Back when he had 16 people working for him, David Merrick would “watch them make the same mistake again and again,” says the owner of Merrick Design & Build, Kensington, Md. He's happier and more successful running a “practice” with just four employees. “I'm in charge of mistakes,” he says, “and typically I don't make them more than once.”
Erik and Leif Jackson “would do any project, anywhere” when they launched Jackson Remodeling in Seattle in 1999. If a client asked them to do something they hadn't done, they would “run back to the office and figure it out.” Now the brothers deliberately screen out one in four leads — after that lead has already survived an initial screening.
Gary Rochman once “wanted to do everything myself” at Rochman Design-Build, Ann Arbor, Mich. Then he got married, had kids, and realized he needed to both make more money and work fewer hours. Among other changes, he hired additional staff and instituted weekly client meetings that are so structured they have printed agendas. His jobs run smoothly, his clients are delighted, and his profits and volume have climbed steadily.
Hands-on, selective, and driven by detail, these remodelers clearly do business on their own terms. They are also small, as you might have guessed; most have revenues of less than $1 million. But where most remodelers are small by chance, those profiled in this article are small by design. Each has seen other companies grow too quickly, only to collapse under their own weight. Each has decided he would rather have a balanced life than take on the stress of running a big business. And each has mapped out a strategy that lets him make a good living while growing his business in a smart, sustainable way.
Why Small and Smart? Small and smart “is essentially being able to make a good profit at a small size,” says Robert Criner, president of Criner Construction, Yorktown, Va., and a well-known advocate of the approach. Isn't it better to make a huge profit at a large size? For some people, sure. But Criner says keeping things small has inherent advantages, including the lower stress of managing fewer employees and clients. Taking on fewer jobs lets him “deliver more than the competition” — and charge more, too. “I can give the personal touch, can spend a little more time making sure the jobsite is neater, cleaner.”
Attention to detail, in turn, assures a steady base of repeat and referral customers. “Once you've got a certain number of past happy clients, you tend to have people who come to your door,” says Linda Case, of Remodelers Advantage. “But when you're growing exponentially, you have to reach out farther and farther” for new work.
Nor is being small a deterrent to expansion later. On the contrary, “you need to be small and smart in order to grow effectively,” says Case. Criner agrees. “The secret is to get all the systems in place for a $3 million company, then grow from $1 million to $2 million.”
Here are five key components of those systems.
Systematic About Numbers Small and smart remodelers have a firm handle on numbers and establish systems to determine markups, to set and manage goals, and to monitor jobs, employees, and company performance. “Reviewing job costs and financial reports is like monitoring the flight instruments of an airplane,” observes Leif Jackson. “It's how you know if you're gaining altitude, holding steady, or about to crash and burn.”
Rochman views systems “as the linchpin to smart growth. We're able to get clear numbers very early in the game.” His job-costing report, for instance, tracks the estimated and actual costs of nearly 30 categories of a job, from demolition to design, from framing to paint. A quick glance and “you can see if you're making money.” He also creates three binders — for himself, the client, and the production manager — to document every aspect of every job, including contracts, change orders, spec sheets, supplier lists, and detailed minutes from those weekly client meetings.
“My guys have all my estimates,” says Mike Staffileno, president of Chagrin River Company, Chesterland, Ohio. “What I estimated for subs, for hours, and for materials.” They review these estimates against actual costs at weekly job meetings, helping Staffileno adjust as needed and refine his numbers for future estimates.
Jackson Remodeling has many forms, including lead sheets, job logs, meeting notes, and time sheets, that field employees are expected to complete. “Our guys would rather be making sawdust than making paperwork,” says Leif Jackson, but they've come to appreciate forms as management tools and now complete them without complaint.
Systems Tips: Always write detailed contracts and change orders. Customize templates for contracts and forms borrowed from colleagues. Give key employees, suppliers, and subs contact and scheduling information. Key software includes HomeTech for estimating, QuickBooks and Excel spreadsheets for job-costing and other customized applications.
Committed to Communication Small and smart remodelers communicate constantly and leave behind a fail-proof paper trail. Rochman attributes “the vast majority of failures” in the business to breakdowns in communication, followed almost inevitably by loss of trust. Good communication is simply “telling people ahead of time what's going to happen and then following through,” he says. This means having your staff put everything in writing and insisting they be specific. Don't write: “Door was discussed.” Do write: “Mrs. J. asked that the door be larger,” specifying how large she wants it, what you propose doing, and how much it will cost. And then give her a copy of that documentation.
Merrick has it “written into my contract that communication is an important part of the job.” He relies heavily on e-mail, which his clients seem to appreciate for its ease, flexibility, and trackability. “By the time I finish a job, I'll have 500 e-mails on it.”
How you communicate is also vital. “You model your client at some level” to establish a comfortable fit and mutual trust, says Rochman. In his case, being in a college town, “we communicate at a highly educated level that matches our clients.”
But you also draw a line. Every small and smart remodeler we spoke to has a clear division between his work life and his personal life, and most don't hesitate to tell their clients that their nights and weekends are their own.
More Communications Tools: Post work-site boards for clients to send and receive messages. Hold weekly job meetings and distribute detailed minutes afterwards. Give field staff camera cell phones for e-mailing job photos to the office.
Just Saying No Small and smart remodelers are selective. They know that pursuing every viable lead could earn them reputations they don't want. Replace some damaged flooring, and “suddenly you're getting lots of calls for rot repair work,” Criner says. They know that jobs outside their normal scope, expertise, duration, or radius could drain finances and morale. They also tend to avoid bidding on architects' drawings. Staffileno didn't like being “shot as the messenger” for pricing projects higher than what the architect had told the client to expect. He now designs “to the client's price. We alleviate a lot of agony that way.”
Perhaps riskier than doing the wrong kind of work is working for the wrong kind of client. As Erik Jackson says, “The house isn't going to give us problems.” So as Jackson Remodeling's reputation grew, the brothers narrowed their target clientele to several nearby neighborhoods with affluent homeowners and 1900–1940 homes. When prospects call, their office manager screens them using a lead sheet, giving a polite no-thanks to obvious non-contenders. She also assesses the general feel of the client and passes her impressions on to Eric, who further screens the “possibles” within 24 hours. If there's a fit, he sets up an appointment. If not, he refers them to another company.
Staffileno looks for red flags when meeting with prospects. He recently declined a job after an interview in which the slightly inebriated wife dominated and mocked her “meek” husband. “If she would do that to him, what would she do to me?” he asks hypothetically. “It's better to make no money at home than to lose money at the office.”
For Rochman, who also uses a lead sheet to phone-screen, declining a job means saying no. Literally. If you're not interested in a prospect, don't ignore them. “You call up and say no! You get a lot more respect” —and you may get that client's business later, when their job is larger or a better match for your company.
Declining the Right Way: If the job isn't right, politely decline and refer it on. “Say, ‘I know another company that's a little better set up for this kind of work,'” suggests Criner. “The fact that we return phone calls within 24 or 48 hours, they love us just for that,” says Rochman.