The enterprise might begin as a hobby, building projects for friends and family, getting paid a little to do something that gives enjoyment and satisfaction. Then, more jobs appear and more money rolls in.
A business is born, and soon bigger decisions must be made: Hire a carpenter to help in the field or hire someone to answer the phone? Remodel the basement into a home office or move into commercial space?
The first milestones have whizzed by so quickly they've hardly faded from the rearview before another looms ahead.
But this is where the easy metaphor ends, because business milestones don't occur as regularly as those along the highway.
For most remodelers, the process of achieving milestones, says REMODELING columnist Mark Richardson, president of Case Design/Remodeling, Bethesda, Md., “is stepping in quicksand. Ninety-nine percent of remodeling businesses were not designed. They evolved.
“It's standing in quicksand and it's up to your waist and you're asking, ‘How do I get out of this?' It's that dynamic.”
But it is possible to navigate the quicksand and realize higher profits if milestones are established as goals and are something you work toward instead of watch whiz by.
“You must plan in order to minimize risk and chaos,” says Judith Miller, a San Francisco-based management consultant to the remodeling industry. “It's like training for a marathon.”
Time to be ProactiveMilestones as goals can be tangible, like moving from being an employee to being self-employed or hiring your first office person or first lead carpenter. But they can also be less tangible, like spending more time with your family, working only 50 hours a week, or taking a two-week vacation without your cell phone.
Instead of creating a list of what might amount to dozens of specific goals over the course of your business's — and your own — life, it might be more helpful to organize them under the following four principles.
- Be a professional
- Recognize you wear too many hats
- Work on the business, not in the business
- Create new growth areas
How do you recognize when change is necessary to move forward? While it would be “tidier to be able to quantify it,” says Linda Case of Remodelers Advantage and a long-time columnist for this magazine, there is no real way to put a dollar figure on the appropriate time to make a change.
“It's hard to pinpoint what triggers milestones from the perspective of volume,” Case says. “A company doing $5,000 jobs is going to go through milestones more quickly,” than one running $50,000 jobs.
For each of the principles, a different set of conditions exists to signal change. And conditions will differ depending on the age of your business. In the early stages, especially, “it's like leaping across a stream on lily pads,” Case says. “At some point you have to leap, have faith and confidence that you're going to be able to pull it all together.”
Be All That You Can Be
The shift from employee to owner — becoming more professional — comes up time and again in conversations with business consultants about milestones.
“At some point nobody wants to work out of your second bedroom, or your kids keep dropping in and it just doesn't work anymore,” Case says. That's when “you begin to put on some of the trappings of professionalism” — moving to commercial office space, perhaps, joining an association, or creating slicker marketing tools.
It may not be so much that you have the drive to be more professional; sometimes you're thrown into it out of necessity.
More than 25 years ago, Charlie Graves, owner of the full-service Graves Bros. Home Improvement in Rochester, N.Y., knew he had to move from a home office to commercial space, which included an office and a warehouse, simply because he needed more storage for the equipment he had accumulated.
Kerry Miller, of Kerry Miller Designs, who relocated his business from New Mexico to Ojai, Calif., after 20 years, realized that he had to “make his business more professional” for his new, upscale market. “I came up with a logo that fit me and the area,” he says. Miller, who sees himself as an artist, always had a laid-back style. But now, he says, “I'm more conscious of the way I dress. I look more professional,” when meeting with clients. After nearly five years in Ojai, Miller is turning away work.
But there's more to it than just getting new desks and a phone system. “Hiring new employees and moving to legitimate office space have to be initiated and supported by underlying attitude shifts,” says Melanie Hodgdon, president of Business Systems Management in Bristol, Maine. Otherwise, “the business may not be truly maturing. Like kids playing dress-up in adult clothing, having an office, office personnel, and salespeople won't necessarily guarantee a mature and successful business.”
For John Keohane, a $1.2 million remodeler from Dedham, Mass., the conditions under which he decided to be more professional came a decade after he began working as a carpenter. Out on his own, he became overwhelmed with the amount of work he faced but feared that no one could do his job as well as he. Keohane finally let go and “spent the money necessary to find [and hire] a talented person” to take over his job in the field, he says.
Only as he took that leap did he admit to himself that he was a remodeler, not someone doing this “on the way to something else.” At the same time he hired that first carpenter, he says, “I hired a graphic artist to put together a logo” to better the company's image. Up until then “I never really had letterhead or anything. My home phone was my phone.”
