Over the past 30 years as a consultant to remodelers, I’ve noticed two rules that apply to pros. The first you’ve probably heard of: the 80-20 rule, in which 20% of what you put into a venture yields 80% of the results. The other one, which I first became aware of from a May 1983 Harvard Business Review essay, you likely haven’t. That rule, paraphrased, is that every company can go through up to five predictable stages of growth.
I call my adaption the Five Stages of Remodeling Growth, and just about every client I’ve encountered fits into one of those stages. Your ultimate success depends on your mastering at least stages 1 through 3, and stages 4 and 5 as well should you wish to expand dramatically and/or sell or pass on your company.
Every stage starts with discomfort, moves to a more comfortable state as you resolve challenges, and then evolves back to discomfort because you’ve outgrown your systems. Lots of remodelers confuse solving problems with creating systems; a system not only solves a problem, it prevents future ones. You need systems to succeed.
Success at every stage requires your company to effectively manage seven functions: marketing, estimating, sales, production, finance/administration, resource management, and leadership. Sometimes the effective manager is you. As you grow, it’s necessary for that job to fall to someone else.
Often, this trajectory of moving up through the business stages mirrors your personal life stages. When you’re young and have a partner and don’t have kids, you can run a pretty good Stage 2 company. Then a baby arrives, and that changes absolutely everything. Your need for growth through the five steps mirrors your need to mature as a person.
And now to the five stages.
Stage 1: The Owner Does It All
This is the classic way a company begins. At this stage, the owner does all the work: markets the company (probably through word of mouth), writes estimates, sells jobs, does the remodeling work, invoices clients, pays bills and, oh yes, carries out the trash.
- 60-hour workweeks are the norm.
- You start with zero revenue.
- Revenue usually follows a “just-in-time” business model, in which you’re lucky to pay current bills with revenue from your current project. More likely, you’re using the next job to pay bills from the last job.
- Income swings wildly, in part because you’re so busy working the current job(s) that you don’t have time to prospect for new work after your current jobs conclude.
- Accounting and financial management systems are primitive.
Take Note: Technically, it’s possible to stay at this level and be happy, but you need to be the kind of person who revels in 60-hour work weeks and works one long-term, high-paying mega-project at a time—think of a multimillion-dollar home that takes three years to build. And remember, you need to have another multimillion-dollar project lined up to start soon after that job ends.
But if your business model envisions you doing anything else—say, 500 jobs a year at $500 each—you’ll wear out long before you can build a fund big enough to retire on. Virtually every remodeler I’ve met strives to get out of Stage 1 as fast as they can.