By Joseph F. Schuler Jr.. The most painful part of downsizing is deciding to do it," says Scott Barr, of Southwest Exteriors, San Antonio.
And Barr should know. When he was named Big50 in 1995, he had 33 employees and $4.5 million in revenues. That was three years after Barr, production manager at the then-named Southwest Remodelers, purchased the business. This year, the downsized company may hit $2 million, with 12 employees, selling different product lines.
"The business got away from me," Barr says of his early years selling vinyl siding, metal roofing, and just about any remodeling work.
The company just wasn't profitable at high volumes. Direct costs were 70% of revenues, and commissions weren't based on GP performance. The volume-driven company's marketing costs topped 18% of revenues. Client satisfaction was dismal. Barr worked 80-hour weeks thrashing about in the quagmire -- one of the reasons for his divorce. To worsen matters, the former owner used Barr's client list at a new company.
Barr decided to bring in local "outsourced CFO" George Black of The Creative Financial Option and immediately acted on Black's recommendations.
Barr negotiated terms with suppliers to convert 30-day payables to three-year notes, securing payment with liens on his assets. He decided to no longer sell vinyl siding and became the first company regionally to sell James Hardie's fiber-cement products. (James Hardie helped him recruit and train crews.) He sold his roofing business. He also decided to sell only replacement windows made by a regional fabricator, eliminating other remodeling lines.
He exited telemarketing (a huge expense) and now gets 40% of his leads from mentions on a syndicated Texas home improvement show. Home shows and referrals feed him the rest. Lastly, Barr obtained an injunction to prevent the previous owner from using his client list.
He has been profitable every year but one since 1997.
His story has a footnote: Barr remarried and has an 11-month-old son. He can now actually spend time with him, because he works just 30 hours weekly. At work, he focuses on client experience: "We tell people we don't want satisfied clients. We want raving fans."