Keohane believes that many remodelers undervalue their businesses and even lack self-esteem, which stops them from becoming more professional. “When I first started, I thought I couldn't get 33% margin. But I did. Then I thought I couldn't get 50%, but I did. Remodelers don't think they can do it. They're the opposite of salesmen, who think they can conquer the world.” Keohane credits joining a peer review group with boosting his confidence and helping him make these changes.
Part of professionalism is seeing your business as a piece in a larger industry —recognizing that knowledge, standards, and best practices are important.
“As long as a remodeler sees him or herself as a person who remodels instead of a person running a business that delivers the service of remodeling, he or she will tend to consider his or her business situation to be so unique that best practices can't be instituted,” Hodgdon says.
Jeff Seidel, owner of J.B. Sterling Company in Fairport, N.Y, says he learned early to see himself as part of something larger. “In the beginning, of course, it's survival; you think about your little circle. As time goes on and you start to make money, you start looking at the entire remodeling industry and the building industry and ask yourself, ‘Where do I fit into that and how much of a market can we get and what is our little niche?' You start applying business fundamentals, planning and projecting budgets” as you try to fit into the industry.
The process feeds on itself in positive ways. Raising standards and seeing your business as part of a larger whole helps boost self-esteem and confidence.
Boosting those helps you better your business in more professional ways.
Putting Down the Hammer
In order to grow, you're going to need to hire other people, because there are just so many hats you can wear. But divorcing yourself from parts of the business in this way is difficult and frightening. Who can do your job better than you? How can you give up so much control?
The conditions that push you in this direction might be anything from the number of jobs facing you to, as Paul Floramo, general manager of Home Improvement Showcase in Rochester, N.Y., says, “getting older and [realizing] there is only so much time you can spend on knees and ladders.”
One rule of thumb for deciding to start hiring, Linda Case says, is “when the individual can no longer do it all.” Yet Case recognizes that companies are rarely completely prepared for the changes they have to make, especially early on, because there's often “not enough money in the bank account to do it.”
But if you're wearing several hats — for example, carpenter, sales, and office manager — you need to understand that each of those hats has a dollar value — which you're most likely not paying yourself. Hiring people to replace you means having to put money into each hat.
By taking on employees, you'll be able to use your time differently — to sell, most likely — and make more money.
Case suggests organizing by writing everything down and remembering to plan for growth in the sense of markup. “If I'm getting a 30% gross profit and thinking about hiring an office manager who I'm going to pay, with benefits, $35,000, I've got to bring in additional volume of $117,000 just to pay that person,” Case says. “Where people get off track is they make decisions based on how they're feeling at the moment” instead of looking ahead. It's always a balancing act, but hiring a certain number of people is necessary for growth.
Keohane says you need to go for it. “You've got to add the overhead first, and the revenue will follow.”
The Company is Not MeHiring employees, seeing yourself as a professional, and fitting into the wider industry go hand in hand with the idea that to succeed you have to work on the business and not in it. Remodeling companies are “not really businesses; they're practices,” Richardson points out. “At some point the business can't grow if it must depend on [the owner].”
If that's the case, an owner won't be able to make objective decisions based on the needs of the company, an entity separate from him or herself. “An owner can decide to do an unprofitable job — it's my friend, or my uncle, just a small job, whatever,” Hodgdon says. “It's harder to justify committing the company's resources to do an unprofitable job.”
Hodgdon also argues that by focusing on the business, owners will begin to “chase profit, not dollars.” Only then will they become motivated to produce accurate job cost reports, allowing them to “identify what kind of work their company does well, reliably, and profitably, and even more important, which jobs are losers,” she says.
Graves, who put down the hammer early on to focus on sales, says, “Every January, I look at how the last year performed, how I think the market will go, and the areas I want to have less involvement in, more involvement in, possibly new profit centers.” He also looks at things he's doing poorly in and where he wants to cut down his involvement. “When I get that straight as to what I want to do and what I feel are reasonable goals for the following year, I put that on paper,” he says.
Gaining objectivity and some distance frees you to spend time creating formal business and marketing plans and, somewhere down the line, an exit strategy.
Richardson says he recently traveled around the country giving talks to remodelers. Maybe 5% of the people in the audiences, he says, raised their hand when asked about having a business plan.
He stresses this as an important goal, as well as having an exit strategy. “It doesn't mean you want to get out now. You're thinking far enough ahead to build equity that's transferable or that you can reap the benefits of,” he says. “If you have an exit strategy, that's a healthy place to be, regardless of how long you stay in business.”
