From Carpenter to CEO

What compels carpenters to go into business for themselves? A wide range of motivations, from the fulfillment of a lifelong goal, to the seemingly obvious route to better money and greater control of their time and craftsmanship.

What keeps most of them from achieving anything near their vision of success? Often, themselves. The same qualities that help residential remodeling carpenters excel at their craft — a love for physical work, people-oriented personalities, independent natures — often get in the way of their business goals. Anecdotally, carpenter-CEOs are less likely than their non-craftsperson peers to charge enough money, to focus sufficiently on their business systems, or to reach out for the help they'll inevitably need.

Dave Brady, for one, nearly underbid his way out of business before it even got off the ground. “I would look at a job and say, ‘We can do this for $1,000,'” says Brady, who started Oak Design & Construction, Oak Park, Ill., in 1979. “Twelve hundred dollars later, we would realize we were losing money.” With focus and what he calls “self-discovery,” including the realization that he could hire better carpenters than himself, he strengthened his financials and today runs a company whose revenues are a stable $3 million to $3.5 million each year.

Many carpenters sabotage their CEO aspirations by avoiding paperwork. “You're used to driving nails and keeping numbers in your head,” says Jud Motsenbocker, who launched Jud Construction, Muncie, Ind., in 1968 and sold the predictably $2 million-a-year company to his son in 2006. “You have to put your systems into place and make them work,” he says.

Systems and processes need to be in place so delegation can happen." --Jason Levinson, Maryland Heritage Custom Builders

Photo Credit: Greg Hadley

One of Jason Levinson's moments of truth came several years after starting Maryland Heritage Custom Builders in Frederick, Md., in 1994. Asked to build a house from the ground up, the then-framing contractor suggested the first fee arrangement that came to mind: cost plus 10%. “I wasn't in it for money, and I was struggling with the mindset that business people are crooks,” he says. His honest-carpenter mentality killed any profits Levinson might have made on the job, but he shrugs it off as a learning experience. “Hey, if I blessed them, I blessed them.”

In 2006, Maryland Heritage Custom Builders had revenues of $1,050,000, and Levinson hopes to grow it above $2 million. The company has changed shape in its 12-year existence; at one point, as a framing contractor, Levinson had 14 field employees; he later took a two-year hiatus as a youth minister. Today he has five employees and a family to support, and a more focused determination to become a true remodeling CEO.

Here are some of the potholes he'll need to avoid en route.

Poorly marked and largely unpoliced, the road from carpenter to CEO is littered with the wreckage of talented people. “We hear that the great majority of remodeling companies fail within the first few years,” says Therese Crahan of the National Association of Home Builders' Remodelors Council. One reason is the ease with which anybody can get behind the wheel. Another is the simple fact that carpenters are hands-on and action-oriented by nature — tendencies that wouldn't be a problem if paperwork weren't so tedious by comparison.

“Were they lovers of paperwork, they would not be carpenters,” muses Linda Case, a REMODELING columnist and founder of Remodeler's Advantage. Many carpenters bypassed college, missing out on finance and marketing classes. There are exceptions, of course, but even skilled lead carpenters can be surprised by the real costs of doing business. “They may know how much their jobs sold for, and it just looks huge,” Case says.

Levinson, for one, went to college but was more interested in lacrosse than academics. He also performed in rodeos, rode motorcycles, and did a five-year turn in the Marine Corps, where as a first lieutenant he enjoyed doing “hasty construction and blowing things up” in such war-torn regions as the Middle East and Somalia. “I'm always looking for adventure,” he says. “The bigger the risk, the bigger the reward.”

It wasn't until Levinson started Maryland Heritage that he experienced the consequences of being so hell-bent on action. He hurriedly estimated a job, forgot to include siding, and had to eat $8,000 in siding costs. Lesson learned? “If I'm a few hours over on installations, it's not going to kill me. But if I do an estimate faster than I should because I'm not thorough, I could make a mistake and lose thousands of dollars.”

Several remodeler-CEOs cite the importance of having a good accountant — preferably a CPA with existing construction clients. “Ninety percent of the remodelers out there are like me: hammer and saw guys,” Motsenbocker says. “They think it's all about the craftsmanship, and they don't realize what it costs to keep a business running.” Admitting that you need help may be half the battle. Before opening the doors at Jud Construction, Motsenbocker enlisted an accountant to help him set up procedures for everything from budget to bookkeeping to timesheets.

Most remodelers aren't nearly so forward-thinking. Small companies often stay so busy initially that they see quiet number-crunching as an intrusion on their time. “Ignorance is bliss,” says Jeff Hall, who founded Villa Builders in Chester, Md., in 1997. “I started out by putting my belt on, and flying by the seat of my pants.” It seemed to work. “I made a decent living, and my books always showed a profit, but I'll be damned if I know how,” he says.

One of my first difficult lessons of management was: You have to get buy-in." --Dave Brady, Oak Design and Construction.

Photo Credit: Andy Goodwin

Brady also recalls a delightfully lackadaisical approach to finances. “Revenues were pretty small for a while, so it was pretty easy to make piles of receipts and invoices, and to divvy up what was left in the checkbook at the end of the week.”

That's generally OK if you “see yourself as just making work for yourself,” Case says. You can always work for others when business slows down. “But when you get bigger, when you have employees, you have to understand your finances.”

