Landing the Big One

Cindy and Joe Roeser had been in business for 15 years and had built a solid reputation in St. Louis. Their average job size was around $100,000, and they'd handled a few $250,000 jobs successfully. Then, a previous client bought a house that he wanted remodeled entirely and called Roeser Construction. Cindy and Joe were eager to do it. They had finally “landed the big one” — an estimated $900,000 job.

For any remodeler, going after that first big job is frightening and exciting. “As an entrepreneur you are seduced by a sense of possibility,” says Paul Winans, owner of Winans construction in Berkeley, Calif., and NARI president-elect. “When it comes walking toward you, you're scared and attracted at the same time. ‘Should we go for it and will we get it and if we do how do we do it?'”

Often, “the big one” is something a past client wants done — someone whose respect you've already earned — but it could just as easily be something you bid on. The definition of “the big one,” of course, is different for every remodeler. The job could be something physically bigger in size, larger in scope, and/or more in dollars than the jobs you've already done.

The “Big One” almost landed on Joe and Cindy Roeser, whose St. Louis remodeling company took on a $900,000 job about four years ago.

Photo Credit: Kevin O. Mooney

Whatever represents “the big one” for your business — even if it's different in degree and not in kind — it will take you outside your comfort zone. When you go there, every once in a while, says Winans, “you learn things for when you go back to your bread and butter work. It becomes easy to run what you've done — once you've paid your tuition at the university of hard knocks.” But going outside that zone without preparing could be a disaster.

It turned out that “there had been a fire in the attic back in the '30s or '40s, and there was a lot of structural damage from the roof that went into the walls, caused the floors to sag, and went down to the basement,” says Joe Roeser. Somehow the architect had missed this and several other things.

The original contract was a time-and-materials job. “Because the house was so old and had been neglected, we didn't contract it out because we didn't know what we were getting into,” says Cindy Roeser. The original estimate of $900,000 was before the damage was discovered. Still, the damage didn't deter the Roesers, and they got deeper into the project.

Some warning flags should have gone up right away, but the Roesers weren't prepared to see trouble. First, taking a contract that's more than double your current contract —and in this case nearly 10 times more — is a bad idea. Thomas Schleifer, Ph.D., a retired contractor who wrote Construction Contractor's Survival Guide and now teaches at the Del E. Webb School of Construction at Arizona State University, studied hundreds of construction businesses over the years and isolated 10 reasons contractors fail. The one that hurt companies the most was change in project size.

“A company is safer growing in modest increments — 20, 30, even 50% larger has modest risk associated with it,” Schleifer says. “A job twice the size of any other job may drain the company. You're betting the whole company on the one job” because you're draining resources. “Field people are struggling. Management is struggling. It's like doubling your bet at roulette and not taking anything off the table.”

Adding the change in job size to any of Schleifer's other nine reasons for failure —changes in location, type of work, key personnel; managerial maturity; poor accounting systems; failure to evaluate project profitability; lack of equipment cost controls; poor billing procedure; and changes in accounting systems — compound the risk. “When two or more of these business changes are undertaken at the same time they can be lethal,” Schleifer says.

The Roesers' problems escalated. “We didn't have systems in place to handle that kind of project in an organized fashion, and it became a little chaotic,” says Cindy, who admits the company did not write down change orders; everything had been done verbally.

Because the house wasn't structurally sound, steel beams were needed, which meant getting a crane and increasing costs. The owners apparently had little communication between the two of them. In the field, employees would do what the husband asked and then do what the wife asked. “We didn't establish who made the final decision,” Cindy says. “The other issue,” she says, was that “the client kind of ran the project. The subs started working for the owners and not for us.”

The Roesers were running three projects simultaneously, but because the mega project took so much of their time, they weren't watching the other two. Nor were they keeping up with marketing for new work. “We made every mistake in the book,” Cindy says.

Going after the big one “is a standard, classic growth predicament,” says Judith Miller, a San Francisco-based consultant to the remodeling industry. Why do people take on these jobs? “Either it's a really sexy job or it's an architect they want to work with or they see the potential to make a lot of money or to eventually become ‘the builder of big houses in Aspen.' And that's not going to happen.” You have to weigh what Miller calls the risk-reward ratio. Can you do the work profitably?

The key to that, says Tim Cross of Merrick Construction, is estimating. “This is where the guy who doesn't know big jobs could get hurt.” For example, he says, “If you get into a big house there's so much cleanup involved and labor for cleanup that you might not expect. You might estimate it at $4,000 and it'll cost $10,000.”

