Small is Smart

Shawn McCadden fondly recalls the early years when he took on small jobs for “old ladies” for whom he'd fix windows and doors, then chat and have a snack. “It was great experience,” says the former remodeler and now director of business innovations for DreamMaker Bath & Kitchen by Worldwide and a REMODELING columnist. “It was a way to generate cash flow and build trust with people. They become great referrers.”

While McCadden used small jobs as a gateway to larger projects, many remodeling companies continue to focus solely on smaller jobs, and still others maintain separate small-job divisions to keep from turning over these jobs — and profits — to other remodelers or handymen.

Defining a “small job” is difficult. Is it measured in size? Scope? Dollar amount? What makes a job small and not a handyman project?

In terms of dollars, a small job might cost between $20,000 and $40,000, suggests remodeling consultant Victoria Downing,

For Dale Nikula, owner of Encore Construction, Dennisport, Mass., which has a small-jobs division, a small job is “anything under $75,000, excluding kitchens and bathrooms.”

At Jud Construction in Muncie, Ind., which focuses on small jobs, “a small job is between $5,000 and $15,000; the company's average job is $8,000,” owner Jud Motsenbocker says.

A small job might be one that takes just two to four weeks to complete. “We rotate four to six small projects in a month's time,” says Steve Klitsch, whose Creative Concepts Remodeling, in Germantown, Md., does about 70 small jobs (each less than $50,000) a year. The key to keeping things moving successfully, Klitsch says, is having the right tradespeople. “Each [of our] trades is familiar with the habits and routines of the others since we've been together for so many years. It's as if I'm a conductor and have recruited an orchestra with the musicians keyed in to play when necessary.”

In general, small-scale jobs also require less paperwork and few, if any selections, and are easier to schedule. “We have two crews that do an entire bathroom start to finish without bringing in anyone from the outside,” says Peter Lehrer, co-owner with Ken Perrin of Artistic Renovations in Seven Hills, Ohio. “We can manage these jobs with a phone call.”

Regardless of these factors, all agree that none of the small jobs they take on are handyman jobs.

“Handyman [jobs] can be done in a day or less,” Downing says. “A small job requires more use of a company's systems. It requires you to go through the processes to make sure you're doing it right.”

More specifically, Motsenbocker says, “a handyman will have a truck loaded with stuff. He looks at a job, gives a price, does the job, collects the money, and goes home.” At Jud Construction, “When we get a call, we send out a salesman who analyzes what has to happen, returns to the office, writes an estimate, does a proposal or a contract,” Motsenbocker says. “People sign it and then it goes to the production department, which produces it.”

Because you're using all your resources, the effort that goes into small jobs can be just as much as that in a larger job. “You have to do an estimate, send a subcontractor, schedule the job, maybe pull people off bigger jobs; it can create a lot of churn in the office. There are bills, invoices, reconciliation, a lot of sales calls,” says Downing, which is why many remodelers turn and run from these jobs. The way to pursue them and even enjoy them is, Downing says, “to be really systematized.”

Jud Construction has, since 1968, always worked small jobs. Last year it did 250 total jobs ranging from $200 to $150,000 —bringing in $2 million in revenue. “The key to running this many jobs is running one job well,” Motsenbocker says.

In other words, you must have the systems in place to make it happen. For Jud Construction that means a series of scripted events beginning with the first phone call. A receptionist answers the phone. (Motsenbocker is adamant that from 8 a.m. until 5 p.m. a human being who knows the company answers the phone.) She fills out a lead sheet and sets an appointment. “Everybody needs to keep their calendars up-to-date so she knows when to send them,” Motsenbocker says. The company uses Microsoft Outlook to keep track of these schedules.

“The receptionist has to be aware of the area, how to get there, how long it will take for the salesperson to analyze the job,” he says. “For a bathroom she'll schedule more time than for a front-door unit. She has to be educated to know that.”

After the salesperson goes out on the lead, he or she fills out a checklist with detailed information. For example if it's a new exterior door, they'll need to know the jamb thickness, exterior finish, type and color of trim, swing and size of the door. The salesperson then returns to the office and creates an estimate using MasterBuilder, which is integrated with the bookkeeping system. “This is important because when the project is sold, it's already entered into the system,” Motsenbocker says. Information is also entered into folders; each salesperson has his or her own personal color. Motsenbocker's is yellow.

