Edwin Fotheringham

When a Maryland remodeler was in a car crash that put him in the hospital, he was away from his business for two months. At the time, his two-and-a-half-person design/build company had two projects in production and three in design. Everyone muddled through, but the owner learned just how much he had been working in his business and not on it.

When he returned to the office — still in somewhat compromised health but on the mend — among other things, the pipeline was dry, punch lists had gone unattended, and cash flow was low.

Remodeling industry consultant and REMODELING columnist Shawn McCadden offers some strategies to use to avoid the issues this remodeler is now having to rectify.

  • Investigate all your insurance options. Have a disability policy that will pay enough money for your company to at least stay afloat. “You’ll still need to pay your mortgage and feed your family,” McCadden says. Be strategic about the policy you get — what it covers, when it kicks in, and how much benefit you will get. Even if you’re no longer swinging a hammer, cover yourself with workers’ compensation insurance. Get “key man” insurance so that if a key player, such as a company owner, is incapacitated or passes away, there will be money available to replace him or her.
  • Hire subordinates whose capabilities complement the owner’s. “With the right people in the field,” McCadden says, “you can instruct people from a distance.” Hire management-quality people with industry experience. No way around it, sales will be difficult if you’re the only salesperson.
  • Cross-train employees.
  • Save some profit. “Many contractors only earn enough to survive and meet monthly payments at home,” McCadden points out. “They need to save net to reinvest back in the business. If you’re making a profit, you should be salting it away so you have reserve funds to stay alive.” If you can, keep at least three to six months of operating capital available.
  • Put systems and procedures in place. These should serve the business, not the owner. For example, make sure all information is readily available and in a format that can be easily digested by all those downstream who need it.
  • Test it out. Stay in your office and see if things still get done in the field. “It’s only through actual experience that we can verify that either the employee has the ability to do these things or that something went astray in the communication ... or [the employee] wasn’t paying attention to what they were being tested on.”

—Stacey Freed, senior editor, REMODELING.