Brielmaier says, “I recommend they take a day off and go golfing or fishing or something.”

Beyond benefits, you can boost your employees’ job satisfaction by empowering them. Share the company’s long- and short-term goals with employees and ask for their suggestions on how to reach those goals.


10. WORK ON YOUR RELATIONSHIPS: You depend on subcontractors and suppliers to help you do good work, so treat them right. Building long-term relationships will make every sub and supplier an integral part of your team.

But pick your partners carefully. Not everyone deserves to be on your team.

George Kirk, Kirk Development Co., Phoenix, uses subs who have been through rough times (“I ask about their business experience,” he says), so they stay with him. He pays them promptly and maintains good relationships with them. The subs respond by keeping their prices down, which helps Kirk control his overhead.

Lynn Motheral of Stonegate Construction, Fort Worth, Texas, developed solid relationships with suppliers through his participation in the local, state, and national builders’ associations. The suppliers keep him up-to-date on all their latest product improvements, and Motheral passes the information on to his clients.

“This really keeps me ahead of the competition,” he says.

“Don’t split hairs over a couple of bucks,” advises Aleto of Aleto Construction. “If you have a good relationship with a supplier, that’s more important than a couple of board feet.”

11. STAY IN TOUCH: Nurture new business by keeping up with past clients. Every year, Herbert mails his former customers a company Christmas card the day after Thanksgiving.

“Clients won’t remember a company’s holiday greeting after they’ve received 25 or 30 cards from family and friends,” Herbert says. But the first holiday cards to show up in the mailbox are sure to be memorable.

Or throw a referral party for your best customers. Last year, Alure, a full-service remodeling company in East Meadow, N.Y., invited clients and community residents to a winter carnival, complete with musicians, clowns, face painters, and a hot dog wagon.

The event drew 1,000 people. “It was a good way to build relationships with feelings and emotions,” says owner Carl Hyman.

Other ways to reach out and touch: Keep your name front and center year-round with calendars. Mail a newsletter or periodic press releases or clippings of the press coverage you’ve received. And let past clients know about the work your company donates to charities.

From time to time, simply pick up the phone and call former clients just to check in. Herbert does this annually, going through his entire client list from A to Z.

12. DON'T OVER DO IT: Prevent burnout by making sure your business doesn’t run your life. Like many remodelers, you probably feel like you work an 80-hour week. Or try to. Take the first steps toward keeping your hours in check by charting your time.

Phil Blosser of Blosser Electric, Blooming Glen, Pa., tracks his time in 10-minute intervals on a chart with task headings. Tasks on the left side include executive duties, sales, design, and customer relations — responsibilities Blosser must handle. Those on the right — production, scheduling, billing, and installation — are tasks he plans to give his production manager.

“If I move a task from left to right, life gets better,” Blosser says.

As they grow and take on staff, owners must learn how to delegate. There’s a right and wrong way to hand off a project.

When you delegate, either refuse to check on the progress of the project, or give the delegatee the right to refuse your help. Don’t micromanage, or you’ll just create more work and stress for everybody.

In this business, you can’t eliminate stress entirely. But once you figure out where most of your tension comes from, you can work on reducing it.

Try taking a mini-holiday from the office. Mike Carey, Carey Contracting, Iron Mountain, Mich., periodically takes his cell phone and laptop out to a favorite bluff in the woods. He says he gets more done in the peaceful environment. That’s working smart.

13. GET SMART: Constant improvement separates professional remodelers from the competition. Continuing education is a valuable resource, so use it to your best advantage.

Keep up with industry trends by attending trade shows, conferences, and seminars. Join networking groups to learn what works — and doesn’t — from colleagues in the know.

“Peer groups are one of the best learning tools out there,” says Mark Scott of Mark IV Builders, Cabin John, Md. “I learn more there than I do anywhere else.”

And, of course, don’t neglect local, state, and national trade associations. Not only do these organizations represent the industry to government legislators, they track issues of concern to contractors, subs, suppliers, and other related professionals. They also offer certification and professional-development programs.

Don’t make the mistake of thinking that you’ll somehow learn to run a business by swinging a hammer. If you haven’t already, take several college courses in business management and finance.

Technical skills don’t automatically qualify you to employ and manage other people with those technical skills, but they’re a good background for business education.

14. LEARN FROM YOUR MISTAKES: Look out. The law of averages has you pegged.

“The longer you are in business, the more likely you are to screw up,” says Scott of Mark IV Builders. “If you’re lucky, you’ll survive the big screwups.”

When the smoke clears, examine mistakes closely. Determine where you went wrong and how you can prevent future mistakes. Here are a few simple ways to fireproof your firm.

One sure way to size up your mistakes — before they cost you unnecessary time or money — is to regularly evaluate your business plan. Bill Shaw, owner of Wm. Shaw & Associates, Houston, creates a monthly report that shows him where he’d be if he brought in all accounts payable, paid up all bills, and shut the doors of his business.

If a local competitor actually does shut down, find out why. Use the information to make sure the same thing doesn’t happen to your company.

Put together a set of “what if” plans by preparing for crises before they occur. Is your office in a floodplain or your copier on its last legs? Consider archiving your records upstairs or off site and find out who rents office equipment.

Even if anticipated problems don’t occur and different ones flare up instead, at least you’ll be in the habit of preparing for the unexpected.

15. PLAN FOR THE FUTURE: It’s hard to look above the horizon when you’re so busy juggling your company’s day-to-day operations, but your survival depends on it. “One thing that tics me off about lots of big companies in this industry is they’re too shortsighted,” Hyman says.

You may be experiencing boom times now, but don’t forget that business is often cyclical. If your market’s demographics change, you must change with it to retain market share.

Consider diversifying or starting up a handyman division or maybe taking on commercial jobs. Do your homework first by talking to peers who do similar types of remodeling work. Evaluate all the pros and cons. Work any new endeavors into your business plan to see if they’re feasible.

If you have the resources and business to support it, you may even want to set up a branch office. Though best suited to large companies, owners of small companies can also benefit from branching out. In the process, their companies will undoubtedly grow.

Ultimately, planning ahead often means laying groundwork for succession — a reality far too few remodelers plan for.

Consider now who would be best to run the firm when you step aside. Don’t just throw someone the reins and leave. Give your successor training and anything else he or she needs to succeed. Properly equipped, your firm will thrive on the foundation you’ve laid.

(This information and more is available on line at http://www.remodeling.hw.net)