There is plenty to worry about when you take on any project — so it had better be worth your while in terms of profit. That's pretty much the thinking when remodelers are asked about whether they accept small jobs. “It's difficult for a company over $1 million to make money at it. I just can't make the margins I need,” says Brian Nobile, whose company, in Branford, Conn., will do small jobs for existing clients but will pass on others. That, of course, means that Nobile and many other remodelers are giving away jobs — and possibly future larger jobs.
Nobile goes on to qualify his remark: “I just can't make the margins I need, based on the way I'm set up.” Therein lies the key. Being prepared and having the right systems in place can help make small jobs pay.
STREAMLINE Small jobs are, of course, different for every company. They can be small in size, scope, cost, or the amount of time they take. But whether a $5,000 job or a $50,000 job is what you consider “small,” efficiency seems to be the way to make such jobs profitable. And efficiency must be built into every step from sales through estimating and production, since the details — such as billing, meetings, and scheduling — of any job are the same, regardless of size. Obviously, spending 10 hours estimating a two-day job will eat into profit, while those same 10 hours on a three-month job will give you a better return on your investment.
Dale Nikula, owner of Encore Construction in Dennisport, Mass., took on small jobs for years only to stop because he didn't have the right systems in place for estimating and quickly turning those jobs around to get them into production. “We had unhappy clients,” he says. Nikula began sending people to local handymen. But at some point he realized that he was giving too much away. He also felt that he was losing touch with clients, “getting away from ‘once a client always a client,'” he says.
Because he had systems for his larger jobs, he was able to streamline those practices to make small jobs possible and profitable. He created a separate small-jobs section in his company. Called the “property management division,” it focuses on jobs under $75,000, not including kitchens and bathrooms. “With those, you have almost as many subs as you would with a full-scale remodel,” he says.
Jobs under $20,000 are usually done on a time-and-materials basis. The company uses a 2-page contract as opposed to the 15-page contract it uses for larger jobs. On large jobs Encore Construction holds a production manager meeting, a turnover meeting, and a pre-construction meeting. “Those meetings don't happen on the smaller jobs,” Nikula says. “Instead, our small-projects manager meets with the salesperson to review the project folder, which includes the proposal, the budget, and other relevant information.”
Limiting the number of meetings to “one and not more than two prior to starting the work,” is important, says Ed Roskowinski, co-owner and general manager of Vujovich Design-Build, in Minneapolis. Like Encore Construction, VDB uses short-form contracts, and although the company uses Sage Timberline software for estimating and accounting, it cut down on data entry and other administrative work by hand-writing the estimate and scope for small jobs and sending out only one bill for a final payment. (Clients give a down payment up front.)
In terms of production, at Encore Construction, one project lead oversees all the jobs, maybe eight at a time, with two or three carpenters from the property management division doing most of the carpentry. Because there is a separate division, with dedicated staff, Encore Construction is able to schedule small jobs independently of larger ones.
VDB, which doesn't have a separate division for small jobs, uses a lead carpenter who manages the job in the office and on site. “If a small project is to be successful, you need to involve as few people as possible,” Roskowinski says. VDB's lead/project manager goes on the initial sales call, puts together a work order, gets the contract, orders material, does all carpentry-related work, and collects payment.
THE PRICE IS RIGHT Although efficiency is necessary, it's not enough to look at these jobs as smaller versions of larger jobs. Ten $5,000 jobs don't really equal one $50,000 job. To send out 10 times the number of bills or pay out 10 times the number of accounts payable receipts is a lot of work. You have to build in all your costs, and margins must be higher than they are on larger jobs. Otherwise, there's slippage.