My company, Remodeling Designs, started in 1990 as a part-time business. We've grown considerably in the past dozen years, crossing the $1 million annual sales mark in 1999 and launching a Case Handyman franchise the year after that. Last year, our remodeling volume was $1.65 million, with an additional $700,000 in handyman.
At different times this growth caused me to consider hiring production support staff. Before taking this step, we did some research. We found that a lot of companies hire a production manger at the point where they have four lead carpenters. We plugged the costs for a production manager into our annual budget and saw we could make it work. In February 2000, at the point where each of our four leads was producing about $250,000 per year, we promoted lead carpenter Mark West to project manager. He had run his own business for a while and was the senior member in the field.
Budget for Added Staff
Deciding to hire a production manager depends on the type of work load the owner wants to bear and whether an operating budget can be written and executed that supports the added costs. In our case, I found I couldn't do all the design, production management, estimating, and purchasing, as well as some sales of larger jobs. Because I wanted to concentrate on designing, a production manager was the logical step.
But regardless of what the owner wants to focus on, the budget is the more important aspect. Unless you're going to directly charge all the production manager's time to a job and put that in your estimates, the additional money has to come from gross profit. The only way to get more gross profit dollars is to either be more efficient or raise your markup. It's unlikely that efficiency will improve enough that added costs will be covered in greater gross profit. So, that leaves raising your markup, and therefore your prices.
This is the key. You must lay out a budget, based on historical data, put in the additional costs, then see what you have to sell to cover those costs without sacrificing net profit.
There are other types of production support you can add to take some of the load off yourself, such as a buyer or an estimator. How do you know what position to hire for? Ask yourself the following questions:
- What is slipping in my business and personal life as a result of my doing all these jobs with no help?
- How much time am I spending at one particular task?
- What jobs do I like least?
- Can I hire someone to do tasks cheaper than I do them?
- Can I make enough gross profit to pay for these people?
Some types of jobs -- estimator, buyer, production assistant -- can be combined. It depends on the work load, job size, and the quality of individual you find to do the job.
Many small to mid-sized companies hesitate to add production support staff because the owner feels he can't afford it. I bet most never sit down and do the budgeting exercise. Without a plan, you will not succeed. If you put it on paper and see that you have to do $1 million at 40% gross profit, you know what your markup needs to be and it's no great mystery.
What does adding support staff do for you? It buys you time, so you can work on the company. In our case, it led to launching a Case Handyman franchise. It also opens up advancement opportunities for your best employees. There are other benefits, too: Being better prepared increases client satisfaction levels, raises repeat and referral rates, and helps build your company reputation.
--Mike Cordonnier is president of Remodeling Designs, Dayton, Ohio.