"In 2009, we find ourselves leaner, more sophisticated, and 'creating our own stimulus package,'" wrote Dave Myers, general manager of J. Francis Co., in its e-newsletter of last week. In a wide-ranging and personable message, Myers went on to explain that JFC, which has remodeled homes and businesses in Pittsburgh for 21 years, had a strong 2008 but is "facing challenges." He writes, "... we have taken unprecedented steps to reduce our overhead costs, without impacting the craftsmanship that our customers say sets us apart from our competition. We are offering incentives to entice our customers to move forward with remodeling work."

I know from having spent time at the J. Francis Co. office that this is a dynamic, smart, and very well-respected company, and I wanted to know more about not only the overhead reductions, but also the unusual process of sharing them with clients.

"When appropriate, we have told customers about the reductions," Myers told me in an e-mail. It's an interesting way of helping clients know that the company is serious about giving them the best service for their money.

Here are some of the cost-cutting strategies J. Francis Co. is using:

  • Changed fuel reimbursement practices for two managers from an allowance based on two-year-old data to actual mileage based on monthly reporting. Moved those expenses from overhead to direct job costs.

  • Continuing pay freeze since the fourth quarter of 2008 through at least the second quarter of 2009.

  • "As per Judith Miller, our production manager's time has been moved 'above the line' to be a direct job cost," Myers says.

  • Insurance: Put package out to bid, netting savings. Also, he says, "We are audited each year by our insurance carrier for workers' comp and business liability. This year we chose to dig into the numbers." Result: Myers learned that the insurer owes the company refunds for 2007 and 2008.

  • Cell phones: Negotiated with Verizon to reduce monthly phone bills 14% while getting phone and PDA upgrades to GPS tracking and timesheet submittals. Joined the National Association of Home Builders and its local chapter, getting an additional 11% off Verizon bills.

  • Turned in a leased vehicle.

  • Owner and general manager exercised an agreement that no overhead money will be spent without review and approval by both parties.

  • Focused marketing expenditures more on producing a gate-fold brochure and a "pardon our dust" door hanger with an outside consultant. Redesigning leave-behind document(s) in-house.

  • Established a policy of returning excess materials immediately instead of letting them become warehouse stock.

  • Decided to not build-out next phase of design center.

  • With staff stabilized and less hiring happening, changed to "pay as needed" option with company that screens potential employees.

Cutting Job Costs:

"We know that our subcontractors are hurting for work as well," Myers says. "We are asking multiple suppliers in the same trade to bid jobs, and we're being 'public' about the need to bid not only based on quality of product, but service, timeline, and yes, price."

  • Doing more bid-package preparation instead of negotiated bids with open specifications.

  • When bidding jobs, "we encourage subcontractors to visit the job's 'print room' to obtain the prints or to purchase them from the assigned vendor. This is almost a qualifier and in turn does not become our cost," he says.

  • Instead of assigning one lead carpenter to a job, where he or she remains every day, "We now float staff based on skills," Myers says, "and no longer guarantee to a customer that we will be on-site every day start to finish."

  • Finally, "It's funny," he notes. "Fuel costs have decreased. But no one has really lowered their delivery and fuel-surcharge costs. We directly ask suppliers to decrease or remove these surcharges."

Thanks to Dave Myers and J. Francis Co. for sharing these strategies with the readers of Remodeling Online.