As a teenager learning construction, I worked for a builder who did both remodeling and new construction. The crew were skilled in a variety of tasks and did quality work, but the company was never as successful as it could have been had the contractor concentrated on one type of construction or the other. Years later, after my wife and I started our own general contracting company, we faced the same dilemma — to preserve the success we had achieved working exclusively as a remodeling company or risk expanding into new construction. It’s easy to see the common threads that run through these two types of work. Both use many of the same technologies and products, although remodeling is easier to get into, because the projects can be small. New construction is not constrained by an existing structure, but it lacks the built-in point of reference remodeling enjoys. After making a successful transition from remodeling to new construction, however, it’s obvious to me that there is also one big difference between them: New construction is riskier. Over the years, my experience has taught me that limiting and managing that risk is the key to success. Here are some of the more important lessons I learned along the way.

For several years in the mid- to late 1970s, I did side jobs as a carpenter before becoming a full-time remodeler. The San Francisco Bay Area at that time was filled with people who wanted to try new things and take chances, and I enjoyed the people I worked for and the variety of projects I was faced with. In 1978, a happy remodeling client...

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