Your “sweet spot” is “a particular kind of project that you enjoy doing, [and] know you can do efficiently, on time, and on budget with a delighted customer and minimal stress,” says consultant and REMODELING columnist Victoria Downing.
Figuring it out needn't be left to trial and error. “I looked at my history and at what my most successful projects and leads are,” says Jay Riordan, owner of Dream Design Builders, a design/build company in San Diego. “Whenever I have a challenge on a project,” Riordan says, “I look at what I could have done to avoid the challenge. Was my contract not clear enough? Was the plan not clear enough? It's usually a communications breakdown.” Riordan keeps a notebook he calls “contract wording,” and whenever he has a challenge, he says, “I take note and look at how I can reword my agreements with clients to make them clearer.”
Riordan has determined that his most successful job is a room addition with a kitchen or a bathroom. He takes into consideration the size of the job and whether it fits his company's structure — superintendents overseeing jobs done by trade contractors. “Smaller projects aren't necessarily a sweet spot because my competition for those jobs is greater,” he says. “Larger projects make more sense.”
LOOK BACK TO LOOK AHEAD One way to gather job history is via a job autopsy, a review of a job shortly after it's completed. “Make sure you look at trends over time,” says Walt Mathieson, an Intuit Master Builder consultant and software consultant to the remodeling industry. “The data has to be collected over a population large enough to be able to draw a reasonable conclusion.” And it's not enough to just look at jobs on which you lost money. “It's equally important to do autopsies of jobs you do well on. You can also learn from those.” Comparing estimates to actual costs, as well as analyzing “non-quantitative information such as what the lead carpenter and production manager say about the job,” says Mathieson, will help you pinpoint problems, discover what you're good at, and, ultimately, will help you determine which projects will return the highest gross profit.
David Heaney, owner of Rocklands Architects and Builders, in Newport, Del., does job autopsies every two weeks on every project to adjust over/under reports to show true profitability. Then he does a final autopsy at the end. “You can look at a project in a macro or micro sense,” he says. “To determine a sweet spot, you'd look at projects from a macro standpoint, doing side-by-side comparisons by project type to determine overall gross profit.”
One thing your research might tell you is which jobs you shouldn't pursue, whether because of profitability or because you don't feel competent doing them. “In my market,” says Jeff Petrucci, of Bloomfield Construction in Ann Arbor, Mich., “there are some very good remodeling companies that only target kitchens. They niche.” So Petrucci, whose background is in roofing, siding, and windows, stays away from kitchens.
“In the past five years I've made the transition to a full-service remodeling company with a focus on exteriors,” he says. “I tell clients ‘If you have me build a room for you and you want it to look like it's always been there, then there's nobody to hire but us.'”
THE WHOLE PACKAGE
It's not just about profit or about what type of job it is, says Glen Lumia, owner of Creative Design Construction & Remodeling, Northvale, N.J., who gears all his systems toward finding what he calls “preferred projects.” “We look at where the lead came from, who the clients are, what they want to spend, why they're buying from us, and where the job is located.”
From the first call, Lumia is finding out whether a job will be right — and profitable — for his company. One of four people — a receptionist, an office manager, or either of two administrative assistants — answers the phone using a scripted scenario, gathering information from callers and assigning point values to their answers. These are then marked on a “job type” form that Lumia created. (See Good Form, page 58.) A previous customer automatically gets the highest value no matter what the job. “We've even changed light bulbs,” Lumia says. Sweet-spot jobs are highlighted on the sheet. A kitchen addition gets 10 points, while a bathroom alteration gets just five. Which town a potential client lives in has a point value, as does the way in which he or she found out about the company.
Leads are then placed in color-coded folders. A red folder is a really hot lead — a sweet spot or a preferred job. “The colors tell us how quickly to respond to the lead,” says Lumia, who, along with one other person, does sales for the company. “And if you get a red folder, you're expected to close on that lead.”