Almost all entrepreneurial businesses grow and develop reactively. In other words, from size to services to personnel, the market shapes what our companies end up looking like. Did you know that you could grow and shape a company that fits you and your skills exactly to your liking? That makes sense intellectually, but do you really believe it? And did you know the benefits of doing so are a high level of personal satisfaction, the right amount of income, and a one-of-a-kind company? Intrigued? Keep reading.
Driving a team
Think of yourself -- the company owner -- as driving a team of four oxen. One represents average job size, the second represents pricing, the third, the owner's role, and the fourth, company volume. By controlling these oxen, by making deliberate decisions in each area, you consciously create the company you desire.
Average job size. The bigger your average job size, the fewer jobs that must be sold, supervised, billed, et cetera. Thus, overhead in dollars and people is reduced. However, risk may go up because the failure of any one job can be significant. A $1 million company could mean 10 jobs at $100,000 or 200 jobs at $5,000. There will be huge differences between those companies. The client will be in a different demographic and the type of job will not be the same. What size and type of job and client most excites you?
Pricing. If you sell $1 million in work at a 20% markup, you anticipate job costs of $833,333 and a gross profit to cover overhead and net profit of $167,667. If, however, your $1 million in sales is sold at a 50% markup, you will do significantly less work ($666,666 in anticipated job costs) for double the gross profit ($333,334). Pricing tends to control how many people you need in the office and in the field, how much service you can give, and how much return is available for salaries and net profit.
Owner's role. This area is key to creating owner satisfaction. To paraphrase, "If the owner ain't happy, ain't nobody happy!" Here's my prescription for a happy owner:
* Pay should be 10% of volume as salary and 10% of volume as net profit
* Excellent benefits
* Hours averaging 50 to 55 a week
* Two to six weeks a year of vacation
* The owners' role should include at least 50% of their time doing work they enjoy
* Satisfaction level should be at least eight on a scale of 10, where 10 is perfect
Delusions of volume
I've purposely left volume for last because it should be a result of the other factors. In my book, you don't want to do any more volume than you want or need to. Don't be driven to high volume by poor pricing, by too many jobs that walk in the door, or by an unexamined wish to be the biggest remodeler in your city. Every dollar of volume adds complexity, personnel, and risk. Choose your volume consciously to serve a purpose.
Underlying all this advice is the belief that you have to know yourself first. Otherwise, how will you know what you want?
A recent exchange of e-mails with David Gerstel, author of Running a Successful Construction Company, brought this wonderful example of an entrepreneur finding the perfect fit: "I am in business but not in the way I have been in past years. Now I take a project, design and cost plan it, and then build it, acting as project manager and lead carpenter. I'm having an absolute ball, love doing carpentry again, and mix it up with writing and study and a bit of consulting and teaching. It is a serene and rewarding existence, and I feel very lucky."
Don't get green with envy, just get going on your own design-a-company project!
--Linda Case, CRA, is founder of Remodelers Advantage Inc. in Fulton, Md., a company providing business solutions through a network of experts and peers. (301) 490-5620; [email protected]; www.remodelersadvantage.com.