To even get to that point, though, you have to ask yourself a lot of hard questions, including why you want the job. Cross does high-end additions and custom homes in a wealthy northern New Jersey suburb. He says he doesn't care if a job is high status. “It's just as important to say no to those big jobs as to say yes.”

You have to know how much time and effort you're willing to put into a job and not be seduced by money or prestige. One recent job Cross turned down was a 15,000-square-foot home built on the side of a hill. “It has more steel and concrete than most commercial buildings.” Because he'd recently finished two 12,000-square-foot homes, he knew he shouldn't touch the larger one. “At first glance, it just looks like a custom home. But it's more than that.” Cross would rather do large jobs with which he's familiar and can handle in a shorter time frame. “You've got to take baby steps,” he says. “When you see the big dollars thrown in front of you, you have to control your excitement and think about what you do before you do it. Make sure you're prepared to take it on and have the manpower and know-how to do it.”

Tim Cross of Merrick Construction in Little Silver, N.J., says that on his first big job, he didn't have enough systems. He has improved those, but estimating correctly is Cross's secret to managing and profiting from larger jobs.

Photo Credit: Linda Rowe

In essence, you want new challenges, but you don't want surprises. Says Denny Conner of Conner Remodeling & Design in Seattle, “I've set aside the idea of going after the big one and have been a little more thoughtful about the talent we have in our lead carpenter mix and what we're really good at.” Conner's projects range between $40,000 and $200,000, so while looking at a “fancy million dollar project seems enticing, the logistics of taking on a project that is so much larger than what we're set up to do just doesn't make sense.”

Another reason to turn down the job is if the client isn't right for you. Because you and the staff will spend a lot of time with the client, “you need to be OK to walk away from the project if the clients don't fit the company's core values,” says Craig Durosko, president of Sun Design Remodeling Specialists in Burke, Va., whose average jobs run between $150,000 and $200,000 after 17 years in business. Michael Cordonnier of Remodeling Designs in Dayton, Ohio, has gone so far as to terminate a relationship halfway through the design process on a project he was expecting to take a year or longer because the clients were difficult. “I thought about what it would be like for our carpenters to deal with these people, and I thought it wasn't worth it,” he says. “I didn't want to subject my employees to it.”

Doing one big job won't necessarily propel you into the next realm. Schleifer cautions that more often you land a big one and get “two others before finding out the big one wasn't suitable. You want to isolate [the large job] and complete it” and turn a profit before tackling another.

It took two years for the Roesers to complete their project. “It turned our company upside down,” Cindy says. “We lost carpenters and clients because we were so involved in this.” The final tab was $2.4 million. They didn't lose too much money, but they ended on a sour note with the owner and lost money on other projects they couldn't maintain. They considered closing the business.

Perhaps because they didn't compound their risk with many of Schleifer's nine other reasons for failure they didn't go under completely. They credit their peer review group and several loyal employees who stuck it out. Not long before the project was completed, the Roesers had joined Remodelers Advantage Roundtables, and, says Joe, “If it weren't for those people and the support and advice we got from them, we would have shut the doors.”

In the ensuing four years, the Roesers have made many changes. Much of the staff is new. They document all change orders and get money up front. They use job binders and went to an open-book policy where project managers have access to the company financials and project budgets and often write up change orders. They've improved client and field communication and hold weekly meetings with project managers as well as company-wide monthly meetings. Subcontractors sign an agreement that states exactly what is expected of them. “They're on our team,” Joe says.

One problem with taking a big job, says Thomas Schleifer, a retired contractor now teaching at Arizona State University, is that it might work out. “The fact that you got away with it doesn't change the risk for the next time out.”

Photo Credit: Compoa

In the fall of 2004 they began a $400,000 job “and it's going very well,” they report. Volume for 2004 was on track for $1.3 million. In hindsight, both feel taking on the grand project was a good learning experience that made them recognize the value of systems. The first big job shouldn't come as a surprise as it did for the Roesers. It's all about planning for additional subs and supervisory people, permits and jobsite trailers, more change orders, longer delivery times for specialty products, and longer and more costly cleanup. Winans suggests talking to people you trust, “other contractors, your spouse, design professionals. Weigh the risks and benefits. If it all went wrong, what would it look like? If it went well, what should it look like? What could I learn?”

Of course, you'll inevitably forget something or undercharge because the job is beyond your experience. But, says Winans, “to me, to do the same thing — the type of job I can do safely and super predictably —wouldn't get me out of bed every day.”