Table of Contents February 2005

VIEW POINT

FIRST WORD

• Extra Credit

  Why not offer a generous portion of windfall profits to the people who helped produce them — your employees? Putting something extra into the pay envelope is a good start. But you can also set aside a specific amount to be spent on tools, equipment, training, company outings, whatever. Better yet, let your employees decide how to divvy up the pot. You'll be pleasantly surprised at how they spend the cash.

   

News + Notes

• Building on the Census

  Census reports open a fascinating window into how the American population has changed. But they also speak volumes about how the population will change.

   
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  The HSA Option

   

• Contractor Beware

  Pity poor Florida. August and September 2004 saw four deadly hurricanes within six weeks, resulting in billions of dollars' worth of damage to homes and businesses and an ongoing, critical need for experienced, licensed construction professionals, especially roofers. But if you're an out-of-state contractor, be aware of strict state requirements for working in Florida before you start packing up your tools.

   

MARKET WATCH

• Figure This

   

• Cross Checks

  This time of year, Tim Cross pays close attention to his leads. “From November to January, there won't be many calls,” says Cross, owner of Merrick Construction, a $5.3-million remodeling and custom construction company in Rumson. N.J.

   
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  Remodeling Activity Indicator

  Homeowner spending on remodeling ended 2004 almost 6% over 2003 levels, according to the Remodeling Activity Indicator (RAI) devised by Harvard's Joint Center for Housing Studies.

   

COMMENTARY

LINDA CASE

• Basic Truths

  Having worked in and around remodelers for more than 35 years now, I've put together a list of some important truths about this business I'd like to offer for your consideration.

   

MARK RICHARDSON

• Form an Alliance

  I believe there are two business disciplines that will have a big influence on the remodeling industry over the next decade. The first is pretty obvious: technology. Already, technology is affecting how we sell and communicate. Your clients may know more than you do about the products that you install because of their research on the Web. And many already prefer e-mail to the phone.

   

WALT STOEPPELWERTH

• Be Ready For Change Orders

  There was a time when change orders represented a large part of a company's profit on a project. This was particularly prevalent in commercial construction, where every proposal was bid by at least four companies. Most lowered their markups to win the bid, counting on change orders to make up the loss once they had the contract. Many residential remodelers have followed the same approach.

   

GUEST COLUMNIST

• 

  Starve a Fever

  Those of us in remodeling have experienced, at one time or another, clients' anxiety attacks. Our company likes to refer to them as “remodeling fever.”

   

YOUR BUSINESS

Ways + Means

• Clear Channels

   

• Pick Your Plan

  My business is taking a personal toll, and I'm not sure I want to be “the boss” anymore. How do I decide to throw in the towel and work for someone else?

   

• Point of Reference

  It's always difficult to let an employee go, but it's something that can't be helped. What you don't want to have happen is an employee suing you over a reference you give a prospective employer.

   

• There is a Free Lunch

  It takes humor to tell the boss he or she is micromanaging. Yes, humor. Production manager Andy Hannan and estimator Kirk Van Kamp of Mark IV Builders in Bethesda, Md., found a non-threatening way to approach the difficult task.

   

• Simple Rewards

  In December 2003, REMODELING published “Field Cruise,” a guest column by Susan Meynell, co-owner with her husband, Paul Meynell, of Acadia Post & Beam. In her commentary, Susan wrote about giving Acadia's employees and their spouses a Caribbean cruise as a Christmastime perk in 2002. But less than a year later that spirit had been, if not broken, then slightly damaged.

   

BOTTOM LINE

• 2005 Mileage Rates

   

• Tax Tips: 2005 Mileage Rates

  The Internal Revenue Service offers new optional standard mileage rates to use for 2005 in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes.

   

• Design Aid

  Need help with logos, marketing materials, ad copy, or brochures? Elance (www.elanceonline.com) is a Web site that pairs up freelance design professionals with business owners for small design projects.

   

• Small Historic Projects

  The National Trust Small Deal Fund is a partnership between Tax Credit Capital and a subsidiary of the National Trust for Historic Preservation designed to create demand for the smaller projects (those that generate less than $2 million in federal historic tax credits) sometimes overlooked by developers.

   

Sales & Marketing

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  Changing Identity

  The saying goes “out with the old, in with the new,” but when you have spent years building the reputation that is synonymous with the name of your company, it can be a dire warning. When Mason Hearn bought out his partner two years ago and changed the company name, he decided to tread lightly.

   

• The Basics of Newsletter Creation

  Marketing experts believe it costs six to seven times as much to make a sale to a new client as it does to an existing client. Newsletters communicate effectively with past, current, and prospective clients and reinforce a remodeler's brand.

