It's not hard to gauge the difference between fit and unfit, healthy and sick. Physical fitness is measurable by weight, blood pressure, heart rate, and other means. Similarly, when it comes to a house, you can determine one that's in good shape vs. one that's dilapidated.
Do you have the same understanding of the health and fitness of your remodeling business?
Most remodeling companies are not designed. Most owners don't sit down with a clear vision of the future and a concrete plan for creating a successful remodeling business. The businesses evolve. One consequence is that almost 60% fail within the first five years. Many remodelers exit the business, primarily because of stress and the difficulty of keeping up with a rapidly changing industry. As many as 80% of companies generate less than $500,000 a year. Most would love to expand, but owners can't figure out how.
Like the body, a remodeling business has measurable indicators of health. Make a chart and rate your company from a low of one to a high of 10 on these 10 criteria. That'll give you a company fitness report.
1. Your leadership. Is it strong? That is, visionary, goal-oriented, strategic? Are you respected, trusted, a good communicator with a history of results? Do you walk your talk?
2. Your numbers. How strong is your understanding of Pamp;L, balance statements, budgeting, estimated vs. actual job costs? Do you have good reporting systems? Is projected gross profit in line with actual? Lead flow on track?
3. Systems/processes. How strong are your A to Z sales/production systems, your management processes, training-in-place? Are there consistent communication vehicles? Is there accountability at all levels?
4. Your team. Measure strength here by high retention, having future leaders in place, good synergy among employees who are committed to improving themselves and your company, clear expectations of roles, gung ho attitudes, and consistently exceeded expectations.
5. Your product. Strength is measured by projects tightly defined by size and type, with high quality craft, process under control, consistent client experience, on-time delivery, clear understanding of who your client is, an ability to respond to diverse economic conditions, and predictable results.
6. Your profitability. Health here means profits just as you predicted them, short and long term balance, cash flow under control, financial relationships in line with growth, consistent yearly improvement, strong cash flow/collection ratios.
7. Your stress. A high mark means you're making time for your family and yourself, able to limit your hours to 45 to 55 a week, sleeping well, feeling under control rather than controlled by the business, proactive rather than reactive, working "on" not just "in" the business, making time for improvement.
8. Your reputation. Are you well respected in the industry? Do you have raving fans for clients, no law suits, the ability to hire easily, 50%-plus referral rates, local/national media interested in you, subs/suppliers who seek you out?
9. Well positioned for growth. Fitness means your company is well-capitalized, is achieving controlled double-digit growth, has a healthy bottom line and a three-to-five year plan, is diversified for risk management and synergies, is investing in technology to accommodate growth/efficiencies, and is mentoring the next generations of leaders.
10. Your relationships. You should have good dialogue with other remodeling industry professionals, suppliers, subcontractors, manufacturers, plus a willingness to give back through association involvement.
Add up your scores for a total result. View your business in terms of these elements and you can begin to see what you need to focus on. For example, if your total score is 80 to 90, you appear to be healthy. Give this to three of your key players to fill out. If your score is 40 to 50, immediately focus on the criteria where you scored below 5 and seek professional help. If your overall score is below 30, develop an exit strategy.
--Mark Richardson is president of Case Design/Remodeling, Bethesda, Md. (301) 229-4600, email@example.com.