For the past 20 years, I have worked with remodeling company owners and have loved every minute of it. One thing I don’t love, however, is meeting a remodeler who works hard, puts in long hours, and yet struggles to earn enough to live the life he or she wants and deserves.
Yet I know that the remodeling business can be lucrative because I see the successful companies, too. There are many remodeling businesses that deliver a healthy personal income to the business owners as well as to the employees. These remodelers take nice vacations — some for eight to 10 weeks a year. They can afford to hire talented employees who keep the business moving when the owners aren’t there and they can pay for the benefits that help to keep employees happy.
The profits of the business have allowed them to set money aside equal to six months of overhead in case of a business emergency. These remodelers live in attractive homes, send their children to private schools, and drive nice cars. They save for retirement.
What are the successful businesses doing that the unsuccessful ones are not?
One of the main differences is that those on top understand the financial fundamentals of their business. When business owners understand and interpret financial information, they make decisions and choose directions that ensure profits.
Many company owners are intimidated by financial statements. But for most, it’s misplaced fear. Anyone who can plan and estimate a complicated remodeling project can most certainly understand the financial numbers behind the business. And this is a key to reaching profitability goals.
Build a plan for profit
The most important step that a business owner can take to be more successful is to build a plan for profit on paper — an operating budget incorporating key financial numbers.
Creating one will show you how to price projects, how much revenue must be sold and produced, and whether you can support the company’s overhead before you go out and sell a single job. I just don’t know how companies function without using an annual operating budget.
Are there companies that produce good profits without using a budget? Of course there are some, but not too many. And I believe that they would have been significantly more successful if they had used this business tool.
An operating budget is not the only tool that strong businesspeople use to run their business but it’s the first step toward making the money you want.
Do you want to call yourself a business owner? Then step up and learn the fundamentals of making profits, which is the goal of any well-run business.
—Victoria Downing is president of Remodelers Advantage, helping remodelers across North America build strong, profitable businesses. 301.490.5620.