To diversify and maintain a steady cash flow and profit, our five-person company, which has been doing custom home building and renovations for 18 years, develops and maintains business relationships with architects, interior designers, and other professionals. But for the past five years, about 15% of our annual revenue — and perhaps an additional 15% in repeat business — comes from our relationship with a local retailer owned by a national home improvement company for which we install kitchens.
Many remodelers might scoff at the idea of working for one of the big boxes. While the relationship has its ups and downs, overall it's worthwhile.
How It Works After getting an assignment from the retailer, we visit the client, check room dimensions, and confirm that the original measurements, gathered by others, are correct. We record work in addition to cabinet installation for our estimate, which is based on units of time with a dollar amount per unit.
For example, if we install a base cabinet with 2.4 units at $30 per unit, we get paid $54 — 75% of the $72 charge: the retailer keeps the remaining $18. The prepared estimate goes to the designer to present to the customer. If the customer purchases the installation, we schedule a visit during delivery week, when we check the delivery. If all is in order, we schedule installation. When the job is complete, the customer signs a waiver, and we receive payment from the retailer in 10 days. When we deliver the waiver to the client, we also present our promotional package that includes project photos and references.
Jobs on Our Doorstep The main advantages to working as a home center installer are that the company brings work to us and we get paid quickly.
The home center jobs don't get in the way of our own larger jobs because we are responsible for scheduling. In fact, if we need to leave one of our larger projects for the electrical, plumbing, or drywall subcontractors to come in, we work with a home center customer to schedule a kitchen. The home center clients can pay by credit card — a plus for many people — and many consumers feel more comfortable dealing with a major retailer.
Bumps in the Road There are, of course, some disadvantages. For one, many of the retailer's designers are inexperienced. The final design review falls on the installer. And often, the price list does not seem to recognize local electrical and plumbing rates. We use the homeowner's electrician and plumber and have them deal with one another directly, or we bring in subcontractors.
No funding during the construction project is the biggest disadvantage. We pay for labor and miscellaneous material expenses upfront. (Cabinets are purchased by the client.) But most of the kitchens we do are cabinet replacements with minor electrical updates and typical kitchen plumbing hookups, which are less expensive than full kitchen guts and have few, if any, change orders.
It's our responsibility to ensure the cabinets fit. If they don't, we may be responsible for a cabinet exchange charge to correct the problem. To minimize risk, we follow a set of checks and balances that combines the retailer's procedures with our own. If the job doesn't go smoothly, the clients always have the retailer to call. That's the insurance policy they pay for.
In the end, it's the new business that these clients generate that motivates us to continue. Our best score was an $800 kitchen repair that led to a $263,000 addition/home renovation. At this writing, I have a set of bid prints for a two-story addition that is the result of a kitchen installation completed in March 2003. While we wait for larger jobs, our home center work generates a profit margin of 20%. And if the economy slows, I'll be able to weather the downturn with my home center relationship. —Rob Corbo owns R. Corbo Improvements in Elizabeth, N.J.