Recently, while facilitating a meeting for a group of close to 50 remodelers, one oft-repeated refrain I heard was, “Price is everything in this market. Clients used to sign a contract at the first meeting; now they want to get three bids. How can I lower my price?”
The question behind the question is: How can you generate sufficient gross profit dollars to cover your overhead, pay your salary, and earn a reasonable (6% to 8%) profit? One answer is to increase field productivity. But how?
In 2006 I attended a two-day seminar on labor productivity presented by FMI, a consultant that focuses on and works with huge international construction companies. In reviewing my notes, however, I found plenty of information from that seminar that applies equally well to smaller remodeling companies.
According to FMI, only two things affect profitability: productivity and pricing. But most remodelers don’t collect enough data or possess enough analytic expertise to actually measure the relationship between the two. And without proper metrics, companies tend to be reactive, which, according to FMI, is characterized by:
- Little or no formalized planning
- Resistance to documents
- Lack of planning blamed on customers and time constraints
- Field managers and crews being moved around
- Little communication between “get work, do work, and keep score”
- Constant phone and radio noise
- Too many emergencies
- A large number of small purchases made by the field
So, how do you improve productivity? A good first step is to track of as many factors affecting productivity as possible. The chart below lists the primary components of productivity improvement. Rating your performance on each one will, over time, show you where the weak spots are and help you to prioritize your track to improvement.
Time really is money. To improve productivity, and therefore the bottom line, focus on better planning and communication. This is a job worth doing. Do it well.