“How Much Is Right?”

In reading recent industry publications I have noticed there are different ideas about what is the right amount of money for a remodeling business owner to earn, as a combination of salary and net profit.

What is hard for me to understand is how there can be anything that is “right.”

Who determines what right is? The client? What does the client know about running a remodeling business? Without that knowledge, how can the client determine the correct combination of salary and net profit?

Practically speaking, in many remodeling selling situations, the client is the one saying how much the contractor should earn. From my experience, I know this is likely to occur when more sales training is needed.

How about “what everybody else is charging” being the factor that determines what right is? How do you know, in fact, what others are charging and, more important, how that relates to their cost of doing business and what their business goals are? There is no way to know all this.

Peer-group participation can put you closer to this level of understanding than just about any other investment you can make in yourself and your business. Sharing accounting reports and challenges is a powerful way to learn more about what right is. Consider remodelers executive roundtables, business networks or Remodeler 20 groups.

The real issue is: What do you want to earn? That is the most important information. To figure this out, you need to know a lot of things, such as your short- and long-term personal goals, including how many hours you want to work, what kind of responsibility you want and when you want to retire.

Suppose you lay out all of the above. It would take time and thought. Imagine walking into a sales call with all those questions addressed, carrying this with you as you make your presentation. What a great thing to lean on when the client asks, “Why is your proposal costing what it does?” It costs what it does because it includes all the client asked for in the project while allowing you as the client’s remodeler to finish the project and be in business for the next few years.

Your continuing to be in business is good for the client because it allows you to be there when the client calls with a concern.

What this all comes down to is relationships and experience. Your earning enough to give your client a great experience, for both of you to have a good relationship long after the project is done, and to be able to have a wonderful life without working forever is the real measure of what right is. It is up to you!

Paul Winans, CR, is president and co-owner, with his wife Nina, of Winans Construction, Inc., an Oakland, California firm founded in 1978. The company, the 2001 National Remodeling Quality Gold Award winner, has an annual remodeling volume of about $1.7 million. Please email him with any comments or questions regarding his column.