   

• Homes on Parade

  Between the muddy feet and the sticky fingers, charitable home tours make some homeowners blanch at the prospect of opening their doors to parades of strangers. Not for the clients of No Problem Builders.

   

FIELD NOTES

• Tim Faller: Lead Carpenter System

  As a company grows, the owner often chooses to cut back on field management. One alternative to managing the field operation is the lead carpenter system. The owner should consider the following positive and negative points when evaluating this system. Owners can avoid the negatives with good training and discipline.

   

• Substitute Teacher

  Croom Construction has paired up with its subcontractors to offer in-house training for 16 superintendents. The Vero Beach, Fla., company hosts a lunch and afternoon training session every two months. David Croom asks each of his A-list subs to teach one class on his or her trade.

   
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  Carpenters Welcome

  In its quest to find carpenters, Bowers Construction has hosted five open houses in the past two years. The idea came from vice president John Coburn, who wanted a more personal approach for hiring. He also wanted a quicker solution because the process of running an ad and conducting interviews takes a lot of time.

   

Tech@Work

• Finding Your Stuff

  We're dealing with so much information these days that it's become a game of hide-and-seek to find files, e-mails, photos, or Web shortcuts on our computers. Try one of these great search tools.

   
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  Now Hear This

  Jonathan Levy, owner of Builders Integrity Group in Naples, Fla., uses a digital voice recorder for three types of communication: daily personal reminders (“So much safer than driving and writing,” he says); in client meetings (“If they know you're recording them, they're going to say less and be more specific”); and with trade contractors (“It makes them hold to their commitment”).

   

GOOD FORM

• 

  Profiting From Discounts

  A new referral card serves many purposes for Case Design/Remodeling of Bethesda, Md. Not only does it help keep the company's name fresh in the minds of existing clients, it also encourages them to refer new clients at a slight discount.

   

FEATURES

• 

  Second Chance

  Homeowner John Carmean and his wife, Chris, are no newcomers to tragedy. Their daughter, Kerry, was just over a year old when a car accident in 1974 broke John's back, paralyzing him from the chest down, putting him in a wheelchair for life.

   
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  Reality Checks

  Once upon a time, the public face of home improvement wore a beard and a plaid flannel shirt. He was Bob Vila, his show was

   

• Key Losses

  Most remodeling company owners will lose a key employee at some point in their tenure. Whether the employee is being fired, relocating, or starting their own company, owners can prepare for this eventuality. They can be ready for the steps they will need to take when that person leaves. And they can set up policies and procedures that prevent major disruptions.

   

Before & After

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  Before+After: Second Chance

  Homeowner John Carmean and his wife, Chris, are no newcomers to tragedy. Their daughter, Kerry, was just over a year old when a car accident in 1974 broke John's back, paralyzing him from the chest down, putting him in a wheelchair for life.

   

Reader Panel

• 

  Consumer Society

  Most of our ReaderPanel respondents agree that today's remodeling customers are more savvy and knowledgeable —about costs, products, and what they want done — than customers have been in the past.

   

BIG50

CLOSE UP

• 

  Profile: Michael Watts

  Michael Watts of Bel Air Construction (Big50 1998) in Jarrettsville, Md., has a theory: What is measured gets improved. To that end, he uses a form to track the progress of his four project managers. He asks each of the managers to estimate the projected completion percentage on current projects.

   

SECOND LOOK

• 

  Second Look: Colin and Heather Bester

  About a year after receiving their 2000 Big50 award, says Colin Bester, former owner of United Home Services in Chantilly, Va., “business was booming. We were doing $2 million a year and had won several awards.” But life threw Colin and co-owner Heather Bittner Bester a curve.

   

SOLUTIONS

• You Get What You Pay For

  We collect approximately 4% of the project budget as a pre-paid deposit on construction to cover us during project development. It is not refundable. This is collected when clients sign a one-page preconstruction project planning document. If they continue with us through project development and construction, this money goes toward the total cost of the job.

   

FACE OFF

• Face Off: Should You Test Potential Field Employees' Skills Before Hiring Them?

   

• Face Off

   

Live + Learn

• Hard Knocks: Rock Bottom

  Forget your ego, realize you have made a mistake, and move on.” That's Jerry Liu's, of D.G. Liu Contractor, attitude about making mistakes. He embraces the idea that he is imperfect and has learned from the past that the sooner you admit you fell short, the more valuable the lesson.

   

• Reading List

  I put it to work right away. I called some of my clients, and I was honest with them. I digested their answers and realized the issue was that one of my best crews (I only work with subs) wasn't performing like I normally expected them to. It was getting difficult to represent them, and I no longer was enthusiastic.

