Like many in the remodeling industry, I started as a one-man operation. I was ambitious and an aggressive salesperson, and I developed a business plan that focused more on growth and expansion than on business operations and methods. In its first three years, my company grew from revenues of $127,000 to $1.2 million with 15 people on the payroll. This growth was manageable only because we focused on a single product -- vinyl siding installation.
By the end of the year 2000, we were close to $3 million, with about 30 employees. Because we maintained separate operations on different islands in Hawaii, we were cross-allocating money and people. It was then that I began to realize the tremendous strain this was placing on me and my business. I was propping up one operation at the expense of another, and by the time I got one division heading in the right direction, another one was off-track. I was also flying between the islands four to six times a week, with barely any time to eat and sleep, and no free time to exercise or enjoy my family.
Time for a Change
In the past year, I reorganized my company, based on a different view of what success is -- different, that is, from the one I started with. Now success means not only earning a good living while providing value to clients but also living a good life, including time for family, for exercise and recreation, and for work in the community. These days I focus each day on what truly matters, rather than allowing the urgencies of business to dictate how I spend every minute.
I've also learned that, for a service-focused business like mine, smaller can be much better than larger. My company may have been too small in 1985, but it had since gotten too large. Today, after instituting some changes, it's almost perfect. I have a trim three-person management staff and a work force of eight full-time and four part-time employees.
Eye on the Prize
When we decided to restructure, we established a new revenue goal of $90,000 per month with 10% net profit. We then provided budgets for all projects to the appropriate site managers. To encourage them to meet those budgets, we offered the site managers an opportunity to earn bonus income based on the combined factors of quality performance, budget control, and customer satisfaction.
What we've seen is that those who want to will thrive in this format, while those who don't will fail from the outset. This way, those who contribute to the success are rewarded. Those who don't are given the opportunity to improve, but if they do not, they are not included in the next project assignment.
Due to the new performance standard, we no longer employ some people who had been with the company for as long as 12 years. That may appear negative, but it has actually allowed us to get smaller and still make money. The reason we've been able to do this is that we're managing the business well and organizing, planning, and monitoring to achieve the desired end result. Over the past three months, 90% of new business has been generated by referral, we've exceeded our revenue goal of $90,000 per month, and we're returning a phenomenal 19% to 21% net profit on all projects.
At this phase, I would say that our company objectives are more quality and service driven than ever before. Likewise, we're more profitable than ever. I can honestly say that the past six months have been without comparison the most enjoyable I've experienced in business. They've also been the most rewarding, because I know we've produced better work and enhanced our reputation.
--Michael Houar is president of Hawaiian Repair and Remodeling in Wailuku, Hawaii.