Though a common method of lowering overhead is to use more outside trade contractors on jobs, not many remodelers go as far as Rob Baugher, owner of Baugher Design & Remodel, in Birmingham, Ala.
A decade ago, Baugher had 14 employees. He now has five people who work solely in the office. In addition to subcontracting the trades, he subcontracts project managers. According to Baugher, this has lowered overhead, improved efficiency, and given Baugher Design & Remodel flexibility to expand. “We expect [the project managers] to lead the orchestra,” Baugher says.
When he first began the switch to all subs for project management, Baugher looked to his then-existing carpentry staff to take over those positions. But he realized that, to run jobs efficiently, he needed people with management skills instead of construction or trade skills. “Most of the carpenters wanted to fix everything by putting on their toolbelts,” Baugher says, “but that slowed things down.”
Now, most people Baugher uses in the PM role are managers with some construction industry experience. He has subcontracted with former farmers, lawyers, ministers, and computer analysts — “usually people who have run their own business,” he says.
Modeling Baugher Design & Remodel this way has given the company flexibility to expand. Baugher hires as many project managers as needed; each one manages one job at a time. “The [more efficiently] they get through a job, the more money they make since they are [essentially] running their own business,” Baugher says.
The project manager comes onto the job just after the contract is signed. Baugher does his best to match clients with the right project manager. “When they accept, [the PMs] start drawing off their flat fee,” about 7% of the job, Baugher says, and they report to the on-staff production manager. “We do the marketing, bookkeeping, and design [and] pull permits,” Baugher says. “[The subcontracted PMs] are really just running the job.”
One concern with using subcontracted project managers is that they might not promote the company’s culture and ideals. Baugher handles that by having in-depth discussions with potential PMs “to find out who they are and how they operate,” he says, and he only uses people referred to him.
As with any subcontractor, business owners must be aware of the Internal Revenue Service guidelines. For example, they must be sure that subcontractors control their own time, supply their own tools, are independent, and report their own taxes.
“It really works out well,” Baugher says. “Every day of the job is planned out ahead [in-house]. We need a manager to make sure everything gets in and gets out .... [Using] this focused management system, we can produce jobs 40% faster.”
—Stacey Freed, senior editor, REMODELING.