Moving Forward
Creating new growth areas is an ongoing milestone, and the areas you choose to focus on will depend on whether a company is in its infancy, its adolescent years, or has reached maturity.
Surpassing some of the earlier milestones and having objectivity helps in the planning of growth milestones such as moving in the direction of design/build, getting a showroom, or becoming a distributor of products.
“For a firm this size that's been in business this long, [the design/build process] was a naked spot for us,” says Bryan Absher of Pritchett Brothers. The more than 40-year-old Bloomington, Ind., company did $4 million in volume last year.
Until recently, the company outsourced its resources — draftspeople, subcontractors, product selection — but they're now moving them in-house. They hired a sales/ draftsperson to head the design/build department and are in the process of building a 1,000-square-foot showroom so clients can “touch, smell, and feel the things you need in the remodeling process,” Absher says.
Several conditions came together to prompt Pritchett Brothers to make this move. “Before the decision,” says Absher, “we would assist and monitor the process,” but it wasn't formalized. Because client follow-through was so high —90% of the people they walked through the process used the company's services — they realized “we've got to do this in-house and make it structured.”
Plus, he adds, they learned from others: Many of the firms in Pritchett's Remodelers Advantage peer review group had found success in design/build. “You can't lose clients because you can't do the services in-house,” Absher says. “It's move and take the lead or go the way of the dodo.”
Life Gets In The WayWhile planning is important and makes change easier, not all changes can be planned for. Sometimes personal events can set up conditions for and change the direction of milestones.
Kerry Miller, who moved his 20-year-old business from one state to another, says he did so in part because it was time for a change, but mostly because his wife wanted to move back to where her family was.
It was scary starting over, he says, “but with 20 years of experience, I wasn't really starting from scratch.”
For Rochester's Floramo, it was his wife's death that made him change course. Floramo and his wife, who was company bookkeeper, had built a business that included two large showrooms, when they learned that she had cancer.
Three years after her diagnosis, she became too ill to work and Floramo says he couldn't “manage the office, the field, the sales. It was overwhelming at that point because she couldn't help out.”
He closed the showrooms and went to work for another remodeler. His wife died in 2000, and Floramo waited two more years to go back out on his own.
Despite the changes, both Miller and Floramo were able to take previous experience and start somewhere in the middle of the process. They'd learned to recognize the conditions for change and were able to prepare to meet new goals.
Floramo is now general manager of Capstone Remodeling and Construction, which has a kitchen and bath division with $750,000 in gross sales and a general construction and remodeling division with gross sales that are nearly double that.
Reactions to personal life events force everyone to question their motivations and think about what they want to pursue in both life and business.
Consultant Judith Miller imagines a graph with three columns: business mile-stones, personal life milestones, and what one would need to succeed in making the jump from one column to another.
Doing this could be a good planning tool because it tells you what needs to be in place for you to be able to take the next step with minimal risk.
Managing the Changes
Trying to balance work, family, spiritual, and other goals is hard work. To make it more manageable, consultant and regular contributor to this publication Clay Nelson says, “You have to really, really want what you want, and you have to be able to write it all down” — what he calls “specific measurable results by when.” Because, he says, “if you don't have a plan, you won't know when you get there. You have to be present enough to know where you want to be along the way in order to see if you're making it or not.”
Nelson suggests asking and answering the following questions to help prepare for upcoming milestones.
- Do I have a written plan? If not, why not?
- Am I being a control monster? Does everything have to go through me?
- Do I know how to communicate what I want?
- What tracking devices do I have in place to make sure I'm going to get what I want?
- Do I have a written marketing plan? Do I understand that I have an image in the community and know what it is? What percentage of the market do I own and how do I keep it there or increase it?
Asking these questions is a good start, but as Case stresses, there's no reason to “invent the business in isolation. There are no excuses for that because there are resources. Belonging to an association and making good friends, reading trade magazines, good books, and maybe having a mentor — at least someone who's successful and a couple of steps ahead of [you] — in the business helps.
“Ask yourself, ‘Do I want to be like this company that's bigger than I am?' That's a huge step, rather than walking into the middle of it and finding out it's not for you.”
Route MarkersWithin each of the principles of change is a set of milestones that are often general but also may be specific to individuals. For example, most people will need to replace themselves in the field, while one person might set a 40-hour work week as a goal. Below are some common goals.
Be a professional