DuKate Fine Remodeling grossed half of its typical revenue last year. That’s the bad news. The good news is that for the first time in over three years, we made a profit.
In February of 2009, DFR was in discussions with a past client on a large design-build project. It would gross nearly $800,000 and it seemed like a miracle in the dried up remodeling climate. Then the bombshell -- the client awarded the project to a new home builder positioning itself as a remodeler. There had been a verbal referral, but secretly the builder, with our plans in hand, underbid the project. The homeowner chose dollars over relationship and with no other significant work in sight, DFR’s internal overhaul began.
Even though a line of credit was available, our owner and president, Mike DuKate decided not to postpone “hitting the wall.” Instead, he decided to hit the wall with the least amount of debt possible. Mike began to focus on building a money market account, establishing a personal line of credit. It has been slow going, but the money market is growing.
PAINFUL DECISIONS
After careful analysis Mike realized he had to layoff 60% of his workforce. “My employees are all loyal ‘A’ players and I didn’t want to lose anyone. But it had to be done,” he says. “We discontinued all marketing except for our truck signage and yard signs, our website, and neighborhood letters in areas where we were working.”
Employee benefits like the Simple IRA program, our Health Reimbursement Arrangement and personal/sick days, were halted. Vacation time was reduced to one week regardless of years of service. There were salary reductions especially for Mike who gave up a hefty 65% of his salary. Because of the reduction in overhead, DFR revisited its mark-up. We were able to lower it making us more competitive with the swelling number of “remodelers.”
“We kept in communication with our laid-off employees and when work started to pick up we were able to bring all of our project managers back one by one” says Mike. “We still use our same designer only now he works as a consultant instead of an employee. He has formed his own design company and works out of his home – a win-win situation for both of us.”
LOOKING AHEAD
So what made it work? “The employees were emotionally invested in the company,” Mike says. “We had built a relationship together for many years, I trusted them and they trusted me.” The employees are helping DFR succeed in this new economy. First and last trips are no longer considered for gas reimbursement. All workers are on the jobsite by 8 a.m. expediting completion and therefore, cash flow. There is no inventory -- all excess materials are returned for credit. DFR no longer furnishes tools; employees purchase their own. And a 1% commission is offered to any employee who sells a job, which has helped sales. So, despite DFR’s dismal gross revenue in 2009, we had our first profit in three years.
In this economy, it seems that water to your knees is normal. Keep your chin up and don’t be surprised if you feel a little wet.
--Kathy Shertzer is a freelance writer and the office manager/gatekeeper at DuKate Fine Remodeling, a design/build firm in Franklin, Ind. To reach her, call 317.736.9961 or e-mail kathy@dukate.net.