   

KITCHEN + BATH

Management

• Software Package

  Goldenseal is an integrated software program that handles estimates, job cost accounting, schedules, contract writing, and project management. Ithaca, N.Y., firm Turtle Creek, a company that started out as a construction firm that specialized in kitchens and bathrooms and then started selling the software it produced, has been producing Goldenseal software since 1987.

   
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  Kitchen Furniture

  Poliform, the Italian manufacturer and master of storage systems, recently introduced Bacchus, a collection of kitchen cabinetry and matching furniture.

   

• Mastering Design

  The National Kitchen & Bath Association and Kitchen+Bath Designer magazine recently presented the Masterclass Conference: Perspectives on Design, an internationally-themed education conference.

   

• Kid's Corner

  In a central area of the showroom, Harriet Noel added a television to play cartoons and kid's videos and a bag of toys to keep the children occupied while parents peruse the showroom.

   
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  Show Again

  The remodeled showroom has nine kitchen displays, three bathroom displays, and a home office area. The update cost $80,000 and was completed by the company's crew in nine months. Leon used display allowances from three cabinetry companies to create the new displays.

   

SPEC BOOK

• 

  Kitchen Lighting

  Whether a client wants subtle effects or a dazzling centerpiece, the latest kitchen lighting options are illuminating. Pendants are an elegant alternative to track lighting over island cooktops, as are soft spotlights in under-cabinet niches.

   

REPLACEMENT

ROOFING

• Through the Roof

  All across the country, roofing companies have seen materials prices go up, up, up. An April story in The Philadelphia Inquirer found that the wholesale price of nails in 50-pound quantities had jumped from $13.95 to $20.95 and that the 4x8 sheet of plywood that cost $8.32 in 2003 now cost $17.92.

   

Windows

• Phil Rea: Hire a Pro

  I recently hired someone for an important position. I'm pleased with her potential. The odd thing is she had a good job and was happy there. I found her through an agency.

   

PRODUCTS

TRENDS

• 

  Building Blocks

  Acrylic- and glass-block products are making a statement as shower enclosures and replacement windows in homes of all styles these days. Popular because they allow light to enter but maintain privacy, block products shine particularly brightly in shower applications.

   
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  Trim Without Trees

  Plastic, wood composite, and metal trim products will see above-average gains through 2008, according to a study from industrial market research firm The Freedonia Group. The study found that although wood materials are still dominant, with two-thirds of total demand in 2003, they've been losing ground in recent decades to composites and other materials.

   
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  Composite Segment Set To Grow

  Despite predictions in the late '90s that composite products were going to be a big player in the 21st century window market, composite windows have not taken off as quickly as once expected — at least not in the form of entire windows.

   

Reader's Choice

• Forms with Function

  Robert Myers of Icon Remodeling in Salt Lake City likes to stay on the cutting edge when it comes to new products. He thinks that Eco Block Insulated Concrete Forms (ICF) might be the next big thing. The forms consist of expanded polystyrene (EPS) panels onto which a contractor adds reinforcing steel and concrete. After the concrete hardens, the forms remain as insulation for the walls.

   
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  No Tanks

  Remodeling older homes in Houston presents special challenges for remodeler Stephen McNiel. “We do a lot of attic conversions, where you have to find creative places to put hot water heaters,” he says. That's why he's so pleased with Noritz's tankless models.

   

ON THE JOB

• Wall Flashing Details

  To seal around wall penetrations, use a two-piece metal plate bedded in urethane sealant. Sheathing wrap above the metal plate should lap over the plate while sheathing wrap below it should be slipped beneath.

   

IN FOCUS

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  Caulks, Sealants, & Adhesives

   
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  Worker Gear: Gloves, Boots, Earmuffs, and more

   
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  Flooring

  After years of scrapping wood that didn't make the grade — pieces with knots, pits, and other disfigurations — flooring manufacturers are now salvaging those imperfect pieces. The trend toward more rustic and country looks means that many homeowners are favoring knotty hickory over clear pine.

   
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  Have a Seat

  The Big John is the brainchild of Levy, a veteran of the plumbing industry who made a name for himself crafting high-end plumbing fixtures for hotels and custom homes. He found that many of his clients were in need of a little extra support when heeding the call of nature.

   

FIRST LOOK

• 

  First Look: Ladders, Doors, Vanities, and more

   

LAST WORD

Benchmark

• Direct Your Costs

  Last fall we began collecting data for our Cost of Doing Business Report, which will appear in our March issue. The NAHB research team collected the data but found that they had to spend a lot of time on follow-up calls to clarify the methods companies used to calculate common financial benchmarks. This is a problem that plagues this column, too, because remodelers can't seem to agree on a common definition and shared formulas for critical financial measurements.