These spreadsheet scenarios illustrate two different responses a remodeling company could make to an increasing demand for its services (as tracked in the Qualified Leads column). In Scenario A, the owner chooses to take on more jobs than the two per quarter he had budgeted - but at the same average selling price and using the same crew. As a result, the pace of work becomes more hectic and costs rise as, for example, the company has to hire out work that it previously kept in-house in order to meet the schedule. Even a modest rise in direct and indirect costs has a noticeable effect on profit percentage. In Scenario B, the owner decides instead to raise the selling price, then selects the best clients from among a more slowly increasing pool of leads. By focusing on efficiency and organization, the company is able to produce an additional job in the fourth quarter, and profits for the year increase substantially.
These spreadsheet scenarios illustrate two different responses a remodeling company could make to an increasing demand for its services (as tracked in the Qualified Leads column). In Scenario A, the owner chooses to take on more jobs than the two per quarter he had budgeted - but at the same average selling price and using the same crew. As a result, the pace of work becomes more hectic and costs rise as, for example, the company has to hire out work that it previously kept in-house in order to meet the schedule. Even a modest rise in direct and indirect costs has a noticeable effect on profit percentage. In Scenario B, the owner decides instead to raise the selling price, then selects the best clients from among a more slowly increasing pool of leads. By focusing on efficiency and organization, the company is able to produce an additional job in the fourth quarter, and profits for the year increase substantially.

When I was a young builder in the early '80s, there was an old-timer in town who worked with a couple of his sons, a small crew, and a handful of good local subcontractors. Despite never advertising, these guys took job after job away from me (and other competitors), selling them for prices much higher than I could have imagined anyone getting at the time. Their workmanship was good but nothing extraordinary, and - in my opinion - their building science was stuck at 1955. Still, there was something about them that kept them working for the best clients, doing high-visibility projects at the highest possible selling prices and, I'm guessing, the highest profit margins. Thankfully, they usually worked on only one job at a time, so once they were booked up they'd be out of our hair for a few months.

At the time, I often wondered: What did that old-timer know that I didn't?

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