John Lee | Aurora Select

The economy is cyclical, and will eventually improve. Your business, intertwined with the economy, is going to grow, change, evolve, adapt, and grow again — or fail. Now is a good time to strategize for the future, improve systems, rethink staffing, solidify relationships with clients, network, and, yes, plan for growth. “Growth is still the obvious choice,” says Judith Miller, a consultant to the remodeling industry and a REMODELING columnist. “But [it should be] considered growth, which takes into account the major uncertainties and which builds on a company’s resources as well as the owner’s vision.”

Although each business faces different challenges, growth patterns are similar. Miller developed a way of looking at remodeling businesses after reading an article titled, “The Five Stages of Small Business Growth,” by Neil Churchill and Virginia Lewis, in the Harvard Business Review in the early 1980s. Filtered through her knowledge of the remodeling industry, Miller focuses on “degrees of delegation” as the main driver of change from one stage to another. Each stage is divided into two parts, she says, an “evolutionary” phase in which a company is on a smooth path and doesn’t need to invest in new things, and a “revolutionary” phase characterized by confusion, chaos, and dysfunctional systems, which is when change occurs.

According to Miller, the five stages look something like this:

1. Owner doesn’t delegate and does the selling, estimating, hammering, and bookkeeping and has a home-based office.

2. Owner has help in the field, a part-time bookkeeper, a home-based office, probably doesn’t charge correctly but has satisfied customers and is “doing well.”

3. Owner does all the selling, most or all of the estimating, and has good people in other positions such as office manager, production manager, and accountant and has an office outside the home. “This is the absolute sweet spot for a remodeling company,” Miller says.

4. Owner sells less than 25% of the time, has a functioning salesforce and only coaches and manages staff.

5. Owner is the visionary strategizing for the future. He or she has successful managers in place reporting to the owner.

How an owner navigates the challenges and issues he or she faces in each phase determines whether a business remains at a stage, grows to the next stage, or dies out. What follows are profiles of three remodeling businesses each at a different growth stage.

Donnie Settlemoir, Custom Carpentry of New England, Stage 1
Matt Teuten / Aurora Select Donnie Settlemoir, Custom Carpentry of New England, Stage 1

Donnie Settlemoir

Custom Carpentry of New England
Portsmouth, N.H.; 10 years in business

2008 volume: $200,000

Business focus: doors, windows, and remodeling

Growth stage: 1

Goals: Spend less time in the field; increase sales. Long-term: develop a trackable business with systems and consistent processes

Challenges: Create a professional image; hire and delegate and still see good results and profit; better understand budgeting, break-even, and profit and loss

After mostly working solo for 10 years, Donnie Settlemoir is to the point where the questions he has been asking need answers. “I see these guys who say, ‘I’ve been working out of the trunk of my car forever. Never had a business card,’” he says, “It seems like they relive the same year over and over, rather than marking out growth. Maybe that works for them, but I’d like to grow every year, test myself. See how I can make it better and easier.” He pauses. “I don’t know if it gets easier, maybe [it becomes] more efficient.”

Settlemoir’s business is classic Stage 1: Despite having a lead supervisor for his door and window lines and a helper, Settlemoir spends 75% of his time in the field, and the rest, including nights and weekends, meeting with clients, preparing estimates and contracts, learning about new products, developing marketing materials, and attending to myriad other business details. His office is in two 14-foot box trucks equipped with laptop and printer. “There’s so much stuff; I’m like a chicken running around with its head chopped off,” he says.

Settlemoir wants to hire another carpenter; his revenue this year may hit $700,000. But, he says, “I never really see where my next job is coming from; it’s always a big surprise. How do you overcome that?”

Miller would point out that this business is in a revolutionary period. Change is going to come, but successful change won’t come unless it’s planned for and managed.

Chance Meeting

At a door and window supplier seminar, Settlemoir met featured speaker Shawn McCadden, a former remodeling company owner who is now a consultant and REMODELING columnist. “I thought I needed to know my product inside out, to know the technical aspects, benefits, and features,” Settlemoir says. “But once I met Shawn, I wondered if there was a [different] way to better my closing percentage.” McCadden recommended the CD Close the Sale from Sandler Sales, which Settlemoir bought and “listened to three or four times.”

He also began to use McCadden as a consultant. “I ask him about everything from how to answer the phone to what vehicle I should drive to presentations, to what I should wear,” Settlemoir says. “He came to the office and looked at things every step of the way.”

Now during downtime, Settlemoir tries to learn new things. “During the dip in the season — between December and February — I do things I wasn’t doing before — checking out new products, looking at new resources, different green options,” he says. He is attending more seminars and to home shows, not to have a booth there but just to network. “At first I wondered if it was worth my time,” he says, “but I’ve put myself in some new situations and have noticed a huge difference already.” For instance, he says, he discovered ICF (insulated concrete forms), got certified to install, talked to distributors, got a lead from them, and is negotiating on an addition using the material.

“I’ll never know everything about construction,” Settlemoir says, “but I know I can solve problems and find the answer.”

Setting a Focus

To justify hiring another carpenter, Settlemoir has decided to focus on sales and marketing. He recognizes the importance of differentiating himself from his competitors, especially during the slow economy. “What’s going to make someone choose my company?” he asks.

Settlemoir says that, for him, the best part of his job is selling and meeting with clients. “There’s a little uncertainty. I’m wondering if they’re going to choose me. The negotiations of it, the signing. I’m not afraid of ‘No.’ One thing I learned from Shawn is that once I present a price, I ask [the prospect] for a ‘Yes’ or a ‘No.’ Would they like to move forward or not? Sometimes if they don’t want to hurt your feelings they’ll tell you ‘maybe’ for four months, and then you drive by one day and see they’ve already hired another guy.”

He had developed his own website but says, “It didn’t have that ‘wow’ feeling.” He then hired a Web company to develop a website for him because, he says, “It puts me ahead of others. It creates instant credibility.”

ServiceMagic lead generation is responsible for about 80% of Settlemoir’s business. He uses the company’s surveys, and when prospects ask for references, he responds: Would you like to see how my last 30 clients rated me? “[Prospects] can see it on ServiceMagic’s site,” he says. “If they want to speak with somebody, I gladly give out a reference’s phone number.”

He also bought a bulk-mail permit and got a rural route of single-family homes to which he mailed postcards.

The window and door business has also been a good way to get Settlemoir inside homes and to create a client and referral base. “I’m able to transform a house in a short time; we’ll do maybe two or three jobs in a week,” he says. “I might get three references out of each client — nine leads from clients who are 100% happy.”

The Next Stage

Settlemoir has big goals: He dreams of one day having four sons to work in and then take over the company. (He is engaged to be married and has no children.) But for now he wants to be able to sell more, track his work, and increase his profit. He knows he needs to improve job costing, which he still does by hand. For large jobs, he creates a folder, keeps tabs on labor and materials, and checks at the end to learn his profit margins. He’s working with McCadden on building a Microsoft Excel job-costing spreadsheet.

And although Settlemoir’s business plans are not yet written down (he and McCadden are working on that), he does know that he wants to maintain a mix of business, continuing with the smaller, quicker door and window jobs as he increases the number of remodeling and additions projects he does. “I want to keep the wheels moving so I can have the future planned.”