Bob Fleming, president of Classic Remodeling & Construction says in 2008, the company’s revenues were down 30% from 2007. “This year we might be down another 10 to 15%,” he says, but it’s hard to predict the thought process of homeowners on making remodeling decisions. “We have a lot of work in the conceptual phase, but it is harder to move the clients into a construction contract. We have had several clients drop-out between the time we took the lead and the first meeting; two because they lost their job, and another one because the market keeps dropping. All have said they plan to proceed with us once the economy gets better,” Fleming says.
Here are the 8 steps he’s taking to adjust to the downturn:
When two large jobs totaling $1 million in revenue fell through at the end of last year, one of the first steps Fleming took was to lay off four office staff.
He restructured his firm to be more efficient at the smaller projects that homeowners now want. “When I realized the project sizes were dropping and that I could not keep up with so many smaller projects, I decided to bring back the project manager that we laid-off as a commissioned salesperson to sell and manage smaller projects,” he says. So far the returning project manager has completed about $300,000 jobs with nice margins, and he has another $400,000 under construction, including a $250K commercial project (an anomaly), and a $125K repair project. “It has been a real help in keeping the field staff busy and in covering cash-flow,” Fleming says.In addition, he is not charging for design on smaller projects. Showing clients their potential project in Chief Architect gets them excited about the project and more willing to spend money.
Knowing that the market is now geared toward more modest remodels, he created a brochure aimed at encouraging clients to think of Classic Remodeling for smaller projects, but not handyman work. “I think we hit a good balance,” he says. “Our hope is that clients will then up-sell themselves,” he says.He is sending the brochure to existing and previous clients, and those he met who were on the fence about their project. In the next few weeks, he will send the brochure to a wider target based on income and location.
For the first time in 10 years, he turned to home shows for marketing. The company set up a booth at two recent home shows. “Most of the projects are very modest and our close ratio will most likely be 1:8 verses our normal 1:4. But the staff worked the show with enthusiasm as they realize that we have to take advantage of every possible opportunity.”
Fleming is doing more networking and every office employee has made a commitment to some organization to attend monthly functions.
Employees finally have time to educates themselves on green remodeling. Fleming and two of his managers recently passed the LEED AP exam, and five more managers are taking the exam this week. He chose LEED training because the company does some commercial work and Fleming says it is the lead certification for commercial buildings. “We see this as a way to set ourselves apart from others, and see much more of our future work geared towards this,” Fleming says.He also wanted his employees to take the exam before March 31. After that day, the regulations for earning a LEED AP change, he says, and it will be harder to get accreditation.
Fleming is pursuing smaller commercial projects that fit the company’s focus and skills. One of our prospective clients is the Noisette Company. The LEED project is on an old navy base, which is now the largest urban redevelopment project in the country, and many of the buildings are historic in nature. “We are offering design/build consultation for tenant unfits and so far they love the one-stop consultation, as we are able to turn plans and pricing around much quicker than the traditional architect/builder scenario,” he says.
Energy credits in the new stimulus package have prompted Fleming to consider starting a separate company for energy upgrades and photo voltaic installations. In South Carolina, federal and state credits pay for 55% of solar installation systems. He will co-brand this company with Classic Remodeling to take advantage of the company’s reputation and client base.