The salesperson brings the contract and down payment to the receptionist, who prepares a maroon, four-tab job folder. “Tab 1 is the checklist, proposals, estimates, final invoice, and job costing info,” Motsenbocker says. “Tab 2 is drawings, the selection sheet, pictures, trade contractor quotes, and the daily log. Tab 3 has previous proposals and bids, previous quotes, insurance info, customer contact info, and miscellaneous, and tab 4 is delivery copies. The whole idea is for everyone in the office to know where to go for information.”

The job is turned over to production, which orders materials and assigns one of 10 carpenters to the job. At the end of the job, that carpenter, in turn, brings the “certificate of satisfaction and direction of payment” for the client to sign. The receptionist and bookkeeper bill out the job, and the salesperson takes the invoice to the house to collect the money and see if the client is satisfied. He or she will also bring a thank-you gift and literature about something else such as new roofing or home modifications for aging in place. “You get your money the same day the invoice goes out, you keep the cash flow, and you can use the visit as a marketing tool,” Motsenbocker says.

Normally, Jud runs about six projects a day but has run as many as 12. “There could be 10 crews or two crews, depending on what they're doing. They have to be skilled in multiple things,” Motsenbocker says. Most jobs are done for a flat fee, but there is the occasional time-and-materials job. “We use a 75% markup to get a 42.8% gross margin,” Motsenbocker says. “The smaller the job, the more margin we're likely to get out of it.”

Although the company's overhead is close to 30% — and Motsenbocker would like to see it at 25% — he wouldn't work any other way. “We like doing this many jobs,” he says. “People are willing to pay for the service we give. When we arrive we lay down a drop cloth. Everybody carries brooms, dustpans, vacuums, trash bags. They wear neat, clean uniforms. Clients know that when we leave, the house will look better than when we got there.”

Another way to grab the profits of small jobs is to use them as filler or to create a separate small-jobs division.

Encore Construction's small-jobs division was begun two years ago, says owner Nikula, because “we were losing touch with clients by handing off smaller jobs to local handymen when we got busy.”

Now the company has a “property management” division to handle small jobs. They are initiated by a sales call, and the division manager (a former project lead) and three carpenters do the work. (These same carpenters are also used on warranty work for bigger jobs.) “These jobs are very profitable,” Nikula says. “We typically mark up between 50% and 70% depending on the size of the job.” By April of this year, this division took in $70,000 — double the original estimate for that time frame, Nikula says.

There is a catch: The division only does work for previous clients or referrals “to maintain full service so they keep coming back to us,” says Nikula, who saw that when he directed clients to handyman services or other remodelers, he lost them for future larger jobs.

Encore's systems are in place regardless of job size; although smaller jobs require less paperwork — perhaps two pages of specs instead of 15 — and fewer steps. “The turnover meeting [handoff from sales to production] on smaller jobs is just the property management [division] and sales,” says Nikula, as opposed to the four meetings, each requiring the involvement of many people, that the company does for a large-job turnover.

Having the right systems makes small jobs more predictable and easier to manage. And the more you do them, the more you'll understand the labor involved, which in turn will decrease slippage and increase profitability.

“There are a lot of 5-by-8 bathrooms,” says Paul Calafiore, owner of DreamMaker Bath and Kitchen, near Hartford, Conn. “Once you start doing a post-job analysis you can see how many hours the guys are putting in. You can fine tune it and dial the numbers right in and come within 1% or 2% slippage.”

Calafiore likes doing smaller jobs — mostly rip and replace —because they are simpler in terms of labor and material selections. He knows his market, and encourages remodeling packages for clients, which they like. “They're busy and don't want to run around [from store to store] to make choices.” And Calafiore believes the staging process is better because his employees are familiar with the products.

Whether you do small jobs as a single focus or as part of a varied job load should be a choice you make depending on your business model. “Ask yourself why you're doing these jobs,” McCadden says. “Is it because you want to add a division? Complement what you already know? Use them as filler? As a marketing opportunity? … How is doing a small job going to benefit you in other ways?”

Regardless of what you consider to be a small job, a client thinks his or her job is big. It's the only thing they're focusing on. Doing the job professionally, with up-front planning and systems in place, will go a long way toward making that “small” job into a magnet for other work.