Change is constant, but rarely convenient. And remodelers admit they spend too much time putting out fires ignited by change and not enough time devising solutions to insulate their companies from getting burned again. Indeed, the rapid pace of change, exacerbated by an unstable economy, exposes remodelers to a volatility for which many aren't prepared.
But anticipating change may seem like a fool's game. Its causes -- competitors, insurers, the government, Wall Street, finicky homeowners, personal health, economic health, shifts in client base -- are often beyond remodelers' control.
But companies staring at diminished balance sheets have been summoned to action. Some owners have involved employees in strategic planning, while others have altered business models to brace themselves against what's next.
"It's been a wake-up call for us," says Paul Zuch of Capital Improvements in Allen, Texas. He admits his naivete blinded him to the severity of his economy's decline in 2002, until company sales that year plummeted by $300,000, or one-third, from the previous year. Since then, Capital has boosted its revenue to just under $1 million and has sustained profitability by avoiding competitive bidding, focusing on projects that all but guarantee 35% to 40% margins, and analyzing financial performance against budget each month.
Basic Instincts
Because many owners wear more than one hat, they rarely have the luxury to step back and look beyond the latest crisis. These remodelers "tend to deal with change through a combination of intuition, smarts, skill, and whatever systems they've been able to cobble together," says Richard Provost of Richmond, Va.-based U.S. Structures, whose 83 Archadeck franchises are shielded from change by an elaborate corporate infrastructure.
This instinctive approach to change, while common among small and mid-sized remodelers, can be risky. In 2002, TreHus Builders in Minneapolis completed its first $1 million project, which represented more than one-quarter of the $3.8 million in revenue TreHus generated that year.
Owner David Amundson expected more big-ticket jobs would soon roll in. When they didn't materialize by summer of 2003, he laid off an estimator, a receptionist, and a draftsperson. Two carpenters feared they were next and left the company.
But Amundson miscalculated and overreacted: His business wasn't nearly as weak as it appeared (TreHus did $3 million in 2003). The loss of these crew members, plus another carpenter who injured himself, left TreHus with only six carpenters -- too few to operate efficiently.
As he rebuilds his staff, Amundson still believes his company is structured properly to pursue larger projects. In mid-November, TreHus had just completed a $450,000 job.
But Amundson also wants to be gazing into a more reliable crystal ball. That's why he hired a project manager with systems experience to do long-range forecasting. Since early October, Amundson has also met weekly with his staff to go over projects in the works and all bids and jobs in the feasibility stage.
