In 2009, resolve to be aware of the following:
Slow is the new normal. Unless you have been in business 15 years or more, current economic conditions may be foreign to you. Little work, slow sales, and limited lead flow may seem new, but they’ll be here for a while.
Ignorance is not bliss. My hunch is that 80% of remodeling businesses operate without budgets. Not knowing your cost of being in business is like putting duct tape over your truck’s gas gauge before heading out on a cross-country trip. Who knows how far you’ll get before you run out of gas. Get your head out of the sand. If you have problems, acknowledge how serious they may be.
Maintain Pricing and Quality
If you are low on work, don’t reduce your prices just to sell something. There’s no faster way to fail than to cut into your margins to match the competition’s price or otherwise win over prospects.
Don’t be tempted to compromise on the quality of your work or the materials you use, either. Poor-quality work will reduce referrals. It will hurt you financially, too: By law, you must provide the same material warranty coverage on a cheap window as on a quality window — which, of course, is less likely to fail.
Break the Growth Addiction
During the latest boom, you may have become addicted to growth, increasing your overhead cost as you grew. Now, that increased overhead may be causing a new addiction — cash flow — which will be difficult to support as business and gross profits taper off.
Don’t be tempted to take just any job or client to support your “overhead habit.” Two more words of advice here: First, if you’ve been in business any amount of time, you’ve probably seen the red flags that pop up around the wrong prospect or project. If a flag is red, run. Second, if you do have an overhead habit, get help to break it. The problem won’t go away on its own.
Abandon Blind Loyalty
When things get slow, you may be tempted to create work to keep your employees busy. You get them to clean or renovate the shop and office. Maybe you put them to work on your rental properties and/or your home.
If this work is necessary and you have the money, perhaps it’s the right thing to do. But if it’s just busy work, be careful not to deplete your reserve funds. Also limit how many employees you put on the same project. Two carpenters inside one 40-square-foot bathroom will not get the work done twice as fast.
If it’s not productive or profitable to keep your employees busy, don’t do it. Lay someone off, or strap your toolbelt back on and do the work yourself.
When things come back around for the remodeling industry, leads and workflow will pick up again. Hold back!
That’s what I did after the recession that followed Sept. 11. I watched as my competition filled up their schedules many months out, “buying” low-priced, money-losing jobs. Like drug addicts at a buffet, many gorged, overdosed, and — to stretch the metaphor — died.
By comparison, I managed my company’s workload, remaining selective about clients, projects, and margins. When my competitors were overbooked, I was one of the few remodelers still available within a reasonable amount of time to complete new projects. Demand for my services increased, and so did my prices.
Create your own New Year’s resolutions for your business. It’s not premature to think about the return of good times. They will be back, and what a shame it would be to survive the recession and die shortly after.
—Shawn McCadden founded, operated, and sold a successful design/build remodeling business. A co-founder of the Residential Design/Build Institute and former director of education for a national K&B remodeling franchise, he frequently speaks at industry events and consults with remodeling companies. email@example.com.