You'll need to put more than numbers in writing to reach your destination as CEO. Delegation is a core component of marketing success, and you can only delegate with good employees and good systems.

“Systems, systems, systems,” Brady says. “They should all be written down,” from budgets to job descriptions to marketing. As his business grew and his workload expanded, “my job changed, and I wasn't prepared,” he says. Instead of having his staff follow written procedures, “I was doing it on an itinerant level, constantly running out, saying, ‘Are we doing this, guys?'”

Levinson says systems are “pretty much the highest priority in our business right now.” So far, he has concentrated on systems for job folders, job spec sheets, production meetings, and production checklists, with more to come. “Employees need to know what needs to be done, not because you're saying it, but because it's a system,” he says. Delegation is a big goal; each of his lead carpenters has a company credit card and knows when to use it. “I don't want them calling me when they need to buy three more sticks of trim.”

More than announcing systems from the top down, Levinson strives to get “buy in” for them — a strategy that Brady also found essential to making systems stick at Oak Design & Construction. “You've got to spend the time educating these guys,” Levinson says. In production meetings, he lays out his company's revenues, profits, and expenses, including such line items as workers' compensation insurance. “The guys in the field tend to look at the people in charge and think, ‘they own the business, and they make all the money.”

Levinson doesn't want his staff to feel that they're expendable — or that he is either. “A lot of these guys, if you go out of business, they don't care because they'll go work somewhere else. I think you should get them to recognize that they're just as important to the business as you are.” And, “to buy into the mindset, and for it to be extremely important for them to work for Maryland Heritage.”

Although loyal employees are critical to success, it's also important to terminate those who don't work out. Case warns against hiring relatives as though you're playing pickup basketball, and against holding onto “sad sacks” out of the goodness of your heart. “I tell everyone, ‘You may need to hire three people to find one good one,'” Case says. “An integral part of success is being able to say, ‘You're not a good fit.'”

Carpenters' independent inclinations can get them lost on the journey from carpenter to CEO. Bite the bullet, and ask for help. Former employers may shut the door, feeling betrayed or even threatened by the prospect of you becoming their competition. But knowledgeable business advisors can be hugely helpful, as can the widening array of educational resources that the industry has to offer, such as trade publications and conferences.

Find a mentor if you can, and be persistent. Most established remodelers advocate joining a leading trade association — the National Association of the Remodeling Industry or the NAHB —and becoming active in your local chapter. Your nearby peers may be somewhat circumspect with their insights, but “there's nobody in the [NAHB] Remodelors Council of 200 or 300 people on a national level who will not sit and talk with you on the phone,” Motsenbocker says.

Jeff Hall searched for a mentor in vain for years. “I needed input on the best ways to structure my business, on covering costs, marketing issues, finding the right clients, and I could not get local remodelers to talk to me.” He finally struck gold when he joined a peer group of non-competitive remodelers from around the country.

Wherever you turn for help, bear in mind that you'll get some daunting advice. Brady also worked with a professional peer group company in the 1990s, after nearly burning out on wearing too many hats. Meeting with other, more successful remodelers helped him develop goals, but “it seemed like climbing K-2.”

For his part, Levinson is absorbing knowledge like a toddler. He began by “devouring” books and magazines related to the profession, works with a local CPA, is working on his CGR and CAPS certifications, and attends as many industry trade shows as he can.

“The ironic truth about this industry is that there are tons of qualified craftsmen out there whose work is as good as or better than a larger, more established firm,” Levinson says. Too often, they resist delegating and “have no interest in putting into place systems and processes that simplify the entire process,” or in “creating a company that doesn't dissolve when their bodies either give up or they check out. Those are the contractors who ‘work for wages',” he says, who work 14-hour days, and who let clients dictate the terms of their projects.

And that's the existence he's determined to leave behind.

A damaging mistake many fledgling carpenter-CEOs make is positioning themselves as an inexpensive alternative to companies with high overhead. Not only will this constrain your ability to pay yourself well and build in profits for your company, but being known for low prices can make it hard to increase your markup later, as your company grows, or even to appeal to a higher-end clientele, Linda Case says.

Case also notes the psychological hurdles many carpenters place before themselves. “I hear a lot that they can't charge a professional-level markup because their market is different. Clear out that head trash,” she says.

Develop professional marketing materials as early as possible. Establish that you charge for estimates, and stick to it. Carve out your niche — your attention to detail, your white-glove service, or whatever else makes you special. Explain that you'll be happy to meet with prospects between 8 a.m. and 5 p.m. — not on evenings or weekends.

Good carpenters are rightly proud of their craftsmanship, but you'll be more successful at selling — at the price you want — if you shift your marketing focus to the experience you deliver.

Michael Howes of MCB Remodeling, Woodside, Calif., says his clients expect his company's work to be of a very high quality. So instead of emphasizing workmanship to prospects, he speaks to them on an emotional level. “We tell them up front that we don't allow radios on the job unless they've moved out, no smoking on the property, no foul language,” and so on.

Much of Howes' inspiration comes from Nordstrom, the legendarily customer-centric department store where he worked after college. “The Nordstrom model so belongs in remodeling,” he says. He especially admired “the consistency of the message. You can't find someone who is even a little bit clueless” about the store's products or policies, who doesn't feel comfortable being accountable for their actions, or who doesn't show respect for the client.