How to Economy-Proof Your Business

These are trying times in the housing industry. The economy is pinching everyone — remodelers included. Sales are down, gas prices are up, and you are stuck in between.

Get unstuck with some fresh perspective. It's time to examine your business from the inside out — and the outside in. Ask for customer feedback, get professional business counseling — heck, stand in the front yard and take a look at the building! Just find out how the rest of the world sees you. Then find a way to differentiate yourself from the competition.

Of all the people out there who are taking your clients — and there are plenty — the most dangerous are not the underbidders, but the simply average remodelers. Average remodelers look fine, they say the right things, and they know a thing or two about building. Unfortunately, that's all they know. They can't diagnose their own business and don't know how to focus on new strategies.

Capitalize on your dedication to green remodeling. Green isn't the wave of the future anymore; it's here right now. So the first strategy is to define what you do that's green. After all, you've been remodeling green for a while now. Analyze the products you are installing and you'll find that many are sustainable and renewable. Energy Star-qualified products, including Low-E windows and doors; low-VOC paint, cabinets, and flooring; good insulation; low-flow toilets and fixtures — they all qualify. Look to Energy Star (www.energystar.gov [1]) and the Partnership for Advancing Technology in Housing (www.pathnet.org [2]) for other ideas. Just tweaking your standard product sheet can boost efficiency, sustainability and healthy living.

Get certified. Set yourself apart from the pack with certifications like CAPS, which raises your awareness of spaces, lighting and comfort. Brag about how many Certified Graduate Remodelers are on staff and how continuing education proves dedication and commitment. Dan Bawden of Legal Eagle Contractors, Co. does.

"We tell all our prospective clients about our CGR and CAPS designations. You're not even on the playing field of high-end remodeling in this market without certifications. Our clientele is smart and they do their homework. They won't rush the process, and they don't suffer fools."

Define the difference. Differentiating doesn't cost more when you do it right. You have a specialty, maybe two or three. What are they? Ask yourself whether you are better at kitchens and baths or add-ons. What about basements? Maybe it's condos. Surely there are specific designs you are drawn to, types of work you enjoy the most, or projects you get passionate about. Figure out what defines a successful project for you and your company — and don't take the easy way out by saying "the one that makes me money." Describing your best projects describes who you are. Then all you have to do is tell the world.

And don't forget to stay active in your local remodelers association, chamber of commerce or small business association. This will help build a strong base of referrals that can reap rewards in the shakiest economic landscapes.

"Those who have a marketing plan and implement it are the last ones dragged into a recession and the first ones out," says my brother, Michael Strong.

Brothers Strong has had a marketing plan for years. We consistently implement it, and our steady lead volume year after year is proof that it works. Of course, closing the deal is another matter, and marketing plans won't always improve the closing ratio, Michael points out, "When our sales dipped in 2007, we were forced to look at why, and that's when we transitioned from looking outside our business to looking inside for economy-proofing solutions."

You may be building a good product, but the question is, how can you build a more efficient product? We mapped the process between "I Want Remodeling" and "I Accept Your Offer" carefully and realized the bottleneck was in the design process. That allowed us to focus on trimming the turnaround time between the call and the presentation. We unified our sales approach throughout the sales team and streamlined the selections process so it didn't bog down in administration.

When the contract sells, we immediately start tracking our WIP (work in progress) numbers before the ink dries — not waiting until after something bad happens on the job site. I remember finding 3 percent slippage on a $25,000 job last year after just a week of construction and thinking the number wasn't too bad. Then it dawned on me that if we did 10 jobs that size, $7,000 would be flying out the window! For a company with 7 employees, that kind of money would make a big difference when it came time for Christmas bonuses.

Make hard cuts. Of course, analyzing the numbers is the easy part. If that doesn't help immunize your company from a downturn, more drastic action may be required — the hard part. Start by looking at the organizational chart to see if there are any soft spots. You may have to combine some responsibilities, outsource them or even eliminate them.

If you have too much overhead or slack in one of your departments, cut the wick quick. One big mistake company leaders make is waiting too long to cut back when times are getting thin. They carry too much staff, especially in the production department, where they may be keeping staff busy but not keeping them effective. Loyal owners tend to think "next month it will get better." Be forewarned: if you say that for very many months in a row, you won't have to worry about keeping any of your staff busy.

Do less work in-house. Hire specialists that will give you consistent pricing, carry some of the costs on a project, and frankly, do the work better than you. It's all they do, right? If you discover your carpenter can do the backsplash as well as the tile man, well, then, you really need a better tile man. Go find one.

Finally, think long and hard before shaving your margins, even in the short term — it's often ineffective and sometimes dangerous. Dropping prices will not help you do projects more efficiently, they will only force you to do them with more pressure. And isn't there enough pressure in the market right now?

Author Information

Tommy Strong (CGR, CAPS, CLC) is vice president of construction services and co-founder of Brothers Strong, a design/build firm in Houston. He writes on behalf of the Partnership for Advancing Technology in Housing (PATH), administered by the U.S. Department of Housing and Urban Development. Learn more at www.pathnet.org [2].